Analysis
11 Dec 18

The rise of employee mobility solutions and subscription models 

Mobility for all employees, including commuting and professional travelling, is or will be a priority for corporates. This is a transversal responsibility where HR, finance, legal, procurement and fleet managers are concerned.

According to Wikipedia, vehicle subscriptions are a type of business model where a customer pays a periodic fee for the use of one or more vehicles. The difference between a vehicle subscription and buying a vehicle is that the subscription service retains ownership of the vehicle. Many subscription services offer more flexibility than leasing in terms of minimum term and the ability to swap between vehicles. 
Vehicle subscriptions have been variously identified as part of the sharing economy or the subscription economy. Vehicle subscriptions have also been classified as a form of transportation-as-a-service and as a form of mobility-as-a-service.

Vehicle subscriptions have been available since at least 2014. The start-up Clutch Technologies launched a subscription service for consumers in Atlanta in mid-2014. Flow Automotive Companies was the first automotive dealership to offer a subscription service, launching Drive Flow in Winston, Salem in 2016, using Clutch's technology platform. 2017 saw several automotive manufacturers announce and launch subscription services, including Book by Cadillac, Porsche Passport, Care by Volvo and Canvas (backed by the Ford Motor Company). By 2018, a number of start-ups and automotive dealership companies had launched subscriptions in multiple markets.

Company cars are only a part of mobility solution.

For long, mobility meant managing a fleet, either perks for executives or service cars for sales and operations. In most corporates it was also about ensuring low rates for renting a car (short term) and providing guidelines for train, planes and hotels for business trips. That responsibility was split between procurement, HR and fleet management.

In Europe, a substantial percentage of company cars are perk cars for managers, essentially to commute and to use privately during the weekends or holidays. They are an element of a mobility policy but it is first an element of a revenue policy for corporate. They are an efficient way to optimise remuneration packages. However, perk cars will be eliminated once tax/social subsidies are removed. The new private lease offer might accelerate that trend. Actually, in some cases, it is already more tax efficient to contract privately and ask for mileage indemnity rather than having a company car. It is worthwhile doing the calculation considering VAT, social contributions, corporate company car taxes (based on CO2 in particular) and expected mileage to make the most efficient choice.

In the US, where there is no particular tax benefit for company cars, there are almost no perk cars. People buy the car they want and ask for reimbursement when allowed. 

Recently, I have seen young people refusing a company car because they had nowhere to park it at home or did not want to commute in a car because of traffic jams. Companies will face more and more people looking for other solutions than a traditional company car and asking for a budget and flexibility to choose the most efficient way to move, especially in big cities.

Leasing companies and OEM are perfectly aware of those future changes and they are preparing by creating private lease offerings and mobility programmes.

Subscription models will enlarge the scope of mobility solutions

Both offers, private lease and car subscriptions (including car/scooter/bike-sharing and e-healing platforms), will contribute to optimising mobility solutions and they will certainly be considered as complementary or alternative solutions to existing company car policies. 

To expand the scope of benefits, some corporations have started offering their employee access to a company car years ago through salary sacrifice when it was not yet possible to have a private lease contract. Nowadays a private lease, in a B2B2E context could be a much easier solution.

Salary sacrifice means you agree to exchange part of your salary so you can get extra benefits from your employer. Benefits offered can include child care vouchers, a company car and additional pension contributions.

Corporate responsibilities have expanded and HR divisions are getting more and more involved in quality to combine private and professional environments. This includes affinity programmes in big corporates: HR and procurement negotiate leasing rates to be applied to their employees. It is likely the initial network independent lessors like ALD, Arval or LeasePlan will also develop private leases.

Uber employees are given a subscription to use Uber for moving from home to their offices in some cities. Some corporates have been allowing taxis (Uber, Taxify or others) for their sales employees when their cars were banned in city centres because of excessive air pollution. It is all about providing more flexibility to reduce costs and improve the efficiency of transportation means.

The mobility concept is a global concept. Corporates are already looking at TCM (Total Cost of Mobility) and we can expect a progressive consolidation of mobility costs where subscription models will be used as an economical alternative to company cars or various kinds of company expenses (taxis, trains, etc…). 

Image: Care by Volvo lets you choose a car from the comfort of your home (source: Volvo Cars)

Author: Pascal Serres, Global Fleet expert

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