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Sustainable mobility: carmakers pick up speed

For over a century, cars were made of four wheels, a steering wheel and a driver. And what if everything changed? The explosion of social and technological innovation has transformed the automotive sector into a laboratory of the future. Two trends emerge: the technology race and the “step on the side” approach. With one unifying concept: sustainable mobility.

April 2016
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Executive Summary

For over a century, cars were made of four wheels, a steering wheel and a driver. And what if everything changed? The explosion of social and technological innovation has transformed the automotive sector into a laboratory of the future. Two trends emerge: the technology race and the “step on the side” approach. With one unifying concept: sustainable mobility.

Initially, sustainable mobility was never part of the automotive world. It emerged approximately fifteen years ago and quickly took a central place in public policies, scientific research and industrial strategies.

From the political and institutional point of view, sustainable mobility consists in informing users and consumers with the CO2 footprint of transport services (which, in a country like France, account for 36% of emissions). Public authorities, especially at a local level, are now encouraging the development of “active mobility” (cycling, walking), but also of public transport and even of shared uses of cars (carpooling, carsharing).

In short, the whole picture is changing. And even if the supremacy of cars seems threatened, it would be risky to bet on its downfall. On the contrary: the sector is now at the forefront for inventing new forms of transport in the future.

Reinventing the car

Some current developments could have a Malthusian effect on the global fleet. The development of autonomous vehicles could accelerate this evolution towards new uses and economic models in major cities, from the substitution of professionally managed fleets to the classic family car. By 2030, these developments will cause a decrease in the number of vehicles per capita and consequently, a reduction in the volume of vehicles.


Nevertheless, global growth could offset this decrease, which started in the big cities but will not necessarily expand beyond. Furthermore, the development of lightweight mobility, such as cycling or walking, only meets a small portion of uses. The same can be said of the offer of public transport. For many other uses, nobody has found any alternative to a motorized vehicle on four wheels, carrying one to five passengers.

Finally, the evolution of cars towards different forms of motorization (hybrid or all-electric), as a result of technological breakthroughs, strong government incentives and a change in demand, could have game-changing effects. Today, cities that are increasingly sensitive to the issue of pollution tend to perceive cars as an additional factor of contamination. However, by 2025 or 2030, we could find ourselves in a completely different situation. As noted by the CEO of Valeo in an article published in ParisTech Review, “thanks to digitalization and autonomous driving, the use of cars will become much more flexible, while electrification will make them better adapted to urban environments. This dual phenomenon will almost certainly reconcile cars with the urban world.”

Major automotive suppliers, focusing on the incorporation of new technologies in cars, will contribute, at their level, to a shift towards sustainable mobility under the label of the energy performance. The involvement of manufacturers has an even greater impact because they take in charge the whole vehicle design. Japanese giant Toyota has recently revealed an ambitious agenda to reduce emissions by 90% by 2050. Their program involves nothing less than the demise of the combustion engine. Their Chinese challenger, Geely, has announced plans to follow the same strategy.

But beyond the technological race, manufacturers also have a particular impact because of their position as central players, connected with all stakeholders. They closely track the evolution of demand and the development of new uses, they seek to gain a foothold in new business models and rewrite the rules of the automotive market. This opens another evolution, which reflects another version of sustainable mobility.

In partnership with Deutsche Bahn, Citroën Multicity Berlin offers a fleet of 250 vehicles to its subscribers. This project illustrates PSA Peugeot Citroën’s efforts to enter an economy of functionality, with the prospect of a major evolution: shifting from being a car salesman to becoming a provider of mobility services. Thanks to their simplified maintenance, electric cars are well suited to these experiments. While still marginal, they could occupy an increasingly significant place in the business model of manufacturers. BtoB, a natural breeding ground for the economy of functionality, with the historical example of Xerox, offers great opportunities to manufacturers. Since 2013, PSA Peugeot Citroën offers a service called “Share Your Fleet”, which covers various mobility needs of employees of large companies.

The strategy is clear: if the volume growth, of European manufacturers in particular, is limited and even turns negative, manufacturers need to consolidate their position and invest in more beneficial and stable segments. We must not forget that with the exception of manufacturers who specialize in the high-end segment, operating margins are often very low – in 2014, 5.8% for Nissan, 5.4% for Ford, 3.9% for Renault, 2.5% for Volkswagen. Without necessarily giving up the race for volume, it is in the overall interest of manufacturers to explore other related activities.

The main feature of this new environment of sustainable mobility, both in its “performance competition” version and as in the exploration of new business models, is its ecosystem dimension.

A new ecosystem

This is a recent development. From the origins until approximately 2010, cars evolved, but the fundamentals stayed the same: four wheels, an engine, a driver. There was certainly a lot more electronics and IT systems, but the car “system” was focused on the driver, who received most of the information and was responsible for the driving. This model is now changing, and in the near future, major developments will transform the very idea of car.

The development of the electric vehicle is based on an infrastructure (with charging stations). The so-called “autonomous” cars, such as the GoogleCar, somewhat paradoxically, need to connect all vehicles to real-time information systems. Autonomous vehicles are not independent: they are basically nodes in a larger network.

For a car manufacturer, all these developments do simply involve technological changes: they call for entirely new ways of working with cars and conceiving them. Manufacturers are forced to interact with a wide range of players. Some of them, such as suppliers or the business network, they are already familiar with. Others, such as electricity suppliers or governments, are completely new to them. They also need to learn to work with the companies that control these networks and information flows.

New forms of cooperation involve institutional interfaces where to discuss about technical issues but also other, less formal, information: questions, hypotheses. This type of cooperation is necessary. But it requires trust. And trust is certainly not part of manufacturers’ DNA: these usually never share their knowledge and distrust other players. Specialists of information flows, for example, are potential threats: they could become new competitors or even worse, take over their place in the value chain. Will cars soon become a simple, undifferentiated piece of hardware, integrated into increasingly complex information systems, taking their value from the software layer provided by Google or Microsoft? Cooperation is not without ulterior motive. All players need one another.

R&D or think tank?

Teamwork does not discard the classic internal R&D model, but integrates it in another kind of information flow, in which third parties (research, technical committees) play a greater role. The resources and expertise located outside of the organization have an increasing value. Manufacturers seek to build platforms and interfaces and take advantage of neutral and open spaces, which can develop synergies and expand their cooperation based on trust. Renault did this with the creation of the Institute of Sustainable Mobility, in 2009.

By creating an external institute, manufacturers have access to a monitoring tool in order to detect weak signals and alert on emerging issues, but also to test hypotheses. Understanding new uses, for example, is not necessarily within the scope of marketing services. Commissioning studies to specialized firms, on the other hand, is not a universal panacea. A semi-independent solution, such as an institute, allows for greater freedom than a marketing department, and more distance from a results logics in PowerPoint slides. It grants the possibility to assess emerging uses, adopt their pace, without necessarily integrated them into an operational product.

Volkswagen has opted for a different strategy, by redefining its entire R&D as a think tank, combining a fairly conventional technological work with much more ambitious prospective exploration, focused on uses and integrated in the broader digitizing movement of our experiences. As explained in 2014 by Martin Winterkorn, “Over the next few years, our industry will face one of the greatest upheavals since the invention of the automobile. People’s mobility expectations are undergoing a fundamental transformation. Their wishes concerning their own cars are changing faster and faster. There are fundamental differences between lifestyles and needs from region to region. And digitalization is increasingly redefining the way we live and work. Against the backdrop of these challenges, the automobile industry must not bury its head in the sand but must welcome these developments and take them into account in its long-term strategies.”

It is a daunting challenge: by reasoning based on the concept of “mobility” rather than from the object “car”, manufacturers must literally learn to think outside the box.

This approach becomes dizzying, if we are to take the meaning of these words seriously. That’s exactly what is at stake for manufacturers today, whatever path they choose. We are talking of companies employing tens of thousands of people and hundreds of subcontractors. Any mistake can have a huge cost.

But the accelerated development of the sector also offers great opportunities. Taking risks, the ability to imagine and plan the future, are almost requirements for any manufacturer: when everyone speeds up and chooses a path, those who linger too long will pay a high price.

And rewards are up the challenge. Taking a “step on the side”, for instance, can be used to explore new business territories. Renault, precisely, set the example by creating Logan, precursor of the “low-cost” segment: a way for the group to reinvent itself and take strong positions on an untapped market.

While reflecting on the social content of sustainable mobility, the group is now exploring solutions for the mobility of the most vulnerable populations. One logical solution would consist in making even cheaper cars, but it is not without risk: Tata, in India, tried to make even cheaper cars than Logan, but without success. Moreover, this type of reasoning shows its limits when applied to precarious rather than low incomes. To address these customers, one needs to think outside the box. For instance, by developing micro-credit solutions with institutional partners and NGOs. Or by designing an offer of services rather than a cheaper product (even a second-hand vehicle with aid to acquisition). Or, as did Renault with Mobiliz Invest, by funding structures of social and solidarity economy (associations, cooperatives, etc.) that offer solutions designed for people with social problems. For manufacturers, the challenge is not only about building new partnerships: it involves exploring whole new professions.


The key to all these challenges? Strategy. The automotive sector is at a crossroads, and never before in its history has it been confronted with so many developments. The concept of “sustainable mobility” combines and articulates the promises of emerging technologies with the emergence new uses. It doesn’t offer any ready-made solution. Manufacturers are starting to choose their own path: some enter the technology race and the quest for performance, others take a step on the side. Newcomers, like Tesla and Geely, are in the technology race, competing with heavyweights such as Toyota. Without completely leaving this competition, European carmakers seem to be more interested in exploring new uses. Will they be able to stay at the frontline of both races?