The Automotive Industry Is Looking Forward To Car Subscription And Car Sharing Models
The automotive industry is on the brink of a major change, as all the major automakers of the world are now preparing for a future where drivers may not want to own the cars that they use. As the industry is undergoing a rapid technological change towards a driverless future, it looks like the road to car sharing and car subscriptions are on the horizon.
That’s right. There are a small but increasingly influential group of drivers in the world who cite the high upfront costs and ownership burdens as a deterrent to owning a car.
“In terms of ownership models, I think really we’re on the cusp of change,” said James Carter, principal consultant at Vision Mobility, which gives advice to the auto industry.
Automakers are now vary of the automotive industry and are starting to explore different avenues from the traditional business model of producing and selling automobiles. Several of the world’s largest automakers like Volvo, BMW, Toyota, Volkswagen have developed subscription services, not unlike streaming services like Netflix, for their customers to try out various car models for a fixed monthly fee.
For one, Toyota Motor plans to launch its subscription service, where it envisions situations where their customers could try out a sedan for a few months and then switch to an SUV. Toyota Motor is planning to introduce this subscription scheme sometime in 2019 in Japan, but also to launch it overseas in Asia as well. The automaker will build a system for the new service so that it can make use of dealerships' cars. The move is also aimed at providing its customers with an opportunity to try various car models and increase options for future purchases.
Volvo is another carmaker that has announced its own subscription service to meet the changing demands. The service is planned for Canada only at the moment, but may soon be tried out at different countries around the world.
The service, which starts at USD$949 (about RM3,990) per month, is a leasing alternative that covers insurance, minor wear, winter tires and other costs in a single payment. Customers sign up for 24 months, shorter than many lease agreements, while they can get a new vehicle and the latest technology that comes with it every year.
“We’re giving everybody an opportunity to get a vehicle, and own a vehicle like they own their cellphone,” said Alexander Lvovich, managing director at Volvo Car Canada Ltd. “These people want convenience, they want defined and predictable price, they want all the services included. And they want to be able to access this experience in a convenient way online.”
Germany’s BMW already offers a subscription type of car service in Tennessee, USA, with monthly fees starting at around $1,100 (RM4,585) for new cars. In Japan, a major used-car dealer has partnered with BMW and begun subscriptions for new Mini brand cars from about 80,000 yen (RM2,955). With these services in place, drivers, for their part, will have to pay more, in terms of monthly basis, than they would by owning a single car, but they will be free from paying insurance and maintenance costs.
While some companies offer subscriptions, there are also some startups which offer car sharing services. The gist of car sharing is simple; you reserve cars on your smartphone app, and drive them to your destination, leaving it for people around the area.
“You get all the benefits of the car without the problems and the costs involved in owning the car,” said Benoit Robert, Communauto’s chief executive.
One of car sharing’s biggest plus point is the fact that it plays a major part of the environmental sustainability movement. An independent study by the University of California Berkeley Transportation Sustainability Research Center measured the impact of car sharing, and found that for every one car shared, about ten are taken off the road. This means that for every 1,000 cars shared, roughly 100M pounds of carbon dioxide are offset.
In Malaysia, the car sharing programme is represented by the South Korean based Socar. The company is a mobile app-based car-sharing programme which boasts of around 240 cars available for use from 100 pick-up points across Kuala Lumpur. Currently, the line-up of cars is comprised of the Perodua Axia and the Honda City at a 30% split each, with the Honda HR-V and the MINI Cooper making up the remaining 40% of the available fleet.
Lime, a bike-sharing startup is looking to expand and to try out car rentals in Seattle, USA. They plan to start their car sharing program similar to its existing bike rental system. Another startup, Getaround, is a platform that allows its users to instantly rent and drive cars shared by people in their city. Their program kicks off in San Diego, USA, where they aim to reduce the financial burden of car ownership by sharing their car on Getaround and earning money when people rent it.
Volkswagen will also roll out its public car-sharing model with about 250 cars, followed by a shuttle service and later a peer-to-peer car sharing service where car owners can give their cars for use and earn money in the process in Rwanda, as announced by Thomas Schafer, the Chief Executive of Volkswagen South Africa. The tentative date of launch will be “towards the end of 2018 or early 2019”.
The ride-hailing service will operate on a similar model such as Uber with the difference being that the cars will be owned by the carmaker. For the self-drive, the company is in the process of finalising various pick-up/drop-off points across the city where clients can pick up a car or return it as well as pay for the services.
Schafer noted that the model, if successful, could see Rwanda pioneer in the technology globally before replicating it across the world.
Services like car-sharing and subscription models, however, are setting the stage for the shift to more widespread automated services as the industry rapidly evolves, said Carter at Vision Mobility.
“We’re very much on the cusp of the future, but I very much see over the next five years that this type of way to get into a vehicle, not just buy, but have usage access to a vehicle, will grow very very quickly and significantly.”
What do you think about the future of car sharing and car subscriptions? Leave a comment below!