How Mobility as a Service may affect vehicle ownership

Suzanne Murtha | 02 Apr 2015 | Comments

In the 1960’s, the concept of buying a car was simple. People grew up dreaming about the car they wanted. They saved for it and they bought it with cash. In the 1980’s, there was a shift in thinking. Consumers began to question the need to spend large amounts of cash for an asset they were going to use infrequently and keep for less than ten years. And so the concept of leasing was developed. Leasing meant not having to buy a vehicle outright, but still having the perks of ownership and access to a vehicle, which was a great solution for many drivers.

Leasing also worked out well for manufacturers, who in the early 2000’s began creating highly accurate models for evaluating residual value in used vehicles. The same companies that were once only focused on the efficient manufacturing of vehicles now began developing substantial financial and leasing branches. By the end of the 2000’s—with persuasive leasing agreements, certified used cars, and economic constraints—drivers no longer wanted to spend their money to own a new car.

In Cambridge, MA—just outside of Boston—Antje Danielson and Robin Chase launched Zipcar, the first car-sharing service. By 2005, the company had secured $10M in funding and had started a new industry. In urban areas, many people were now choosing not to participate in vehicle ownership or paying for parking, tolling, insurance, or gas and instead chose a car sharing option.

Today, owning a vehicle is not as important as it was in the 60’s. Applications for drivers’ licenses have declined, especially in urban areas. As demand for personal ownership has declined, demand for transportation and mobility services are increasing.

There are now many competitors to Zipcar, like City CarShare in the San Francisco Bay Area and I-GO in Chicago. Traditional rental car companies are also joining the market. Zipcar was acquired by AVIS, and Enterprise and Hertz have also initiated car-sharing services. But those joining the car-sharing market have faced an uphill climb in managing demand and the logistics involved in forecasting one-way trips. These obstacles have not been simple to overcome.

Even traditional vehicle manufacturing companies—Audi/VW, BMW, and Daimler—are joining the mix. While other manufacturers may also be pursing car-sharing services as a line of business, they have been less vocal about the pursuit.

Uber and Lyft have also made the news, developing a new model for mobility services and capitalizing on the high demand. Uber was most recently valued at $41B.

Atkins expects to see several new brands enter the mobility space over the next ten years and this includes companies offering mobility as a service. Most recently, there have been rumors about Apple and Virgin in the electric car space, and we’ve already witnessed Google’s autonomous vehicles.

All of these examples point to a dissipation of the importance of brand in traditional automotive manufacturing. This trend also opens an opportunity for untraditional partnering for services. With the growth of the Uber and Lyft comes the distinct possibility of smaller international automobile manufacturers successfully selling to the US market. Previously Chinese, Indian, or other non-traditional manufacturers would have an uphill battle selling directly to US consumers. But new approaches, such as selling their vehicles through services similar to Uber or Lyft, may be feasible—offering lower prices for mobility services instead of ownership.

While enthusiasts will likely continue to supply a steady demand for high-end vehicles, Atkins forecasts a shift away from the importance of branding at the middle to lower-levels. We believe the consistent, decreasing demand for ownership and the many new brands entering the market will create a new focus on those that offer mobility as a service.

For more information on MaaS, you can download a new white paper, Journeys of the Future, written by the UK Transportation’s intelligent mobility team at Atkins here.

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