Mobility isn’t just a buzzword, and it isn’t something that’s way off in the distance as many would have you believe with talk of ‘future mobility’. It’s real, and it’s already here.
According to Volkswagen Group, the mobility market globally will grow from a €2 trillion to €5 trillion a year market by 2030, presenting a huge growth opportunity for those willing to keep up with the pace of change or reinvent themselves to thrive and seize the opportunities in front of them.
Driven by a number of societal, legislative, economic and technological changes, mobility is manifesting itself in a myriad of ways, from e-scooters at one end to air taxis at the other. But each shares a goal of a truly integrated multimodal transport network.
Vehicle ownership is fast becoming vehicle usership
Wave one of the shift to mobility has been happening for a long time, driven by increasingly flexible and affordable finance products.
Traditionally vehicle users either bought a car outright or accessed one for fixed period – usually three years – on a lease agreement. But as we all know, the growth of affordable finance products revolutionised the new vehicle market and made more vehicles accessible to more people.
What it’s also done, perhaps without anyone even realising it, is change vehicle owners into vehicle users, and OEMs into asset owners through their finance businesses.
Consider this: today, over 80% of all new vehicle sales in Europe’s top five markets are financed by either captive or non-captive finance institutions, accounting for approximately €265bn of a €330bn market. Vehicles acquired in this way are not owned, they are used. Of course, the user has responsibilities in the upkeep of the vehicle and is making a commitment, but ultimately the vehicle is a temporary, borrowed possession.
Now consider the rise in subscription models we’ve seen in recent years. While this is a market still in its infancy, Deloitte estimate that by 2025, €22bn of the €330bn new car market will shift to subscription – that equates to 8% of all new registrations which is more than 10% of today’s leasing and PCP market.
I believe those estimates are conservative and the subscription market could be bigger still by 2025.
Bearing in mind the new vehicle market could remain flat due to the ongoing supply issues, this subscription volume will come from existing market segments, meaning we’ll likely see vehicles that are currently acquired through PCP or lease migrate to subscription.
This suggests is that if you’re in the business of financing vehicles today and you don’t have a subscription proposition soon, you will lose market share.
Mobility as a Service
If the definition of ownership is already being redefined, what’s next?
Wave two of the shift to mobility will be the establishment of Mobility as a Service (MaaS). In practice, what this means is the emergence of multimodal transport solutions that shift people and goods from A to Z in the most convenient, affordable and efficient way possible.
We’re already seeing some of this play out today in the form of ride hailing apps, car sharing, public transport and subscription services. Over time we will see even more consumers move away from car ownership and begin to utilise these services, at first in urban areas where the infrastructure is already in place, but increasingly in the suburbs and even rural areas too.
Technology will underpin this growth. Today, apps help people access public transport and book taxis, while fleet management software enables asset owners to track, move and manage their fleets. In time, these systems will become ever more connected.
Mobility as a Service is an attractive proposition for users. It offers the advantages of owning a personal vehicle, but with greater flexibility. For OEMS and fleet operators, it offers new growth opportunities and the chance to be at the forefront of innovation in a new market. Mobility is already here, but we’re only at the start of the journey and it’s vital that businesses don’t miss the boat.
Mobility is already here
Evidence of the growth of subscription services is all around us. News of Stellantis’ acquisition of ShareNow, the Mercedes and BMW joint venture, broke recently. ShareNow will be merged into Stellantis’ Free2Move ‘global mobility hub’, which aims to have revenues of €2.8bn and about 15m active customers by the end of the decade.
Care by Volvo, launched in September 2020, is another example. The manufacturer has suggested that half of its vehicles will be on subscription by 2025, with 15% of retail sales coming from the scheme in just its first year of operation. Interestingly, Volvo says that 91% of Care’s customers are new to the brand.
Then you have fleet operators like Sixt who disposed of their leasing operations to focus on digitisation and flexibility. Customers now access Rent, Share or Ride services via an app, alongside the Sixt+ flexible subscription service. Sixt claim customers can access 240,000 cars and over five million connected drivers though the app.
These are shining examples of what subscription model can be, but they also remind us that we are very much in the discovery phase of what mobility should look like. Experimentation is happening all over the place as OEMs and fleets trial new retail formats and consumers dip their toes for the first time.
We’re also seeing greater levels of collaboration between different companies. This mobility shift requires huge investment and sharing the burden has become very appealing in these early stages as well as leaning on third parties who have the expertise and infrastructure to move, store and prep thousands of vehicles.
The impact this is having on the vehicle lifecycle is huge and is ushering in the biggest change to vehicle retail we’ve seen in decades.
Cox Automotive Mobility is the future proof partner of choice for customers exploring and operating new mobility services. From short term rental and vehicle subscription software platforms to electric vehicle solutions and beyond, our mobility portfolio helps our customers flex their operations in this fast-moving landscape and sustainably future proof their businesses.
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