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How the Sharing Economy Will Impact Car Ownership in the Immediate Future

By Tarun Kajeepeta
Founder, Condor Detroit

This post is part of the MICHauto Summit series, a collection of articles aimed to shed light on the evolving culture and careers in the automotive and mobility industries. This post is the view of the writer and does not reflect the views of MICHauto or the Detroit Regional Chamber. Learn more and register for the Summit today.

The sharing economy is one of the strongest driving forces in shaping the future mobility landscape.  The tremendous growth of peer-to-peer ride sharing has resulted in services such as Lyft and Uber becoming nearly ubiquitous in the day-to-day lives of young professionals within a matter of years. However, many industry analysts and experts agree that the number of personal cars per household is unlikely to decline until 2025 at the earliest. What does this mean in the immediate term?

In early 2017, the Condor Detroit team conducted a brief survey to understand consumer perceptions and behaviors when “getting” a car (we intentionally defined this loosely to encompass purchasing, leasing and other arrangements). The team found that nearly all (97 percent) respondents identified two aspects of car buying to be the most important:

  • Getting a great deal and/or price and
  • Simple, transparent purchasing process

Conversely, vehicle-specific attributes such as make and model were important to only 78 percent of respondents.

The sharing economy is one part of the evolving automotive and mobility industry culture. Learn more about the culture and careers at the 2017 MICHauto Summit.

These findings are not entirely surprising. We know lease volumes have nearly doubled over the last decade and account for one-third of all new vehicle sales. However, while leasing is a step in the right direction to addressing consumer priorities, it has some core limitations and pain points for consumers. Namely, leases are highly inflexible, with minimum terms of 24 months and most being 36 to 39 months. In addition, leases are difficult to transfer, force customers to pay a new car premium and require in-person retail shopping (a broader car ownership problem for another time).

This leads us to the new frontier of personal car use: subscription-based vehicle services.

Here is how it works: a central entity owns and maintains a fleet of vehicles which individuals subscribe to and have regular access to as a personal vehicle. Flexibility is maximized, as consumers can cancel any time. And prices are transparent and consistent across the board based on the package selected.

The concept may appear foreign to some, but it is already becoming prevalent in the industry. General Motors, Ford and Porsche have all launched vehicle subscription services in select U.S. markets. Cox Automotive has piloted multiple car subscription solutions across several cities. Additionally, several startups have brought their own twist to the model and attempted to take a share of the growing market.

The winners and losers in this space will be defined by their ability to achieve affordability, reliability and convenience, which appear to matter most universally to consumers. Furthermore, those who are able to best leverage vehicle connectivity and digital technology to optimize the user experience will set themselves apart from the pack. It will be interesting to see whether subscription service models serve as an entry point for digital disruptors to gain share in a space that has been dominated by established players or if the behemoths of the industry will be agile enough to adapt to shifting consumer preferences in a timely fashion.

While the exact answers remain elusive at the moment, it is clear that subscription service models will present a formidable challenge to the traditional car ownership dynamic in the US and many other global markets.

Tarun Kajeepeta is the founder of Condor Detroit, a month-to-month car subscription service.

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