Mobility Report
Mobility demand is expected to increase 70% by 2030
THE CIRCULAR MOBILITY ECOSYSTEM
Decarbonization and electrification are two of the hottest topics being discussed by operators within the Mobility industry. As many countries have already set specific targets to reduce their carbon emissions by 2050-2060, circular mobility is expected to positively contribute to the shift towards a “greener” economy. Mobility demand, in terms of passengers and vehicle stock, is expected to increase 70% by 2030. Circular cars will be a key building block to serve the global raising demand, while at the same time keeping resource consumption low.
According to a recent report published by Accenture, there are four key transformation pathways to accomplish circularity within the automotive ecosystem:
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Reach net-zero carbon emission through the entire vehicle lifecycle including low-carbon emission resources, assembly, and integration with energy grid.
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Exploit resource recovery and close material loops (e.g. battery recycling)
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Increase the lifespan of both vehicles and components through subscription-based ownership, re-use, and large-scale remanufacturing
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Ensure efficient use and high-occupancy of vehicles
The creation of the circular mobility ecosystem has several barriers. Some are related to customers and use patterns, whilst others are linked to the business models, production methods, technologies, and regulations. The challenges are many and we identify few key recommendations to overcome them:
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Agree on a common framework for guiding and measuring progress
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Reassess the profit motive of the auto industry from selling products to selling mobility and other services
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Set standards for data and reporting measures to foster circularity in vehicle design development, life-cycle management, and end-of-life processing
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Secure policy support for systemic transformation
Flexibility, affordability and convinience are beneficial differentiating factors likely to drive growth in the upcoming years.
THE CAR SUBSCRIPTION MARKET
The car subscription market is set to be one of the major contributors to the circular mobility ecosystem. This was valued at $3.5B in 2019 and is expected to grow to $12B by 2027 (CAGR of MOBILITY REPORT 23.1%). Europe was the largest revenue contributor and is projected to reach as much as $4.5B in revenue by 2027 (CAGR of 21.7%).
The car subscription business model is fairly straightforward. There are fixed periodic recurring fees that cover mainly insurance and maintenance of the vehicle. The minimum duration of the subscription is 1 month and the maximum is about 2 years. It is a hybrid between car rental and car leasing solutions.
Flexibility, affordability, and convenience are beneficial differentiating factors likely to drive growth in the upcoming years. Strategic partnerships with automakers and dealers give a competitive advantage combined with the development of strong digital platforms to serve the end-users effectively.
The global car subscription market can be segmented into service providers, type of vehicles, end-use, subscription period, and region. Depending on the service providers, the market can be identified as OEM/Captives or Independent/Third-party service providers. The end-user could be private (B2C, P2P) or business (B2B), whilst the vehicles are typically either IC powered or electric.
Car subscriptions have several benefits over car leasing. First of all, the subscription allows the subscribed vehicles for multiple switches,minimizing idle time and maximizing efficiency.Moreover, the car lessee incurs costs such as maintenance, repair, insurance, license, and taxes. These costs are fully provided by the service provider within the subscription model. Finally, the leasing is a medium to long-term service that normally is beyond the 1-2 years term.
According to a recent study (include the source),end users seem to prefer the authorized vehicle providers over independent third parties. In this way, many automotive manufacturers are introducing their car subscription vertical to enter this untapped market. That said, market participants need to establish strategic partnerships to exploit the long-term business opportunities and gain the competitive advantage needed to acquire market share within the space. For instance, Hyundai Motor launched a subscription model in partnership with Revv across six cities in India.
In the era of the digital economy, end-users tend to prefer online business platforms as they are more efficient from an operational point of view. Websites and mobile apps are the main vehicles to fulfill the changing needs and demands of end-users. Increasing internet penetration across the globe, along with the creation of well-developed and user-friendly websites or mobile apps fosters business activities effectively. Market players must develop their website and mobile application with additional features to differentiate against the immense competition from the incumbents. The main risks of the car subscription market participants are supply chain execution, regulatory and policy changes, compliance with safety measures, dependency on labor, working capital management, and liquidity & solvency management. COVID-19 has unfortunately hurt the market from the demand and supply side. This momentum is expected to continue in 2021; however, a small recovery is likely to pick up as the vaccine roll-out speeds up in each country. Commute restrictions and lower consumer confidence tighten the demand for car subscriptions.
