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To own or not to own: traditional car ownership under growing pressure

Autonomous mobility solutions predicted to disrupt traditional model in coming decade

The traditional model of car ownership is also under pressure from the mobility as a service (MaaS) concept.

The traditional model of car ownership is also under pressure from the mobility as a service (MaaS) concept.

 

Depending on who you talk to, almost nobody will own a car in 2030 or the old habit of having a roadster in the driveway will die extremely hard indeed. But there is growing evidence of some of the heat going out of our love affair with the car.

A research study carried out by Accenture in 2019 – just before the Covid pandemic hit – found that many car owners would consider giving up car ownership in the future in favour of autonomous mobility solutions, such as self-driving buses or taxis. Of the 96 per cent of car owners who said they thought they would own a car in the future, nearly half (48 per cent) said they would consider giving up car ownership if autonomous mobility solutions were available.

The traditional model of car ownership is also under pressure from the mobility as a service (MaaS) concept. This is a kind of Spotify or Netflix for the personal transport world. People take out monthly subscriptions which allow them a certain amount of usage of a rental car fleet, with vehicles parked on city streets and easily located using a phone app. They pay extra if they exceed their monthly limits, just like a mobile phone plan.

The main advantage of the subscription model is that it lowers the cost and hassle involved in car usage. The motorist is no longer tied to one car for years, has no high up-front costs and no debt. All the capital outlay rests with the auto maker or subscription service provider – often the same thing.

And there are other advantages, according to US management consulting firm Oliver Wyman. In an article entitled “How car ownership can become a relic”, Oliver Wyman consultants Joern Buss, Leslie Chacko and Robert Bauer point out that subscription lets people change their cars almost as often as they change their shoes. “Some plans allow flipping a car every few days. You could drive a sensible sedan during the week and switch to a sports car or sports utility vehicle for weekend treks.”

Generation Z

And younger generations of motorists may find the new model very attractive, according to the Oliver Wyman team. “Millennials and members of Generation Z – already among the biggest users of MaaS offerings – are showing the most interest in this unconventional approach to automobiles. They like the flexibility and lack of commitment, given that their needs are probably changing regularly as they buy homes, get married, have babies and change jobs. Car subscription also often fits better into personal budgets for these demographics – which are already familiar and comfortable with the idea of monthly subscription services, given their heavy mobile phone use and adoption of entertainment and gaming services.”

There are more than 5,000 car-share vehicles in the UK and 80 per cent of them are in London, according to Deloitte director Andrew Byrne.
There are more than 5,000 car-share vehicles in the UK and 80 per cent of them are in London, according to Deloitte director Andrew Byrne.

Renault Ireland product manager Jeremy Warnock believes MaaS adoption will grow in the coming years. “Shared mobility is unquestionably part of the future,” he says. “Groupe Renault’s new Mobilize brand has been set up to develop products to meet the needs of that market. And by products we mean not just vehicles but the services and platforms through which people access them.”

By 2030, use of these services will have increased significantly, he adds. “It may be that some customers give up on private car ownership and move to shared mobility. Others may grow up never owning a car and never feel the need to own one. But we’re more likely to see a blended model – where perhaps a household goes from owning two or more cars to owning fewer cars and occasionally using a shared car to replace an owned car that was underutilised.”

While people seem to find MaaS attractive, Deloitte director Andrew Byrne points to a contradiction in between sentiment and action. “Data produced by Ericsson shows that while 90 per cent of people believe it would be a great idea to car share, 90 per cent of them still want to own a car.”

He says this comes down to practicalities. “There are over 5,000 car-share vehicles in the UK and 80 per cent of them are in London. The model doesn’t really work outside big cities. Millennials tend to be up for car sharing and the ShareNow app is available in 18 cities in eight countries. But that’s great for young, single people. If you look at a married couple with two kids, car sharing will never work for them.”

Time will also have an influence. “The pay-as-you-go idea is good and we might have a different conversation about it in 2040, but I can’t see the current ownership model changing in any substantive way in the next decade.”

Virtual car

In the meantime, the concept of what we actually own when we buy a car may undergo fundamental change. According to fleet leasing specialist LeasePlan, ownership of a car will increasingly mean ownership of a virtual object, instead of the current normality of owning a physical object.

In an article in UK trade publication Fleetpoint, the company foresaw a time when urban dwellers who choose not to own a car would still have access to personal mobility through “cloud ownership”, where a car is available on demand. “Through interaction with devices and personal data stored in a cloud, these cars will demonstrate a level of personalisation which sits somewhere between the concept of a taxi and a privately owned car. However, this does not mean that private car ownership is going away – certainly not in rural areas. Instead, manufacturers will leverage new technologies to make the ownership experience more personal and customer-centric than ever before.”

This trend may well open up a third option beyond traditional purchase and leasing with the leasing companies stepping into the space to provide the financial and service model to support it.

It all comes down to money in the end, however, and whatever ownership or subscription models emerge, they will have to make financial sense for the automakers if they are to work. “The car manufacturers are in business to make money,” says Byrne. “Yes, they want to develop safer vehicles and reduce emissions but, in the end, it comes down to making money for their shareholders.”