Designs, business models for vehicle subscription services

Features - Cover Story

SAP’s automotive industry director and regional head Hagen Heubach offers 5 tips on adopting mobiltiy-as-a-service operations.

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June 26, 2020

Porsche’s Passport subscription service allows drivers to select vehicles from an app and swap models frequently.
Photo courtesy of Porsche

Cayenne on Monday. 911 on Friday.

That’s the marketing hook Porsche is dangling to entice consumers to consider Passport, an all-inclusive vehicle-by-subscription service that the German luxury automaker is testing in a handful of North American markets.

While still finding its footing in a fast-evolving transportation marketplace, the subscription-based mobility-as-a-service (MaaS) model is increasingly compelling to consumers and auto manufacturers, dealers, rental companies, and assorted third-party disruptors, for clear business reasons. By 2030, MaaS, which also encompasses options such as car and ride sharing, is expected to reach $9.2 trillion in market capitalization globally, according to Statistica.

Fueling the rise of MaaS business models is a profound attitude shift whereby most consumers view the car as more functional than aspirational. In its “Evolution of Mobility Study” released in early 2019, Cox Automotive found that nearly 40% of consumers agree that transportation is necessary, but owning a vehicle isn’t. That’s particularly true among Gen Z (55%) and Millennials (45%). With members of these two huge generations (an estimated 65 million Gen Zers and 73 million Millennials in the U.S. alone) poised to become the automotive industry’s primary customer, they could provide the scale for vehicle-by-subscription services to thrive.

“Consumer interest in car ownership will shift to a desire for mobility access,” Cox predicts. And based on its research, it expects interest in the subscription model will come not just from Millennials and Gen Z. For Gen X and Baby Boomers, the chief appeal of a subscription service is minimal effort in maintaining/repairing the vehicle. For Millennials and Gen Z, the key drivers include access to new in-vehicle technology, and the flexibility to swap out vehicles.

What’s clear across generations, according to Cox’s research, is that consumers who have a preference about where they get a vehicle by subscription want the service to come from an original equipment manufacturer (OEM) or a dealer. To capitalize on that preference and gain a share of what is predicted to be a multi-trillion-dollar MaaS market, automakers must first develop and refine a subscription model appealing enough to a broad range of consumers to be sustainably profitable. To do that, they’ll need to focus on five key areas.

Customer centricity

Everything you need. One monthly payment. That’s how Volvo describes its Care by Volvo subscription service, where members pay a monthly fee for a package that includes the vehicle, maintenance, and insurance.

In the Experience Economy, superior customer experiences strengthen customer relationships and loyalty. To better understand what customers want from a subscription service and how they use it, auto manufacturers need the ability to capture, in real-time, feedback from their vehicles’ mobility applications. Users gain 360° customer and vehicle insight, then react and interact accordingly, via customers’ preferred communications channels. Because delivering a high-quality customer experience involves multiple facets of an OEM’s organization, that insight needs to flow unfettered across the enterprise. Artificial intelligence (AI), augmented reality (AR), and chatbots will be instrumental in gathering and leveraging that insight.

Collecting and analyzing timely experience data/feedback at every meaningful touchpoint with the customer will allow manufacturers to improve the experience. That requires a powerful digital backbone that can collect and synthesize insight from operational and experiential data.

Platform of mobility services

BMW Access: All you’ll own is the road. “Leave the oil-changes, insurance, and hassles of vehicle ownership in the dust,” BMW says in touting the subscription service, Access, that it’s piloting in Nashville, Tennessee and Philadelphia, Pennsylvania.

When they engage a vehicle subscription service, consumers are essentially stepping into an entire MaaS ecosystem, with the vehicle as the focal point for an array of services oriented toward providing outcomes to create the desired customer experience – insurance, maintenance, fueling, parking availability, mapping, integrated billing, and more. For subscribers to interact seamlessly with that ecosystem, OEMs need a digital platform that connects elements of that ecosystem, enabling them to collect and learn from operational and contextual feedback from vehicles, consumers, partners, and employees to continuously innovate and improve their customer, product, and brand experiences.

The Mercedes-Benz Collection service allows drivers to subscribe to various Mercedes cars and SUVs.

Connected cars

Of its Mercedes-Benz Collection subscription service, Mercedes-Benz says, “We want to ensure the best service and safety for all of our members. To do so, we keep track of various data points to record vehicle and driver history.”

The ability to collect and promptly analyze the data supplied by onboard Internet of Things (IoT)-connected sensors will be critical to the success of a subscription vehicle service, providing OEMs and others within the subscription ecosystem with real-time insight to optimize the subscription fleet via predictive maintenance. Operating data also can be used to inform pricing insurance, trigger timely delivery of parking space availability alerts, or partner offers for products and services in the driver’s area.

Digital supply chain, smart manufacturing

To operationalize the business, integrate it digitally and operationally into the mainstream enterprise from the start. It will then intelligently connect to the rest of the business, supply chains, and customers, enabling manufacturers to quickly identify trends; handle impulses and short-term signals from customers, dealers, suppliers, and other partners; and make better-informed strategic decisions about the subscription service within the context of the entire enterprise – pricing/fee/billing structures, optimizing fleet assets, customer communications, etc.

Engaging with changing workforce

Exploring, scaling up, and sustaining new mobility business models while maintaining strong positioning in traditional markets depends heavily on attracting and retaining talent. Especially different types of talent, as OEMs need workforces that are ready to plug into the shifting strategic priorities that accompany the Experience Economy, MaaS, and a more software-intensive automotive business.

So as much emphasis as they place on data and enterprise-wide digital intelligence to deliver a high-quality customer experience, they’ll need to do the same to deliver a premium employee experience. OEMs that excel at both will have an edge in seizing a share of the potentially massive global MaaS market.

SAP

About the author: Hagen Heubach is director and regional head of the automotive industry business unit at SAP SE, with end-to-end responsibility for SAP’s automotive solution portfolio as well as the company’s strategy on future mobility and new business models.