Next Generation Car Company: Indego
A.T. Kearney’s global automotive practice created Indego from a clean
slate. Similar to the way other industries have been shaken by the
arrival of a new business model, we wanted to envision a new automotive
world. If we could reinvent the automotive industry without any existing
barriers, how would it look?
As with other industry game-changers, we started with what the
customer really values — flexible, reliable, low-cost mobility. Our
answer is not buying a car and paying for all the related expenses, but
rather leasing an all-inclusive package of premium product and services.
Because an Indego start-up would entail around US$2 billion over four
years, it is unlikely to happen in a pure form. But a large,
non-automotive company could leverage their brand and customer base to
benefit from such a model. Alternatively, some companies, perhaps with a
related offering, might join together to form a consortium. Most
likely, existing OEMs – or emerging carmakers – will adopt elements of
the Indego model.
Operating Margin — Indego vs. traditional car companies
Indego is compelling. It promises to outperform all existing OEMs,
with an operating margin of 22% compared to the 6% average for volume
manufacturers.
In parallel, because of its foundational customer-focus, customers realize value in tandem with the car company.
Drivers of profit also provide value to customers
Lease not sell
By leasing the vehicle, Indego maintains
ownership and control of the asset over its entire life. A traditional
car company that produces one million cars a year, with a corresponding
cost structure, will only generate revenues on the initial sale of those
cars over the course of the year. In the Indego model, the cost
structure is set to produce 250,000 cars a year, but revenues will be
generated by the two million cars owned by customers circulating on the
roads.
The customer avoids depreciation on their
sizable initial investment. Plus in many cases they have dodged finance
charges. Customers will have options to pick from different bundles of
product and service levels. They will also have the flexibility to
easily change contracts.
Product content
New, modular body styles, based on a common
platform, are produced every two years instead of the industry norm of
six to eight years. The frequent redesigns create excitement and support
the branding and fashion appeal of the vehicles. This “fast fashion”
concept leverages low cost retooling, and most features are easily
changed or updated for remarketing.
Customers are able to switch out their car every
two years for a fashionable new model without worrying about residual
values or having to wrangle with a dealer.
Whole lifecycle revenue
The focus on the whole lifecycle provides multiple,
additional, profitable revenue streams. Both fixed network and mobile
servicing will be provided – all outsourced. Service and repair usage
and response time will be determined by the service level the customer
selects.
The integration of vehicle diagnostic software and
supporting telematics functionality enable the customer care function to
contact the customer to advise them of servicing or repair requirements
and to schedule the appointment. Customers gain confidence in their
car’s reliability and only have to pay for necessary services.
Lean product development
A small, core product development team is
responsible for integration and co-ordination, with detailing, testing,
and homologation outsourced. With a digital value chain, Indego and its
partners can exchange product data at every stage in the process over
the entire product lifecycle. Contract engineers are hired by the hour,
full service suppliers enable recovery of parts cost, and turnkey
services offer a fixed price for deliverables.
Customers gain from overall low costs that the
Indego model delivers. An all-inclusive package of premium product and
services can be offered for an ongoing lease of between US$2,700 to
US$5,800 per year.
Direct sales and distribution
A traditional dealer network is not required.
Transactions will be performed through a dedicated website and a
centralized call center for support. Test drives will be organized
through a network of daily rental outlets.
Customers can rent vehicles for a half-day or
full-day of unsupervised testing. They will receive a rental refund or
incentive if they subsequently sign a lease. And they can use the Web to
explore product and service options, plus place orders online, all from
their homes.
Low cost investment
Facility, tooling, and distribution investment is
limited by a combination of product and supply chain design. Steel body
structure stampings are outsourced to a low-cost country, plastic skin
panels are produced close-to-market using in-mold colored films to
replace top-coat painting, final assembly is within the markets to
reduce delivery costs, and make-to-order eliminates traditional
inventories. Distribution is outsourced to third parties and transporter
vehicles will operate from assembly plants to “break bulk” facilities,
delivering direct to the customer within five days.
The customer does not have new vehicle taxes or
registrations – Indego manages all fees through their third-party
logistics operators. This network also facilitates the return of
vehicles and their refurbishment.
Branding and marketing
The IndeGo brand targets the mass sub-B, B, and C
classes, which globally represent 20 million unit sales. This
positioning depends on a distinctive customer relationship of ongoing
and continuous personal contact, which also is a source of additional
revenue.
The onboard telemetry and call center can provide
customers traffic alerts, navigation assistance, roadside assistance,
directions, music, and any number of additional features.
To learn more, download our Indego highlights document.
Contact
 Martin Haubensak is a partner in A.T. Kearney's Automotive practice. He is based in our Düsseldorf office.
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