New forms of transportation such as ridesharing and Mobility-As-a-Service continue to fascinate consumers everywhere, and thus intrigue the automotive industry. Executives are looking for ways to coexist with subscription and mobility programs. They’re also looking to expand their offerings for their franchised dealer networks. It’s smart when you consider the opportunity of program growth, as well as the increase in consumer demand.
In the recent Cox Evolution of Mobility study1, the report found that four out of every ten persons admit that access to transportation is important, but not necessarily through personal vehicle ownership. Furthermore, one-third say they are open to new transportation methods rather than owning their vehicle.
What is Mobility-as-a-Service?
The general public view of transportation is changing. While consumers may not necessarily be looking to eliminate personal ownership of their vehicles, they are interested in on-demand transportation options that do not involve the use of their own asset. This is similar to other subscription-based services like Netflix or Stitch Fix that have redefined the way we look at entertainment and apparel.
Which Carmakers Are Poised for Growth?
Automakers like BMW and Mercedes-Benz have been at the forefront of car sharing programs, each rolling out their Share Now program, enabling users to share over 20,000 cars in 30 cities around the world. While this pales in comparison to the number of personally owned vehicles on the road, it’s a well-defined program that will only continue to grow.
Lexus, Toyota and Ford have also embraced the car-sharing segment, understanding that consumer tastes are changing, and they need to develop programs with their dealers that meet these needs.
It’s no surprise that any of these forward-thinking brands are utilizing Mobility-as-a-Service and subscription programs, after all each one has thrived under and benefited from the earliest form of vehicle subscription, known as car lease transfership.
Lease transfership programs developed over 20 years ago when there were very few options available to rid oneself of a lease. People were looking to exercise their option to escape their lease contract when they wanted or needed, by transferring the lease over to someone else. This model feels like a subscription because the person getting out of the lease could walk away when they wanted, and the person taking over the lease could “subscribe” to a lease contract with remaining terms of whatever worked for their life at the time, such as a person who wanted only a ten-month lease because their job was changing, or someone who wanted to try out a particular SUV for several months because their family was expanding.
However, not all automotive brands have followed the example and bought into this “subscription” mindset. These brands are in jeopardy of missing out because of their inability to adapt to changing preferences and needs. Companies such as Honda/Acura, Nissan/Infiniti, and Hyundai/Kia are three of the more notable families. For years, each one has decided against the wishes of their drivers refusing to allow lease transfer subscription options, making it difficult for their drivers to enjoy what others have enjoyed for more than 20 years.
Lease transfer hasn’t hurt brands like BMW, Mercedes-Benz, Lexus, Toyota and Ford. In fact, it has actually helped them. Customers aren’t looking to turn away from the brand, rather they’re looking to transfer the lease because a particular model no longer works for their changing lifestyle. These brands repeatedly enjoy higher brand retention compared with Honda, Nissan, and Hyundai, whose customers grow frustrated with their lack of transfer options and ultimately switch brands at the completion of their leases to avoid future frustrations.
It’s time for these brands to finally change their ways and fully embrace the freedom and flexibility their drivers have been asking for over the last two decades. Failure to do so will place them at a competitive disadvantage at a time when the broader industry is going through a much more elaborate evolution with complete dealer-enabled car-sharing programs.
1: “Retail Auto Sales to Drop Further as Alternatives to Ownership Become More Accessible and Affordable, According to Final Phase of Cox Automotive Evolution of Mobility Study”; January 17, 2019, Cox Automotive
