How can emerging economies navigate the mobility transition?

In a world characterised by rapid urbanization, inadequate infrastructure, congestion and deteriorating air quality, as well as economic inequality and an evolving rural landscape, an improved mobility ecosystem should be fundamentally accessible, affordable, connected and clean.

Perhaps there is a case for ‘universal mobility’, as more than a billion people lack access to transport services globally. The economic principle of ‘pareto optimality’ - where resources cannot be reallocated to make one individual better off without making at least one individual worse off - could serve as a guiding principle.

For example, in India, almost 300 million people lack access to all-weather roads, affecting their access to mobility, economic opportunity and basic services such as healthcare and education. A possible pareto-optimal outcome could be one that unlocks economic value by ensuring that a majority gets access to mobility services - thus not only enhancing economic growth, but also bridging inequality gaps. One of the key challenges for emerging economies will be to leapfrog technologies as they transition to higher economic growth paths and balance environmental risks, while at the same time keeping mobility accessible to all.

The automotive sector is witnessing a transformation towards organised mobility services with digital platforms, a paradigm of shared mobility in time or space, and low-carbon vehicles – efficient internal combustion engine vehicles, as well as electric and hybrid technologies. To make this transition sustainable for the long term, it must be based on the economic pillars of value addition, employment generation and manufacturing competitiveness. In addition, the emergence of the new mobility and electric vehicle (EV) industry presents an opportunity for developing economies to attract large amounts of capital and to build a workforce with advanced skills: all of which will drive higher economic value-addition and, in turn, fuel growth for the long term.

Some of the ASEAN countries have a growing auto industry. The sector accounts for around 10% of GDP in Thailand and Indonesia, which indicates there is room for growth in India, where it accounts for 7.2% of GDP. Today, these ASEAN countries are competing for investments in the automotive value chain, but they also rely on exporting to their neighbours in the region through strategic free-trade agreements (FTA).

Countries such as Viet Nam, for example - with a low investment base and potentially untapped resources in terms of land - are seen by foreign investors as an opportunity for setting up manufacturing in the ASEAN region. Can India, with its higher levels of human capital and advanced technical institutions, emerge as a new automotive hub, just as new EV companies are disrupting the conventional automotive value chain?

The shift to EVs has seen the emergence of new players globally, causing many established auto manufacturers to rethink their strategies. In China, it is estimated that close to 500 manufacturers are registered to make EVs. All will not survive, but they are representative of the new economic opportunity that this transition presents. A recent study by the Council on Energy, Environment and Water estimates that with localization of electric powertrains and battery-pack assembly, India could realize a 6% higher output value addition for the auto industry, in a scenario in which EVs make up 30% of passenger vehicle sales.

The mobility landscape in India and other developing countries with similar socio-economic profiles is shifting gears for the future - from a mix of personal and unorganized shared mobility, to a growing personal segment and an organized, shared ecosystem. With more than 600 million Indians still living in rural areas and under-served communities, and about 9 million people annually migrating inter-state, the demand for mobility services in India is expected to reach $90 billion by some estimates. From mobility start-ups to EV manufacturing, almost 250 start-ups involved in some part of the value chain have raised more than $20 billion in investments so far.

With a population of 1.2 billion, of whom around 40% live in urban areas - a similar demographic profile to India - the African region has the potential to be another $90 billion mobility market in the next decade. Africa is the second-fastest growing region in the world - and with socio-economic challenges similar to India's, as well as low vehicle ownership and poor access to transport services, it positions the Indian auto industry strategically to tap into these opportunities, including technology leapfrogging.

The positive impacts of the new mobility ecosystem on the economic value chain are significant and could potentially shift the new automotive hubs to the developing world.

As we enter the new decade, the three common pillars of universal mobility will be shared, connected and electric. Furthermore, we need collaboration between governments, the private sector and civil society. These are the two triads of future mobility.

For the future CEOs of automotive companies, there is a lot of food for thought here. Is a different product strategy sufficient to tackle some of these disruptions? Can mobility as a service help drive an innovative and unique product portfolio? Is there a need for a strong partnership with the energy value chain as we look at decentralized energy solutions like EV charging? Should manufacturers contribute thought leadership towards urban or town planning, considering future investments in transport infrastructure, in turn driving new ideas for mobility? How can we optimise costs and expand our consumer base, while ramping up investment in research and development?

Last but not least, there needs to be a vision for the industry that is enabled by a technology-investment-regulatory roadmap, one that encompasses the spirit of entrepreneurship and value creation. Every country will have a set of policy choices to make, balancing the goals of economic growth, energy security and environmental impact. Nations need to see the mobility industry as an enabler of economic growth rather than just a polluter and consumer of natural resources.