So we have all seen the statistics and are aware of the growing trends in the automotive space:
- Around the year 1800, no more than 3% of the world’s population lived in cities. Now that number is just over 50% and is estimated to grow closer to 70% by 2050. We know that fewer younger people are obtaining driving licences and that car ownership is lower in cities than non-urban areas
- Today less than 1% of global new car sales are electric vehicles (EVs). Latest reports suggest that by 2040 35% of global new car sales will be EVs
- Automotive-related companies are developing mobility strategies. Mobility covers a whole range of topics, EVs, autonomous cars, multi-modal transport solutions, car sharing, etc. Then there are the related topics regarding how do customers purchase their mobility needs – finance, leasing, pay-as-you-go, subscription…….
All these issues need to be joined-up if future mobility solutions are to work. Whilst there are clearly opportunities for companies to develop and own as much of the value chain as possible, no one player will own all the required elements end-to-end. Therefore, partnerships and collaboration between OEMs, finance & leasing companies, energy suppliers, technology companies and public transport providers (to name but some) will be essential. Furthermore, governments will play a key role in the long-term sustainable success of such strategies with regard to complementary financial incentives and infrastructure planning. Note the success of EVs in Norway due to government support.
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As mentioned earlier, it is fair to say that most automotive-related companies are developing their strategies to address all these issues. Indeed, new entrants and traditionally non-automotive companies are looking to disrupt the market – Google, Uber etc. However, there is one major factor that will decide whether future mobility strategies will survive or fail – the customer.
If the predictions for future EV ownership and adoption of new mobility strategies are to be realised, the majority of customers need to be convinced, not just the early adopters. If we look at the last seismic shift in the automotive finance market, PCP, which now dominates retail car purchasing, it was hardly an overnight success.
PCP programmes were launched in earnest in the UK during the mid to late 1980s. There were various approaches to how it was launched. Ford led the way with Options by investing significantly with a view to the long term benefits of a trade cycle product. PCP programmes quickly became available across the market from most OEMs and finance companies. However, as more PCP programmes were launched, customer communication regarding the new product was limited and mixed.
The take-up of PCP by customers was slow as indeed was the initial acceptance within the dealer world of having to explain a different way of buying a car. Therefore, PCP became predominately price-led which overcame any uncertainty customers had regarding the product and its benefits – but not necessarily the best route to sustainable success.
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By GlobalDataSo what were the issues behind this initial slow up-take? There are a number of reasons – dealer acceptance, customer understanding, cultural, OEM support….
Let’s start with dealers; until dealers fully embraced PCP and its benefits it is hardly surprising that customers would not be convinced. But being convinced also meant dealers embracing the customer benefits and suitability of the product not just that it benefited the dealer.
Clearly OEM support is also vital; recognising the enhanced customer loyalty and reduced replacement cycle and providing financial incentives to dealers and customers. Therefore, OEM support along the whole value chain encompassing all interested parties is essential in developing a great customer experience.
How the OEM, dealer and finance company work together ultimately determines the success of a new car PCP programme. There were clearly cultural issues at play regarding a switch from ownership to what was perceived as a more usage-based concept. Customers must feel well-informed before they venture into a new way of purchasing a car. Therefore, as dealers became better at explaining the product and the PCP concept became more broadly understood, the rate of adoption increased.
There are clear parallels with the challenges facing the industry with regard to the next seismic shift into the world of future mobility. The shift away from ownership will be far greater than that introduced by PCP. Therefore, what steps are being taken to help customers understand the impact of this and how the implications of such a shift will benefit them? How do we convince customers that EVs for example really are the future and current concerns such as range anxiety will not be a problem?
A recent survey found that 60% of customers who intended to buy a car within the next decade would consider an EV as an option. But the vast majority said they needed more information. Their desire for more information is not limited to the EV product itself; it extends to better understanding how they should acquire the EV. Should they buy the vehicle but lease the battery? What is the infrastructure like to support the EV once purchased? Will existing government incentives that support the economic benefits of an EV be sustained? What will the depreciation be like?
Such issues will be equally relevant to future multi-modal transport solutions. Customers will only use such new concepts if they are easy to understand and easy to use. Therefore, using the parallel of the development of PCPs, if mobility concepts are to be both successful and sustainable, all participants in the value chain need to be joined-up providing a seamless customer experience. This is essential to gain customer confidence to adopt the new concepts in the first instance. It is then also required to ensure that the customer experience lives-up to the expectation.
In summary, it has been said by transport sociologists that if new mobility concepts are to succeed, 50% of the challenge is dependent on effective customer communication. This was certainly true in the development of PCP. It will be of even greater importance in the envisaged world of new mobility which will require seismic shifts in culture and perceptions before we reach the goal of broad customer acceptance.
There’s no such thing as an e-customer, just a well-informed customer.
Martin Ballard is director, UK Operations, at global asset finance consultancy BenchMark Consulting International
