Rich rewards in the mobility sector trigger a scramble for scale

Mobility
24/04/2024 Article

To succeed in the mobility business, companies need scale – and they need it fast. Representatives from Spanish financial services firm CaixaBank, vehicle manufacturer Kia in Slovenia and UK online platform provider Finalrentals discuss how they are ramping up their mobility businesses.

The battle for supremacy in the emerging mobility business is heading to be clash of giants.

“In mobility, scale matters,” says Amelia Bradley, associate partner at Corporate Value Associates (CVA). 

The mobility ecosystem is becoming so broad and diverse that companies looking to dominate the business will need substantial reach and resources. A confluence of powerful trends, such as the spread of digital technologies, the rise of electric vehicles and the surge in associated mobility services, is opening an array of new markets. They stretch from traditional car sales and fleet management facilities and a growing number of financing options through to multiple mobility-as-a-service offerings, data platforms and advanced decision-support for travelers. Few companies currently have the capabilities required to build a strong presence in more than a fraction of those markets.

The value of a motor vehicle now extends well beyond its initial price tag and subsequent residual values because the asset can be used in different ways in a variety of mobility products, says Bradley. “To tap into spending in the mobility space, companies need to look not just at a car’s first lifecycle but also the lifecycles that occur afterwards.” Bradley estimates an average vehicle’s lifetime value could reach as much as €50,000. 

Vehicle manufacturers, major motor dealers and financial services companies that have long served the automotive industry have a head start in the race to secure the bulk of the mobility business. Many already boast extensive resources and far-reaching distribution channels. But the pivot from the staid automotive industry to the fast-moving mobility business is forcing them to overhaul their business models. What’s more, traditional giants of the auto industry face increasing competition from agile new entrants into the mobility market. Every competitor in the mobility sector is striving to leverage its core strengths to extend its revenue opportunities.

“The fight is still going on. No one has an automatic right to monetize value in the mobility business,” says Markus Collet, partner at CVA. 

The race to ramp up scale in the mobility business is propelling corporations with a track record in the automotive industry as well as niche newcomers into partnerships, alliances and acquisitions. Many long-standing ties are being unwound and new connections secured that better serve the demands of mobility business.

To discover how companies from different parts of the mobility sector are scaling their businesses to grow revenue opportunities, Qorus and CVA invited three companies to share their strategies at a recent online event. Spanish financial services firm CaixaBank, vehicle manufacturer Kia in Slovenia and UK car rental platform provider Finalrentals outlined their strategies for growing their presence in the mobility sector.

CaixaBank’s four-pronged mobility strategy

Xavier Oms, mobility and equipment director at CaixaBank, says the Spanish firm is tackling the mobility business on four fronts. They are:

1. Alliances with vehicle manufacturers, dealers, rental firms and client focus groups: These alliances enable CaixaBank to provide financing solutions at the point of sale or through its branch network.

2. Digital platform for end-users: Consumers who access the online platform are guided by CaixaBank, through a series questions, to a portfolio comprising offerings from the bank together with products from vehicle manufacturers, dealers and rental firms that match their needs.

3. Partnerships with vehicle manufacturers: CaixaBank works closely with a small group of vehicle manufacturers to share data insights and market a select range of cars to its customers.

4. Sustainability initiatives: As part of its commitment to sustainability, CaixaBank has introduced attractive financing options to encourage clients to switch to electric vehicles.

“We’re shaking the market. We are using our capabilities at CaixaBank to generate as much business as possible by serving our clients,” says Oms.

He argues that the bank’s thrust into the mobility sector is not cannibalizing existing businesses. “Other players such as distributors and car dealers were quite concerned when we began to move into mobility. But now whenever we launch a new initiative, they see that we are providing more traffic into their stores and giving them opportunities for cross-selling.”

Kia targets three big mobility trends

Vehicle manufacturer Kia is scaling up its mobility business by targeting the three big trends sweeping the automotive industry – electrification, digitalization and mobility solutions.

Matej Sinsky, manager CX solutions (future business) at Kia in Solvenia, says the car maker is innovating in many of its approaches to mobility.

1. Electrification: With the EU outlawing the production of vehicles using internal combustion engine vehicles by 2035, Kia is stepping up its focus on zero-emission cars. It plans to increase its EV offering from three to nine models by 2027 and is securing ties with business partners to provide its customers with home charging and public charging facilities. Through its alliance with Digital Charging Solutions, for example, Kia gives its customers access to more than 700,000 public charge points in 28 European countries.

2. Digitalization: Kia is enhancing its online sales platform, launched in 2019, to improve the customer experience it offers and to increase its range of financial products. The company is looking to work closer with financial institutions to exchange data and extend the product range it provides customers. It is also improving its mobile app, Kia App, by increasing the functions and services it gives clients.

3. Mobility solutions: The car company currently offers Kia Share, a short-term app-based car-sharing service; Kia Drive, a car rental solution that customers can access using a mobile app or website; and Kia Flex, a long-term rental service.  

“We are working hard at developing Kia Drive, our middle-range car rental offering. Customers can use our mobile app to rent a car from any dealership in the country, pay for it and just come and collect the vehicle. Afterwards, they can return the car back to the dealer.”

Sinsky adds that Kia hopes to extend Kia Flex into a mobility ecosystem offering. “We could then earn recurring revenue as the car gets older and is rented out to different users.”

Focus yields impressive results for Finalrentals

UK fintech Finalrentals is a recent entrant into the mobility market. By focusing on an underserved niche in the market, it is achieving impressive growth.

“In the past 14 months, we have grown our locations, our revenue and our partners six-fold,” says Ammar Akhtar, founder and CEO at Finalrentals.  

Founded in 2019, Finalrentals operates a digital platform that gives small car rental firms access to international online travel sites such as booking.com, Kayak and Skyscanner. The company has established franchises in 32 countries and boasts more than 76,000 cars on its books. It aims to get a foothold in 100 countries within the next two years.

Akhtar says local businesses generate around 56% of global car rental revenues but few of those firms were able to access multinational travel booking platforms. Through Finalrentals they can now get a presence on those platforms and compete with major international rental companies.

According to Akhtar, 88% of car rental bookings are conducted online. “We have created a new economy for small players that had no share of the online business before.” He adds that Finalrentals is connecting to a growing number of online sites and is also introducing value-added products, such as insurance and links to airline bookings, to its platform.

“Doors are opening. I’m very happy to represent the small side of this industry and help those companies monetize their services.”

Companies across the mobility sector are growing their businesses within and across their initial areas of focus. None have so far managed to secure a strong presence throughout multiple mobility markets – many of those markets are still in their infancy. 

Business leaders attending the online event identified new technology and digital solutions as the likely main drivers of growth in the mobility sector followed by catalysts such as improvements in the design of products and greater customer maturity. Financial services firms may hold an edge over vehicle manufacturers in the quest to gain the upper hand in the mobility market. Their advantages were ranked by participants at the event as access to customers, funding, digital platforms, risk management, asset management and data insights. Yet many vehicle manufacturers can boast similar resources.

The mobility market is a big space. And it’s getting bigger. Whether the mobility business will be dominated by a headful of multi-market titans or a range of strong niche specialists is as yet unclear. What is certain is that the opportunities across the sector are substantial.

The Qorus Mobility Community and CVA have collaborated to produce a report that examines key trends in the mobility sector. Click here to download a free copy of the report.

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