We recently ran a small survey on online car buying preferences.
What we discovered is that two thirds of would-be car buyers prefer more flexible ways of purchasing a car online. To meet this growing demand for change, car manufacturers must adapt existing purchase models.
A new opportunity
The data only tells part of the story. It’s evident that online car sales, where the vehicle is purchased outright, are here to stay. Though what’s interesting is the different modes and models of purchase and how they encompass changing attitudes towards the environment and ownership.
To put it simply, those who use vehicles daily are more likely to correspond to models and behaviours around outright ownership whereas more infrequent drivers are more likely to correspond to those around subscription or sharing.
For example: an avid motorist is more likely to own their car outright vs someone who drives out of necessity, or someone conscious of their impact on the environment but cannot afford an electric car.
State of play
Car-share companies such as Zipcar have grown in recent years in many urban areas, this combined with the pedestrianisation of major roads like Church Street in Stoke Newington and wholly combustible cars not being sold from 2030 onwards creates a perfect storm that must be addressed.
To support different customer appetites and bolster market share, manufacturers first need to imagine new payment methods, for both complete ownership, rental or lease of a vehicle. The three most obvious candidates are on demand vehicles, subscription-based models and sharing.
1. On demand
By creating an on-demand offering, vehicles could be delivered to customers’ doors or a preferred location within one hour of ordering. Employees delivering the vehicles could leverage other on demand vehicles in the area or consider e-scooters as an option to return to base.
The lease could be for hours, or days and the price calculated upfront, with the return or drop-off point for the vehicle designated and a new driver or employee ready to take it away.
An earned reward program based on promoting non-combustible, or smaller, vehicles could also be offered. The application itself could also display the most environmentally and fuel economic vehicle as top listings.
A low-fi version of this exists in the form of car clubs but often the premiums to join are expensive and car coverage can be sparse. Other offerings like Zipcar are popular in urban areas but booking can be difficult.
By capitalising here, car manufacturers can use their network of vehicles to form fleets which create new revenue models and directly respond to changing consumer expectations around sustainability and convenience.
Weekly rolling subscription models are another alternative to buying vehicles outright or financing them. Offering easy to cancel, rolling subscriptions could see people take up vehicles more readily whilst offering them flexibility of return when they’re no longer needed. A particular use case might be life events, for example, moving property or starting a new job.
Whilst this may conflict with other models of financing vehicles that are more lucrative for car manufacturers today, more people may take up this service due to the absence of ongoing commitment.
Moreover, by offering a premium, no hassle, service including:
- Dropping the car off and picking it up on cancellation of the subscription.
- Prebooked valeting - removing the need to get the car cleaned.
- Replacement vehicles if an accident happens.
Means people may be willing to pay higher premiums for subscription as opposed to finance-based offerings.
By creating applications that allow people to list their vehicle as a shared car, manufacturers could generate new revenue streams by taking a small cut of the total amount paid by the person leasing the car from the owner. The application could run on both a listing basis and a request basis e.g. an owner lists their Nissan Juke vs someone looking to lease a vehicle requests a Vauxhall Corsa.
Data about listings could be used to offer automated recommendations based on exact or closest possible matches of an owner’s listing or a leaser’s request i.e. “There’s no exact fit right now but we found this Fiat Punto.”
Again, rewards could be offered for more sustainable leases based around vehicle model, distance estimation and how it’s fuelled. Another interesting opportunity which this model offers is the opportunity to forge new partnerships with insurers, offering policies as part of the application view of a would-be vehicle leaser with manufacturers taking a percentage of the policy sale.
Despite an appetite to change, staunch cultural attitudes may impede the immediate adoption of these models. For many, cars are an emblem of freedom, think Route 66 or the North Coast 500, and status.
On the flip side of ownership are questions about sustainability. Of course, car manufacturers make money from selling new cars through outright purchases or financing them over time, but some customers are already asking for change and manufacturers need to respond even beyond adopting EVs into their range. By doing what? Still think this point needs a bit more detail.
However you look at it, the current mode of car ownership whether – combustible, electric or hydrogen-powered – is not sustainable or necessarily desirable.
This means the automotive industry must consider:
- Designing, building, and maintaining different business and pricing models.
- Creating networks of shared vehicles.
- Rethinking stories about brand and car ownership.
By seizing the challenge, car manufacturers can capture the hearts and minds of people confronted with uncomfortable realities about climate and production, combined with an appetite for new ways of purchasing.
This can enable manufacturers to tap into new revenue streams and ward off their competition, whilst making good on commitments to the environment that don’t solely rely on replicating existing ownership models with non-combustible alternatives.