21 sep 17

OEMs broadly agree with PwC study on car-sharing future

Fewer cars, shorter replacement cycles – and more traffic: that, in short, is the change that car-sharing will bring to the mobility of tomorrow. Last week, Fleet Europe reported on the PwC study that said so. This week at the IAA 2017 Motor Show in Frankfurt, we asked OEMs for their reaction.

Most OEMs have a wait-and-see attitude. One typical reaction went as follows: “Every new study brings fresh figures. But when we talk about the evolution of mobility and automotive sales, it's just not possible to look 10, 15 years into the future and predict what the numbers will be”. 

Ownership to 'usership'
That's not to say that car manufacturers dispute the fact that car-sharing and shared mobility in general will grow in prominence and have a significant impact on car sales – a downward impact, to be specific. That fact is well understood, but the manufacturers are confident that they are still on the right side of history: “Because, let's not forget that there are still huge growth opportunities for new car sales outside of Europe. There are plenty of developing markets outside the mature ones”. 

“As car ownership evolves into car 'usership' in certain geographies and demographies, it's indeed very possible that the number of cars will go down for those areas and age categories”, says Wolfgang Booms, Executive Director Fleet Sales and Remarketing at Ford of Europe. He's thinking especially about city centres and wider urban areas, where it makes sense to replace a large amount of low-mileage cars with fewer cars that will be shared, and thus each achieve a higher mileage.

Interesting future
So OEMs do acknowledge that the mobility equation is changing, and that they'll need to re-calibrate their position in it. “In fact, we're already doing that”, says Steven Higgs, Global and North American Fleet Sales Manager at GM. “One: we develop electric cars. Two: we have Maven, our mobility platform. Three: we're investing in ride-hailing specialist Lyft. And four: we're involved in a host of other projects. Why are we doing all that? Because we're eager to be part of this interesting future that is taking shape for the automotive and mobility space. I just know that the next 20 years will be so fascinating for the industry as a whole – and for our customers in particular”.  

It's dawned on OEMs some years ago that cars have become - to use the now well-worn cliché - 'smartphones on wheels'. This means, among other things, that service and maintenance can be optimised, and ultimately reduced. And OEMs have adapted their business strategy accordingly. 

Accelerated electrification
The rise of car-sharing will accelerate the electrification of fleets, as electric is the preferred powertrain technology for car-sharing. This will further eat in to the revenue opportunities for car manufacturers and their network, as service and maintenance costs for electric vehicles will be even lower than for 'smartphone' cars powered by fossil fuels. 

On the other hand, the upfront price of cars, which has been going up for some years now, will continue its upward trajectory, OEMs say. Or, as Wolfgang Booms of Ford of Europe puts it: “Cars get bigger, battery cost comes in, new safety features are installed and new technology features make their appearance in the car, always based on the needs and expectations of the drivers and users. That being said, the price of the vehicle has to keep up with those innovations”. 

Revenue streams
Rising cost and falling revenue combine to present OEMs with a problem they are trying to solve by looking for other business models and revenue streams. And indeed, participation in car-sharing and other new mobility modes is one avenue that most car manufacturers are exploring in one way or another. 

And it's not lease companies, but car manufacturers as well that are getting involved in shared mobility projects of many different stripes. In fact, virtually every car manufacturer these days prefers to label themselves as a 'mobility service provider'. To that end, PSA has created its Free2Move mobility brand, BMW has its car-sharing programme DriveNow, Daimler has Car2go (pictured), and Volvo and Toyota are partnering with Uber.

Second life
So clearly, most car manufacturers are already paving their way towards the new mobility equation with the development of new business models – either on their own of via partnerships. They aim to incorporate not just cars and ownership, but also 'usership' and multimodal mobility. The ultimate goal: to continue selling cars, even with a radically changing customer profile; and to sell services that are related not just to the vehicle itself, but also to the user of that vehicle, or of other mobility modes. 

Given time, car manufacturers will want to extend these services as far and wide as possible. “In the past car manufacturers focused on the first life of the car, now it is time to play a significant role in the second and even third life of that car”, confirms Wolfgang Booms of Ford of Europe. 

Even if the manufacturers want to dispute the figures presented in the PwC study, they don't dispute its general direction. In other words: even if the final destination is as yet unclear, all are agreed on the way forward. And in an industry that has to process a lot of uncertainty, that at least is a comforting thought.  

Image: Car2go

Authored by: Steven Schoefs