Battle for miles and minutes in mobility explored by Andrew Williams.

Soon the auto industry will no longer be defined by the number of units sold but by how many miles are driven and how long is spent in the vehicle.  So, how might vehicle subscription services be used to increase consumer usage of in-vehicle connected services and could the integration of money-making digital services from a variety of providers help companies gain more value from miles and minutes driven?

'Usage-based' mindset

According to Azarias Reda, founder and CEO of subscription technology platform Carma Car, a key effect of subscription services is that they begin to move customers to a 'usage-based' mindset in their mobility expenditure.  Although the same could be said for ridesharing and car-sharing models, he believes that subscriptions are different because consumers are spending extended times in one car, typically a month or longer. He said: "So, if vehicle subscription offers eventually start to include other offers like in-car connectivity or navigation we believe consumers would find it much easier to understand and purchase.  This has been one of the areas we have focused on building the Carma Platform, which allows subscription operators to offer additional value-added services to the subscription experience."

Meanwhile, recent results from McKinsey's consumer survey covering 3,000 customers in US, Europe and China indicate consumer willingness to pay for connectivity services varies from 40% to 70%, depending on the use-case. Besides perceived value, Dr. Timo Möller head of the McKinsey Centre for Future Mobility, points out that consumer expectations of accessing free or ad-supported use-cases is also an additional factor that influences willingness level.

"For use cases like connected navigation, around 40% of consumers are willing to pay, ostensibly due to easy availability of real-time navigation apps on smartphones.  For services like networked parking, 70% of car drivers are willing to pay money.  Therefore, each use case will need a tailored mode of monetisation," he says.

Möller also argues that the automotive industry should clearly communicate the value proposition to the consumer, regardless of the payment model.  For specific use cases or use-case bundles, he believes that the subscription model, including lifetime subscriptions, can be a good option.  For other use cases, he takes the view that performance- or usage-based payments, are more relevant.  He added: "Also, freemium models are relevant – as we know it from media or apps.  In these models, customers can use free services but also have the option to purchase premium services on top."

Gaining value

For Reda, the two most important changes associated with subscriptions are the facts that providers now hold details of payment cards on file and that drivers have an extended stay in one car, unlike car-sharing and ridesharing.  In his view, this is a great combination for offering additional digital services to complement the base vehicle subscription. "I think there are some excellent parallels to draw to Amazon Prime in this space.  Amazon Prime started as a free shipping membership on the core e-commerce platform.  Over the years, it has grown to include plenty of digital services accessible over multiple devices.  Similarly, vehicle subscriptions are only starting to address basic mobility needs, but there are plenty of opportunities ahead. An important point to make is that the way subscriptions have been emerging so far, and the way we have been building our subscription platform, is to give each operator significant control over the programme, unlike previous mobility solutions.  That means, more players in the auto industry can be a part of the monetisation opportunities created via subscriptions."

Elsewhere, Möller believes that critical mass is important for monetisation to reach meaningful levels, both of users whose data is available in a usable, standardised, compliant manner as well as of industry players offering connected services.  As such, data exchanges and aggregators will become more relevant, as will partnerships, mergers and acquisitions and investment by larger players in start-ups that focus on this area, as well as carmakers who are opening their data platforms for third party service provisioning in the vehicle.

"On the front-end, we see virtual personal assistants, as the consumer-facing service integrator for monetising services from a variety of providers in convenient natural conversation-mode with driver and occupants.  This can be both branded approaches like Alexa in vehicle, and white-label offerings like IBM Watson.  These would work seamlessly with innovations in HMI technologies that can personalise all aspects connected service experience," says Möller.

Electric vehicles

In Reda's view, both car-sharing and subscription services play an important role in increasing adoption of EVs.  For example, car-sharing schemes help to address range anxiety issues because customers already have a pre-planned route, and can easily take an EV as they are not getting the car for unknown use cases. "On the other hand, subscriptions remove any residual risk to owning an EV.  While this is also accomplished via leasing, the month-to-month cadence of subscriptions makes the barrier to entry much lower," he says.

Möller agrees that car-sharing and subscription-based vehicle access services are an efficient tool to overcome concerns relating to high purchase price, range and trust in the technology. "Consumers do not need to bear the high upfront cost of the vehicles and gain real-world experience, especially with respect to driving range, as well as availability and usability of charging stations," he adds.

[Mob.Williams.2018.04.16]