In the context of declining sales and increasingly urban populations, is it wise for car brands to continue to pursue an ownership model that lumps the consumer with maintenance and parking costs when they might only use their vehicle once a day. RAPP's Belinda Clark explores the strategic implications of the shift.
Some people simply don’t have the desire to own a car. Despite growing up, buying a house and having children, they defy this key milestone by finding work-arounds that simply work better for them. I must confess, I am one of these people. A car-less home owner and a first-time mother to-be that is. As an expectant mum, I do find myself re-considering car ownership. Well-meaning people insist that a car is necessary now that a baby is on the way, and logically I admit this makes sense. Having somewhere to put all that baby stuff, skipping the tube mayhem and driving ‘round the block to put baby to sleep does sound grand. And yet, even these big life events haven’t convinced me. So what’s driving this carlessness? And what are car manufacturers to do about it?
What’s driving it is an increasing realisation of the unsustainable environmental impact of car ownership as well as newer technologies and new ways of thinking that’s making car access without car ownership possible. And changing the game in the process!
Technologies like networked taxi companies (e.g. Lyft and Uber) are making it easy for people to get around without charging the earth while branded car sharing services (like ZipCar, Drive Now and We Share) are making cars more accessible than ever. For some car manufacturers this has had a devastating effect as evidenced by Jaguar Land Rover’s recent job losses, but for others, it has created new opportunities for growth.
Noteworthy car sharing services: BMW’s Drive Now and VW’s ‘We Share’ have captialised on this growth by recognising that “a private vehicle is not in use for an average of…23 hours a day and, during that time, only takes up parking space”. In addition they’ve adapted their services to offer flexible packages that suit this new audience’s needs better than ever before. While these initiatives are still small and London-based, they are moving in the right direction and snapping up customers in the process. But what else can car manufacturers do?
1. Take branded car sharing to the next level
Current branded car sharing services are missing a trick when it comes to offering a wide-reaching, simple and readily available service for everyone. Based on traditional car hire models they require pre-booking for a set period and include hidden costs that make car hire scary and confusing for the un-initiated. Taking a leaf out of the Santander Bike Hire book, car sharing services could instead offer ready-to-hire cars available at a moment’s notice, returnable at customers’ leisure, and with a clear and transparent cost structure (like Santander’s capped access and p/30 min. usage charges). Making changes like these is a sure fire way to give car manufacturers an edge and paves the way for car sharing to be used each and everyday by all.
2. Re-think barriers to entry
One of the biggest barriers to car ownership is the hefty deposit and monthly fee, but the mobile network industry has shown another way. Since the early ‘90s, networks have adopted a ‘Subsidy Model’ enabling customers mobile access without the introductory fee. Offering a phone with a premium package enables mobile operators to acquire customers quickly and customers to adopt and upgrade their phones faster.
For car manufacturers this model has the potential to reduce barriers to entry and increase demand, especially with customers that may otherwise be unreachable. With the introduction of smaller, cheaper and more energy efficient cars, a solution like this may well be on the cards in the near future.
3. Think beyond individual car ownership
Car ownership is usually thought of as individual or sometimes family-based, but community solutions like the original ‘Peer to Peer’ of car sharing could well provide an alternative answer.
The original ‘Peer to Peer’ of Car Rental (a bit like AirBNB but for vehicles) offers a way for existing car owners to share their cars with others in their community for a fee. As the onus usually lies with the sharer rather than the sharee, it’s popularity has been limited and kept it relatively niche but the concept of collective ownership and sharing is one that car manufacturers could certainly borrow from.
If car manufacturers were to adopt this model and make it their own, they could share the burden of risk whilst profiting from it at the same time. To date, I am yet to find a car manufacturer that has properly capitalised on this opportunity but the opportunity is clearly still there for the taking.
Whilst sustainability and environmental concerns may have stopped some people from buying cars (including me), some of the solutions outlined here could certainly turn this around. For me, solutions like car sharing and Peer to Peer rental have definitely made me think differently about how and when I could make use of a car. And I doubt I’m the only one.
In 2019 at least, I hope car manufacturers move away from traditional thinking and move towards a new way of enabling access to cars that meets all the needs of this new and emerging audience.