From Tu Automotive
There’s an argument that changing customer behaviors are changing the world of mobility.
This transformation will inevitably lead to challenges within the connected and autonomous vehicle (CAV) ecosystem, which will include the need to inspire consumer confidence over the next decade to increase the acceptance and the adoption of CAV technologies, autonomous mobility, and mobility-as-a-service. The uptake will be slow without a change in customer attitudes towards these technologies. However, maybe the Covid-19 pandemic has illustrated a clearer use for them.
As the future starts now, it’s important to consider the customer behavioral trends of the last five years. Octavian Chelu, principal consultant fleet and leasing at Frost & Sullivan, finds that the number of new vehicle registrations was growing before the pandemic began to bite. This has caused a decline in new vehicle registrations but the market is beginning to recover. He explains that the markets in 2020 declined by 30%. Yet, he predicts they will reach the 2019 level by the end of 2023. This depends on whether there will be any more lockdowns this year, in 2021.
He adds: “In terms of behavior, we have since over the last 2 years is seen people looking for more flexible solutions such as vehicle leasing. Ride-sharing and car-sharing have appeared in the last few years. The company car segment is shifting to using ride-sharing, for example. This has accelerated some trends in the market. New mobility was hit by the Covid-19 crisis – the reluctance to using ride and car-sharing: is there a risk of being infected? People are looking into receiving their own mobility solution, tailored to their own individual use case: e.g. vehicle subscription, allowing you to use a vehicle as little as a month, or more, as you don’t need to sign a contract and you can drop out of the contract at any point in time.”
Chelu argues that this model presents a perfect solution for anyone wanting to avoid public transport. That’s because there is no need to lease the vehicle for 4 years – particularly as we don’t know what might happen over that period. Life changes. “We are still talking about Brexit and Covid-19 and so the demand is increasing in the market for this kind of flexible solution and it will become more and more popular,” he says. This will include an increasingly vigorous push for EVs and vehicle subscription model will allow you to test drive them.
However, he suggests there is still much uncertainty about the economy and about the residual value of EVs. He nevertheless finds: “The needs are coming out of this uncertainty, and the major outcome of the past five years is going to be with regards to the transformation from vehicle ownership to vehicle usership. How is the government going to support? In Belgium they are struggling to reduce CO2, reduce congestion and so they are looking for a mobility budget.”
A mobility budget will permit people to use a bus or train instead of using a vehicle. This kind of mobility shift policy is what he thinks is going to be seen more often in the future. This is because governments are being confronted by the need to reduce CO2. He argues that EVs can go some way to addressing this challenge. However, he adds: “You also need to create green areas in the city to reduce congestion and so you need to have a proper transport network with Mobility-as-a-Service. Many people are talking about it but not many of them are doing anything about it.”
Shifting customer demographics
Dr Pascal Feillard, senior director business transformation, automotive at Capgemini Engineering affirms: “Customer behavior is definitely changing and there are two main propellants: a shifting customer demographic, where older consumer bases are being replaced with younger customers whose socio-cultural values align with sustainability agendas. The second driver for change is macroeconomic challenges and constraints, which are challenging the weight of the car ownership in the households’ expenses.” He stresses that the need for safety and security, changes in energy usage, the limited uptake of pure electric vehicles and the growth of breakout automakers like Tesla, who promise a renewed and appealing car experience.
He says Cap Gemini’s latest research has confirmed the three megatrends that are driving a new era of change: sustainability, customer centricity, and intelligent industry. He explains that the societal and regulatory pressures are driving change across the industry from the perspective of sustainability – pushing vehicle manufacturers to adopt a greener end-to-end approach to address “not just the environmental impact of a vehicle, but every aspect of its operations and those of its partners”. Success of the shift depends not just on their products. He says there is a need to generate enthusiasm as well as a willingness to buy them and to embrace the concepts.
Feillard explains: “Auto companies will also need to cater to changing customer preferences, especially younger customers’ expectations for personalization, seamless transactions and consistent brand experience. Connected services will play an increasingly important role in this as software proliferates inside and around vehicles, not only to support personalization, but also to strengthen and reinforce the car/ecosystem communication capacity. As a key enabler of the mobility experience, we should expect software to play a crucial role in this area and influence it radically. Sales models will need to accommodate these requirements with subscriptions and agency sales becoming more common.”
Need for a market push
So, how can they inspire consumer confidence over the next decade to increase the acceptance and adoption of CAV technologies, autonomous mobility and MaaS? Chelu believes there is no right answer. Much depends on what the mobility providers, the carmakers and the leading companies are going to do. That’s because the technology can be developed but he thinks it may not be successful unless there is a push in the market for it. This has already happened with EVs. Uptake has increased but there is still a long way to go to achieve their mass adoption.
Chelu explains: “We have a model of living our lives that is not sustainable. Having congestion and mega-cities means we have to reduce the number of vehicles. We need to look at not owning a vehicle. That’s the direction in which we are heading but that’s the direction we are going towards.”
Despite this, he argues that autonomous vehicles aren’t going to happen at a large scale until 2030 or so. Their adoption is going to be slow because there is a need for the technology to improve, and there is a need to educate the market. He adds: “If we can’t prove that it’s beneficial, we are not going to use it very much. The rate at which the world population is growing is mind-blowing. If someone is stuck three hours a day in their EV, they are going to be done with driving to the office. We need to make it faster and safer, improving other aspects of our lives.”
Blurring the lines
Feillard believes the lines between car sharing and ownership are blurring – despite the view of many consumers that car ownership is a matter of convenience. Vehicle ownership has often also been about a person’s status. However, there are some reasonable arguments for engaging with a more flexible approach to vehicle usage and this is where the service and subscription models come into play. He says Cap Gemini has found that: “Customers are looking for unique experiences and they are more inclined towards services that add to the overall driving experience. In terms of purchase options, subscription models have a promising development as they can provide customers with the possibility of changing their car more frequently. However, field experiments indicate that these new business models could be limited to a fraction of the automotive market, such as B2B leasing and upper-end markets. Additionally, the Covid-19 pandemic has amplified a trend among younger consumers who are more likely to now purchase a car in order to avoid taking public transport. Offering a more flexible approach to mobility will be key for OEMs.”
Chelu concludes that customer behavior will change gradually and that needs to happen to reduce the resistance to the new mobility models and to the types of vehicle. He argues for a hybrid approach to ease people into it, which will need backup from the authorities to reach the goal. In terms of mobility’s future, he says mobility users are “going to look for less restrictive ways to use vehicles, and to get around as quickly as possible”.
Speed and convenience are still going to be decisive factors, whether or not a person or a business actually owns the vehicle, which is why there is a need for fast and integrated approach to MaaS. As time marches on, customer behavior can be influenced by increasing the mobility options – from vehicle subscriptions to vehicle leasing. This, argues Chelu, will require unified pricing based on the use of a type of vehicle per day, paying for what you use and not paying for what the provider wants you use it for. To succeed, these services will need to be tailor-made to customer demand. Meanwhile, the pandemic is pushing us all to go a bit faster towards these models.