PART 2: Is the car ownership model we’re used to about to break down?
When people start asking questions like this, it’s usually because it already has. It’s in the nature of human beings to cling to the familiar – we’d rather avoid change if we can, because it’s difficult and often frightening. But the fact of the matter is that the familiar model for new car ownership is almost certainly in its death-throws.
As we explored in Part 1, fewer and fewer people are 'buying' new cars. In the private market, over three quarters of sales are bought on some form of credit (1), and the most popular credit solution is PCP, which now accounts for over 70% (2) of private sales. And this is true across the market – even luxury brands like Bentley are increasingly turning to PCP as a driver of new sales volume.
Of course the used market remains overwhelmingly 'buyers', but PCP is making inroads into the used market too: PCP now accounts for a third of used car finance agreements, and this is growing. Used car dealers are clearly keen to replicate the success of new car PCP in the used market.
Change is also being driven by manufacturers. Self-preservation demands that a sensible company spreads risk: just as most OEMs have experimented with different alternative powertrains (such as hybrid, electric and hydrogen) so they are dabbling in these new ownership models, investing in new business models internally and externally.
In Stockholm Audi has established Audi Unite (3), a group ownership scheme where up to four drivers share one car.DriveNow is a joint venture between BMW and Sixt, providing car sharing services in seven European and North American cities. The world’s largest car sharing operation, Car2Go was founded by Daimler AG in 2008.
We shouldn’t forget that OEMs are investing in these businesses to increase their sales: Audi would rather sell one car to four people than no cars at all! But at the same time operations like these, backed by some of the world’s most respected brands, are legitimising these new models for consumers.
And this is a key point.
Whenever a new product or service is launched, the challenge is to get beyond the ‘early adopters’ who actively seek out innovative solutions and are prepared to take a risk in return for being in the vanguard. When a trusted brand enters the market they bring with them a comfort factor for mainstream consumers and legitimise the new product and service.
At some point in the near future these factors will start to come together: negative pressures like increasing cost of ownership and congestion, coupled with wider positive experience of new user models and an increasingly common view that it makes more sense to ‘use’ than to ‘own’ will play against the idea that cars are to be bought.
With trusted automotive brands offering these new ownership models, consumer resistance will also be reduced. After all, many people have already abandoned car ownership: I suspect that most people with PCPs don’t really know that they are effectively leasing their car – but one day the penny will drop.
TO BE CONTINUED...
Part 3: “A brave new world of car usership”
(1) http://www.fla.org.uk/index.php/motor-finance/
(2) FLA INDUSTRY STATISTICS, Finance & Leasing Association 2015
(3) https://www.audiunite.com/se/service/en_unite.html
