The increasing popularity of on-demand services and solutions as a service has affected numerous areas of our lives and helped drive the customer experience forward. Next to feel the impact of this key element of digital transformation is transport. Just like how Uber and similar ride-hire companies have transformed the way we use taxis, so “car as a service” (CaaS) is set to transform how we use automobiles.
The term CaaS has been around for some time now, mainly in the vehicle rental industry, and centers on providing consumers with a car on demand for as long as they need it. As with any XaaS solution in the enterprise environment, it is an OPEX model rather than a CAPEX one.
The rise of ride-hailing companies such as Uber has played a role in this shift away from vehicle ownership, too, as consumers seek more agility and flexibility in the way they get around.
Why is this happening?
There are a number of reasons for this trend: to start with, car purchasing by the technology-dependent millennial generation is falling rapidly. For them, owning a car simply does not carry the same appeal it did for their parents’ generations. In addition, costs of owning and running a car have increased, particularly in cities where parking charges and congestion fees impact people’s budgets. Insurance remains another costly barrier to why people are choosing not to own a car today. Plus homeworking and telecommuting have increased, meaning fewer people actually need to drive to work.
The impact may be so dramatic that by 2030, only 20 percent of Americans will own a car, according to a report from think tank RethinkX.
Manufacturers recognizing the shift
Auto manufacturers have caught onto the trend, too. German automotive behemoth Daimler, owner of Mercedes-Benz, acquired a 50 percent share in French ride-hailing app Chauffeur Privé in December 2017, just the company’s latest move into the sector. Daimler had previously acquired MyTaxi and has invested in Dubai's Careem.
Other companies are in on the act as well. In 2016 General Motors invested $500 million in ride-hailing app Lyft, while Toyota invested in Uber, Volkswagen bought shares in Gett, and BMW bought a share of carpool platform Scoop. It seems that car manufacturers have recognized that the shift from car ownership to far greater access to vehicles, or “usership,” is here to stay. Technology seems to have created disruption in a very traditional marketplace.
Technology central to the change
Technology is powering this new model, with many modern consumers, be they millennials or simply tech-savvy users, being more interested in getting their hands on the very latest digital technologies than in getting their hands on the wheel of a car. Today, technology has changed the way we think about everything from music to work, and it is now changing the way we think about how we use cars.
Research by Penn Schoen Berland found that over half of millennials are happy to share rides with others. Around one-third of them are willing to rent out their own vehicles, and where the idea of a first car once dominated teenage obsessions, today these people are more focused on the latest technology and devices.
Another report by Research and Markets suggests that there will be 26 million car-sharing users worldwide by 2020, compared to 4.8 million in 2014. Millennials seem to be driving this new lifestyle that chooses shared rides over ownership, and it will have a profound effect on the future of the automotive industry.
Factor in the evolution of the in-car user experience and you have a true paradigm shift. The Internet of Things (IoT) and rise of the connected car mean we can have a completely personalized experience in any car: we can log onto our personal email, social media accounts, Spotify playlists and much more. This shift follows the digital transformation on-demand approach, or “as a service” (XaaS) mode, and gives greater choice, flexibility and agility to end users that enhances their experience.
The right partner, the right customer experience
As drivers continue to make the shift from ownership to usership and technology goes on changing the entire driving experience, companies that thrive will be those that work with the right strategic partners.
This is a major transformation of a traditional industry. Central to the connected car and the move from ownership to usership is global connectivity: but further to that, the other key step is that rental companies, manufacturers and other related companies recognize that digital transformation is fundamental to success. At Orange we believe that successful companies will be those that adopt the right as-a-service philosophy to car manufacture and deliver a seamless, secure, global driving experience. Orange specializes in helping large enterprises successfully navigate this area of digital transformation.
Julien Masson joined Orange Business in February 2017 as Head of Connected Car. He is leading the development and deployment of the Orange vertical automotive business strategy for the whole connected vehicle ecosystem.
Julien has extensive experience in infotainment and telematics within the automotive industry, acquired over 17 years working in different parts of the connected car value chain: Tier 1 audio and navigation suppliers such as Clarion and Parrot Automotive; OEMs such as Nissan, where he defined cross-car-line audio, Bluetooth and navigation strategies in cooperation with Renault; and telematics service providers such as Connexis, where he rolled out in-mass production voice and data services for BMW Assist.
Prior to joining Orange Business, Julien led the European Business Development and Sales Operations at Parrot Automotive for five years.