Subscription Commerce

Former GM Chief Says Ditch Vehicle Ownership For Ridesharing

Former GM Chief says Ditch Vehicle ownership

What was once a radical idea is seeming much less radical these days, and thanks has to go to modern payments and commerce, among other factors.

Here the story: The former president of General Motors, Dan Ammann, is criticizing vehicle ownership. As Bloomberg described it, he called “solo drivers of gasoline-powered cars ‘the fundamental problem’ behind pollution, congestion and vehicle crashes.” Ammann was president of GM until January and now leads a company working with self-driving cars, Cruise, in which GM has a stake. “Ammann, 47, is looking to promote the idea that electric, self-driving vehicles purpose built for ride-sharing are the best cure for modern-day urban transportation woes,” the report said.

Indeed, vehicle sharing and subscriptions are generally gaining traction in the automotive world, and the preferences of younger consumers seem to be shifting toward something that does not equate vehicle ownership with mainstream consumer life.

The anticipated compound annual growth rate (CAGR) of the global automotive subscription services market through 2022 is 71 percent.

In an effort to reach drivers who want the convenience and variety of a subscription, Mercedes-Benz is rolling out a pilot service called the Mercedes-Benz Collection. Drivers will be able to access Mercedes-Benz vehicles in Philadelphia and Nashville with the launch, the company said in an announcement. With the pilot, Mercedes-Benz is launching three tiers: Signature, Reserve and Premier. Drivers can select from any vehicle body style offered within their selected level. Vehicles offered include SUVs, sedans, coupes, cabriolets, wagon models and even roadsters.

The trend is not confined to famous automotive luxury brands, either. Earlier this year, for instance, Toyota announced the official launch of KINTO, a new company to manage and operate its car subscription service. KINTO is funded by Toyota Financial Services and Sumitomo Mitsui Auto Service Company.

Other trends are also at play.

According to IHS data, around 2007, the average American consumer could be counted on to own 13.4 cars over the course of their lifetime. Ten years later, that figure has fallen to 9.3.

According to the U.S. Department of Transportation, cars on the road are getting older. The average age of a truck or car in operation in the United States in 2017 is nearly 12 years old. That’s two years older than it was 2007, and nearly four years older than it was in 1997.

The same federal data also shows that owners are holding onto their cars for longer, hence the fewer cars owned over a lifetime. The average term of ownership has also been on the rise — U.S. customers once were expected to hold onto a car for an average of four to five years; that number has climbed consistently to reach an average of six to seven years.

There are a variety of factors responsible for those changes. Shifting employment patterns, reduced customer budgets and improved automotive quality, combined with the rising costs of car ownership, are among the reasons consumers and their cars have a much longer relationship than ever before.

How far will these trends shift in the coming months? Stay tuned.

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