This article was originally published in Automotive World by John Phillips, GM of EMEA, Zuora.
Mobility-as-a Service (MaaS) has been hailed as a trend which could integrate and revolutionise the way city dwellers navigate their passenger journeys from one form of transport to another. Deloitte has claimed that, in dense urban environments, MaaS would offer such an improved journey and passenger experience that it could replace the need for many consumers to own private forms of transportation. Akshay Jaising of Maven, a car sharing service, has also claimed that every shared car removes ten vehicles from the road.
OEMs are already standing up and taking notice of this trend and how it could impact on their business models. In September 2019 BMW and Daimler, decided to see this trend as an opportunity, and announced that they are investing nearly £1 billion to combine their mobility solutions around the world. Embracing coopetition, they have created a joint mobility venture, ShareNow, which will offer car sharing, multi-modal, and taxi ride hailing services, for an increasingly autonomous and on-demand future.
Consumer appetite also demonstrates a shift from ‘ownership to usership.’ A recent mobility study published by Cox Automotive highlights that the desire to own vehicles is dropping steeply among younger consumers. Enticed by the relatively small fee needed up-front and the convenience offered, many consumers in cities do not now see the need to own a car.
The rise of MaaS
According to PwC, the mobility as a service (MaaS) industry is set to be worthover £120 billion by 2022. MaaS is the integration of various forms of transport services into a single mobility service accessible on demand, according to the MaaS Alliance. Experts can see car rides easily becoming part of a multi-transport mode journey, with passengers hopping from shared bicycles to cars and scooters – or even car to car depending on routes. The popularity of existing shared mobility schemes in many European cities is buoying hope in the shared services future.
An example of this shift is Radiuz, a Dutch company saw the need for ownership based mobility solutions was disappearing and instead created a solution to offer travel as a usage-based model. The platform offers integrated mobility solutions, including public transport, bikes, taxis and even parking, in the form of a pay-as-you-go subscription, which provides access to a variety of mobility options allowing customers to plan, book and view all journeys directly online.
Arguably, many consumers are already used to a subscription based consumption model – Zuora’s recent bi-annual Subscription Economy Index (SEI) found that the Subscription Economy – an era marked by a broad consumer shift towards on-demand services – has grown more than 350% in the past 7 and a half years (since the SEI has been published).
MaaS’s impact on the automotive industry
To adapt to the industry change in the way passengers view and use transport, we will also see automotive business models evolve. The introduction of autonomous ride-sharing vehicles will be the cornerstone to making MaaS a reality and change the way consumers move around urban environments. Less congestion on the road, more environmentally friendly and convenient transport will cause a surge in consumer demand for MaaS.
And, from a B2B perspective, it is predicted that by 2025-26, vehicle subscription programs could account for nearly 10% of all new vehicle sales in the U.S. and Europe. Experts predict that over 16 million vehicles will be part of vehicle subscription services by 2025.
To prepare for this shift in how people use transport, OEMs and manufacturers should consider whether the autonomous vehicles of the future may need to be built with a subscription based payment model in mind. By developing unique, customised subscription offerings for both drivers and fleet managers alike, customers will be better placed to select the service which best suits them, and their own subscription based business.
To make this vision a reality the car manufacturers will need to think about financing models, loan terms and maintenance and repairs, as some transition from the traditional car dealerships model to becoming fleet managers.
It’s time for the automotive industry to take action. Many notable technology companies including Spotify, Uber, Apple and even Google have changed their business models to adapt to evolving customer demand – moving from a static and linear product offering to a subscription-based model to encourage recurring, predictable and stable revenue. The automotive industry should follow suit.