The Netflix and Spotify of car supply are coming
The days of fixed term car ownership models are numbered as private and business drivers migrate to more flexible-style subscription services, according to a series of experts.
Disruptors from both within and outside the automotive industry are challenging the standard vehicle lease or ownership model, which has endured for the better part of a century.
Justin Benson, head of automotive at KPMG UK, said, “Think about it in the context of paying for a monthly or weekly subscription, like Netflix or Spotify, but instead, for all of your travel needs. No longer will you be signing up for a lease or PCP (personal contract purchase) every few years, as you’ll have a regular payment which will give you access to the use of a vehicle in the first instance.”
Further into the future this subscription-type service will extend to combine all modes of travel into one payment, said Benson, whose conclusions were based on a survey of 1000 automotive industry executives, as well as 2000 customers from around the world.
City authorities target car ownership
City authorities are already under intense pressure to manage traffic and air pollution, said Jonathan Hampson, general manager UK of car sharing specialist Zipcar.
[Read how Europe's capital cities are targeting the car]
“The car and the city have reached breaking point. The status quo has to change, we have no choice,” he said, adding that cities are starting to put in place ‘coping mechanisms’ that target the private car, “whether it be congestion charges, workplace parking levies, ultra-low emission zones, increasingly punitive permitting regimes, and planning regulations. Make no mistake about it, policy makers have the private car firmly in their sights.”
With almost 3,000 vehicles, including 1,000 free floating cars, and 250,000 customers across London, Zipcar is benefiting from the cultural trend towards access rather than ownership.
“In that context, car ownership does not look that smart. In what rational world would I pay for something 100% of the time that I use only 5% of the time, if I had a choice?” asked Hampson.
Businesses adopt car share philosophy
This logic applies equally to private as well as business customers, he added.
“About 35% of our business is business customers, and it’s one of the fastest growing areas of what we do,” said Hampson. “It tends to be SMEs who can’t justify a fleet of vehicles and who value the flexibility we can offer them. So, for example, a florist who only needs a vehicle for three hours per day to pick up their flowers from the market in the morning and bring them back is a perfect use case for us. They can use our vehicle for the trip and then walk away and forget about it.”
The appeal of this all-inclusive offer, with maintenance and insurance bound up in a single payment, is mirrored in driving subscription models that give businesses and drivers the freedom to terminate a lease contract on a monthly, or even weekly, basis without paying a penalty.
Germany's new car subscription service
In Berlin, app-based car subscription service Cluno (pictured above) secured $28 million in funding last week to accelerate the expansion of its business. The company claims it takes just three minutes on a smartphone to apply for a car, including a credit check, and it will even deliver the vehicle to the customer. There is still a minimum contract period of six months, but the monthly subscription fee covers maintenance, wear, winter tyres, warranty, registration, vehicle tax, and comprehensive insurance.
Cluno says that the traditional purchase, finance, or lease routes to car ownership lack flexibility and demand effort to compare offers, negotiate prices, and fill in contract forms.
The company’s new investor is Valar Ventures, where Andrew McCormack, general partner, said, “The success of Netflix and Spotify has confirmed the trend towards usage over ownership. The same concept will be standard in mobility and car ownership; the timing for Cluno’s car subscription service is just right.”
Looking a little further into the future, and monthly subscriptions will cover not only access to cars, via businesses like Zipcar and Cluno, but all forms of transport.
MaaS launch in Stockholm
Ubigo, a new Mobility as a Service operator, has launched in Stockholm following a successful trial in Gothenburg. The pilot revealed that within six months the convenience of access to different travel options (public transport, car sharing, car rental, taxis and bikes), dramatically improved customer satisfaction levels compared to car ownership. Ubigo works on a household membership basis, giving all members of a family access to the same subscription via an app.
“There are tons of possibilities in the business to business sector as well,” said Johan von Porat, operations manager, Ubigo, who suggested that an office could be treated like a household, “and every colleague could be a member of that household. Then at the end of the month we just send them the invoice for whatever they have spent on travel.”