In the broader mobility industry, automotive OEMs and mobility players have been hit very hard. The traditional automotive industry will likely produce 7.5 million fewer vehicles in 2020 according to McKinsey. Ride hailers have experienced declines of about 60 percent which has resulted in significant layoffs.
The leasing industry only got impacted slightly to moderately due to its long-term contracts. Its recurring revenues gave it a continuous stable income. Even though almost no cars were driving, monthly leasing amounts are still transferred to their bank accounts. If the clients do not have payment problems obviously.
As seen during other crises, consumers will postpone discretionary purchases and limit their expenses as they anticipate harder times ahead. So how do you prepare yourself for such an uncertain future post-Corona? What kind of future should you prepare yourself for?
Scenario planning helps organizations plan for uncertain futures
If you can correctly predict the future, stop working and start investing on the stock market. To all the others, do not spend endless discussions in which quarter or year the recovery takes place. You better work with 2 key scenarios: a slow recovery and a fast recovery scenario. Once your team has adopted these 2 focused scenarios, it will allow a structured team discussion about the impact on society, the industry or your company.
Take one example: a slow recovery will force consumers to postpone new-car purchases. This in its turn will boost the need for repairs and have a positive influence on the after-sales automotive market. A fast recovery will lead you to different conclusions.
Let us zoom in on mobility players as another example. Especially those players that are not backed up by large investors, are having a hard time, but probably can survive a fast recovery. A slow recovery here will lead to drastic consolidation and new players entering the field. Will the leasing companies also become mobility players in this slow recovery scenario? Or will they stay focused on leasing assets even if the world moves to mobility as a service, so that eventually they risk losing all contact with the end consumer?
Top performers thrive by investing in downturns
Many leaders will object when asking for investments now cause we ‘’need to survive first’’. You see several players backing down on investments for autonomous cars like Daimler is doing with Urbanetics now. Others, like Waymo and Comma.ai, are not backing down. In times of crisis, finding talent is obviously a lot easier. Time will tell if this crisis again will determine the future top performers.
The outcome of that scenario thinking will be different if you are working in the traditional automotive industry, in the leasing industry or for a mobility player. But irrespective of the industry, working with these 2 simple scenarios’ will keep your alignment much more structured. It also ensures that your company remains agile and resilient. You have prepared yourself for both an adaptive scenario (‘Calm the fuck down’) as well as for a disruptive scenario (‘Change or die’). So, whatever, anybody in your organization believes, you have a scenario ready.
What can you expect as next step?
In the next step, the heavy lifting starts. You need to work out both scenarios in parallel and determine for both the impact on your business model, your organizational structure, and the capabilities you need. That will be covered in our next article.