Car ownership was once seen as the pinnacle of adulthood; but these days many are finding it increasingly hard to justify such an enormous financial commitment. Between high insurance premiums, registration fees, and petrol prices, owning a vehicle has become less desirable than ever.
New trends and solutions are changing the way consumers buy and utilize vehicles.
Mobility as a Service (MaaS)
Modern technology is revolutionising how we travel. Rideshare apps, car sharing platforms and mapping applications offer us more ways to get from A to B than ever before.
With an increasing need for more personalized transport services comes a significant market space and momentum for Mobility as a Service (MaaS). MaaS is a subscription-based model that gives users access to multiple mobility options from within one app through ticketing and payment operations – perfect for urban mobility services like Uber.
MaaS is likely to grow and adapt over time, as new business models and revenue streams emerge. While many of these developments remain at their early stages, MaaS’ impactful nature cannot be denied for both individuals and companies alike. But can it replace traditional concepts of car ownership altogether?
Convenience is one of the main considerations driving consumer decisions around purchasing vehicles, even surpassing price. That is why so many independent dealerships emphasize its significance as part of their marketing message.
Car buyers today are looking for ways to cut costs and save time when purchasing, maintaining or exchanging vehicles. Electric vehicle (EV) manufacturers like Tesla and China’s NIO are taking note of this trend by selling cars online with hassle-free returns and swaps – something EV companies such as Nissan can also do.
These innovations do not appear to have reduced the value of car ownership. Instead, research indicates that consumers often underestimate their private costs of owning their vehicles; more people might forgoing ownership if these costs were better understood5. Furthermore, ride-hailing services have yet to fully displace private transportation in urban environments.
Subscription services – from Dollar Shave Club and streaming video content, to furniture – have become increasingly popular as consumers value having the flexibility of selecting their vehicle without incurring the costs associated with ownership. This “option value” is especially evident among younger generations.
New on-demand travel options such as ride-hailing and mobility-as-a-service apps (digital platforms that help people seamlessly plan, book and pay for various transportation services) are lowering car ownership rates in many cities. Daimler’s 2008 Car2Go car-sharing service proved that on-demand access to private vehicles can replace owning one in dense urban environments.
Automakers have taken note of this trend and introduced vehicle subscription offerings of their own. These offerings typically provide brand-specific fleets as well as concierge services and more attractive insurance packages than would otherwise be available independently.
Companies today are facing increasing demands to use sustainable business practices, including using recycled materials, ethical sourcing practices and transparency measures in their supply chains. While the benefits may be clear, undertaking such an endeavor may not always be straightforward.
Private cars are one of the leading sources of air and noise pollution, contributing to climate change, taking up valuable real estate that could otherwise be used for active transportation and limiting our time spent exercising and socializing. Car dependence also reduces exercise time as well as time spent exercising alone or with others.
Even though car ownership brings many negative impacts, it remains hard to discourage its purchase. According to research, car dependency stems largely from over-appreciating cars beyond their functionality and underestimating costs; as a result, cities must provide alternatives and make them accessible more easily.
Autonomy is an obvious next step and supply chain leaders are quickly moving in this direction. For instance, Nissan Leaf features ProPilot technology for hands-free highway driving while Audi’s Level 4 autonomous car only requires that its driver enter their destination address.
With such technology, car ownership may become less attractive as more people turn to ride-hailing fleets and car sharing with friends. Furthermore, this can help lower carbon emissions by leaving idle cars sitting idle until needed by someone.
This will likely bring major changes to insurance, necessitating new rules and regulations regarding liability in autonomous vehicles as well as an overhaul of traditional functions such as pricing, claims processing and management.