Digitalization
he impact that digitalization has already had on the car industry can be measured in one figure: €119 billion. That is the amount which has flowed into start-ups in the form of risk capital and other financial resources so far, according to a recent Berylls survey, How mobility start-ups are transforming the global automotive industry. Some 1,003 start-up companies were investigated, with some amazing results.
We are already seeing the effects of new digital business models on the roads. In the US and to some extent in China, the major car service agencies, or “ride hailing” companies, have changed mobility behavior. In many cities there is no longer a taxi service to the airport, for example.
Mobility service providers are systematically expanding their networks nationally and internationally. Of the 10 start-ups which have attracted the most investment, six are ride hailing services: DiDi (China), Uber (US), Grab (Singapore), Ola (India), Lyft (USA), and Ucar (China). As one example, in the seven years since it was founded, Lyft has expanded to cover 95 percent of the US population. Its services are available in 700 towns and cities, and with a stock market value of $15.6 billion and turnover of $2.16 billion, Lyft is only one of the successes of digitalization. The other companies in the Top 10 (Tesla, NIO, Faraday Future, and Cruise) are focusing on the production of electric vehicles and/or autonomous driving. Altogether, the 10 biggest start-ups have raised 49 percent of the total risk capital.
The focus segments for mobility start-ups are currently: ride hailing (with €44.1 billion in risk capital); vehicle construction, especially electric cars and self-driving cars (€28.4 billion); shared mobility services, such as SHARE NOW (€15.8 billion); electric and electronic components (€11.6 billion); connectivity solutions for vehicles (€1.8 billion); used vehicle sales (€1.6 billion); payment systems (€1.5 billion); “last mile” freight traffic (€1.5 billion); digital infrastructure connectivity (€1.1 billion); and Industry 4.0 applications for the car industry (€1 billion).
The three leading segments are attracting 75 percent of investment resources and the 10 major ones cover more than 90 percent. Berylls investigated more than 150 sectors along the car supply chain in the course of our research, which identified enormous potential for further start-ups in emerging sectors.
We expect substantial new investor demand in start-up segments including: cloud services and cyber security; sensors and sensor system integration in connection with autonomous driving (lidar, radar etc.); physical and digital infrastructure for driving electric vehicles; new human machine interface (HMI) systems such as augmented reality; speech and gesture recognition; connectivity services for the vehicle (such as remote diagnosis and remote steering); and vehicle subscriptions. These areas and others are under-represented when it comes to entrepreneurship and risk capital, and in future we expect many different opportunities to arise for start-up companies.
From the point of view of the German car industry, an increasing readiness in German-speaking countries to establish or support new digital business models with risk capital is a welcome development. Over the past three years, more than 30 start-ups have been established in the DACH region (D – Germany, A – Austria, CH – Switzerland), offering innovative mobility solutions.
Although Berlin and Munich have nowhere near the status of Silicon Valley or Tel Aviv in the tech industry, more and more new automobility companies are starting up in Germany. Financing is more readily available: all German car manufacturers as well as major suppliers (such as Bosch, ZF, Continental and Mahle) have recognized that they can gain access to technological innovation by investing risk capital. Other large DAX-listed companies including Allianz and Siemens are also investing in mobility start-ups. If Daimler was the most active investor in start-ups in 2017, in 2018 it was BMW. The BMW Group and BMW iVenture have been happy to spend a lot of money on their participation and takeovers of Parkmobile, DriveNow, Moovit, Fair.com, May Mobility, Caroobi, Lunewave, Critical TechWorks and Graphcore. Their financial contributions have exceeded €300 million.
The hype about more “unicorns” (privately owned start-up companies valued at $1 billion or more) to come is by no means over, and the example of AUTO1.com in 2018 shows that the next ones could come from Germany. AUTO1.com is a Europe-wide online marketplace with its own stock of vehicles, which has been concentrating on commercial car wholesalers. The group also runs the internet platform “Wir kaufen ein Auto” [“We’re buying a car”] for private vehicle sales. SoftBank, the highly active Japanese investor, has paid €460 million for a 20 percent share in AUTO1.com. This values the company at €2.3 billion, making the Berlin start-up a genuine unicorn.
