The End of Auto Ownership: How Would the Auto Industry Adapt? | Lean production
We all remember our first car and the excitement and feeling of freedom that came with it, even though it wasn’t the smartest or newest model on the road. Later in life, if we’re lucky enough to be able to afford a slightly more expensive model, cars can become a status symbol.
But what if that desire to own was replaced with a desire for convenience and a pay-as-you-go approach? With a drop in the number of people learning to drive, an increase in the popularity of companies like Uber, and the likelihood of self-driving vehicles on our roads nearby, there are concerns that we are seeing a shift towards leasing rather than owning, a car.
In many ways, this makes economic sense. It eliminates the need for up-front capital investment and subsequent repayments required to purchase a car, as well as the ongoing burden of running costs, regular maintenance, and technical checks.
If we see a fundamental shift in the traditional and long-standing pattern of how we own and use cars, it will have a huge impact on various stakeholders in the industry. Let’s take a look at each affected part.
1. Manufacturers and dealers
Brand loyalty is vital in the automotive industry with an emphasis on keeping the customer happy so that they come back time and time again. However, if it is not individuals buying vehicles but rental companies, manufacturers and dealers should rethink how they have built and secured that brand loyalty and retain their customers.
Manufacturers and dealers alike should focus on targeting rental companies looking for value, reliability, and maintenance and operating costs: a whole different beast. Perhaps this move would see the end of custom leather seats and a shift to a more functional approach where cars are built for driver comfort in the back seats and high mileage.
If this trend hit manufacturers as hard as suspected, it would change the focus of the entire supply chain as it appears to support the revised requirements.
2. Used sales
If the cars are fleet-owned and we pay to use the vehicles only when needed, it is conceivable that we will see an end, or at least a significant decline, in the second-hand market. . After all, why buy a used car if you can easily lease a new one when you need it?
Since rental companies would demand a decent return on their investment when purchasing vehicles, fleet cars would be subject to higher mileage and wear and tear, which would reduce the likelihood that these vehicles would be an attractive option for drivers. buyers looking for convenience.
3. Finance companies
Currently, financing options such as personal loans, individual leasing, and hire purchase support the individual ownership model. Often, brands have their own captive finance companies to meet this demand and help secure an ongoing customer relationship.
However, with the shift to a new ownership model, we would likely see more fleet financing opportunities and therefore a shift in the parties that fund the industry. If the vehicles were used for carsharing and rental, this would affect the residual value of the asset and therefore the loan profile and risk.
New opportunities are emerging for finance companies to support the new model of ownership and use, supporting cashless, secure and instant payment methods for car rental.
4. The insurance market
Currently, car owners in the UK purchase insurance for specific vehicles. If we see a shift towards car rental and the use of taxi services instead of owning, then the question arises as to whether and how people get insurance. Would the rental companies take over the coverage and include the costs in the rental price, or would we, as individuals, need insurance for any vehicle we might use?
Since fleet insurance could not take into account the risk profile of the individual driver, premiums could be higher because insurers cannot assess their risk profile with the same degree of certainty as with people with a known loss history.
5. Technology companies
From reservation systems to payment systems, all new models of ownership would be supported by technology. In the rental market, for example, companies should think about how they track vehicles and handle deliveries and returns in different parts of the country. The opportunities in this market are remarkable.
6. Public transport
As access to the car becomes easier and cheaper, it is likely that one can expect a decrease in the demand for public transport.
Maintaining environmental and sustainable development commitments is a permanent need, with the aim of ultimately reducing the number of vehicles on the road. As a result, discussions need to take place around the integration of the new ownership model and the existing public transport infrastructure.
If the process is kept simple, the two structures combined could in fact allow greater mobility at a lower cost. Remote locations would have better access to a wider transportation network and hopefully this would encourage people to get out of their cars and use public transportation. A long shot maybe, but maybe some will even get rid of their car altogether.
A seismic change could occur relatively quickly, irrevocably changing the auto industry. In addition to the challenges, this new landscape would present enormous opportunities for those who reacted appropriately. Maybe you can be one of the disruptors of the new market.
Ruth Andrew, Senior Partner at the National Law Firm, Mills and prefect