Exploring emerging factors impacting shift from ownership to usership
Pricing pressures, volatile electric vehicle (EV) residual values, supply chain constraints, and widespread economic uncertainty are putting the brakes on mobility providers’ move to usership. Large firms such as Volvo have scaled back their usership operations. And many start-ups, including Cluno, Onto, Drover and Fair, have closed or been acquired by bigger rivals.
To build successful, enduring businesses, mobility providers should review their product offerings, secure ties with key partners and build effective pricing models that address the lifetime values of vehicles and customers, says Amelia Bradley, Associate Partner at consulting firm Corporate Value Associates (CVA).
“When the market is challenging in the short term, it’s tempting for companies to slow down everything that’s not their core business. But usership is still a fundamental part of mobility.”
"Some usership products are really taking off, especially private operating leases, but others like subscription services have faced challenges"
Amelia Bradley (Corporate Value Associates)CVA estimates that more than 60% of vehicles in Europe will operate under usership models by 2030, up from less than 40% in 2021. Such models include operating leases, subscription services, rentals and car-sharing options. Operating leases are well established in Europe and have been used by several providers as a launch pad for other usership offerings, says Bradley.
Such challenges include how to successfully price flexible usership products, whether to provide single product solutions or integrated offerings, and how best to scale their businesses and efficiently manage their assets.
Our Mobility Community event held in February examined the shift that has begun in the mobility sector from traditional vehicle ownership to more flexible usership models. Speakers included representatives from multinational fleet management company Ayvens, Belgian mobility start-up studio Lab Box, and automotive and energy investment firm Next Gear Ventures.
“Usership is going to be the new norm. It's a megatrend. But, it’s complex. And it’s going to take time.”
Michel Taride (Next Gear Ventures)Executives attending the online event identified several factors stalling the shift to usership. When polled they pointed to P&L and pricing challenges (34%), lack of demand (27%), gaps in capabilities and operations (17%), insufficient scale and capital constraints (12%), and inadequate government or municipal support (7%). A further 3% of executives believe there are no specific barriers to the transition. They contend the shift will simply take more time than most firms initially expected.
The challenges facing providers of usership solutions are both complex and interlinked, says CVA Partner & Head of Automobility Platform Markus Collet.
“It’s not surprising that P&L challenges are seen as the top obstacle by mobility leaders because that is where everything comes together, especially issues such as the right cost base and correct pricing.”
The slow take-up of many types of usership offerings across much of Europe has exerted considerable financial pressure on lots of mobility providers, especially start-ups. Moreover, several firms have rolled back their usership products or delayed the introduction of new solutions.
Michel Taride, Strategic Advisor and Partner at Next Gear Ventures, says the challenges facing mobility providers are extremely diverse. These challenges are defined not only by the provider’s core business but also by the regional and cultural characteristics of their target markets. Usership solutions tend to be more popular among urban consumers in northern Europe, in contrast to their southern counterparts, and are especially favored by young people.
“Usership is going to be the new norm. It's a megatrend. But, it’s complex. And it’s going to take time. It requires a cultural change, a mindset shift, among consumers.”
"Usership is still gaining momentum even in a mature market like the Netherlands where we’ve been involved in private operating leases for more than 10 years.”
Jordy Van Ettekoven (Ayvens)Taride, a former Group President at Hertz International, adds that the business background of usership providers equips them with specific strengths but also presents them with particular challenges. He identifies these strengths and challenges in three major sectors of the mobility industry:
Car rental firms and leasing companies
Strengths: Established fleet management capabilities, extensive operational experience, and strong customer service.
Challenges: Often outdated and fragmented technology systems, complex transition from B2B to B2C models, and major shift required to adapt to new usership products such as car sharing.
Vehicle OEMs and dealers!
Strengths: Vehicle expertise, established market presence, and robust infrastructure.
Challenges: Difficult shift from a product to a service mindset, lack of fleet management and dynamic pricing experience, and complex AI customer management systems need to be adopted.
Technology service providers and start-up
Strengths: Strong technology platforms, excellent customer experience, and highly flexible product offerings.
Challenges: Limited operational experience, rapid upscaling required, pressure to balance innovation with efficiency, and high investor expectations.
The variety and breadth of the challenges facing usership providers will require them to tailor business strategies that galvanize their strengths and address the needs of their particular markets. CVA’s Bradley points out that usership providers that have continued to thrive tend to support integrated platforms that offer a range of products.
“Sixt, for example, has managed to leverage its rental capabilities and bolt on to its operations additional products such as rolling contracts. Similarly, Arval Flex has done well to fill the gap between its leasing products and short-term rentals in specific markets by leveraging its asset management capabilities.”
Jordy Van Ettekoven, Segment Director for OEM Partnerships Ayvens in the Netherlands, says the company is capitalizing on its extensive fleet management experience, with its deep understanding of private operating leases and its ability to quickly reallocate assets, to offer users tailored usership solutions.
“Usership is still gaining momentum even in a mature market like the Netherlands where we’ve been involved in private operating leases for more than 10 years.”
Driving the shift to usership are the high cost of owning vehicles in the Netherlands as well as concerns among consumers about the volatility of EV residual values, says Van Ettekoven.
“Ayvens is a risk-taking company. We manage risk and customers trust us to manage risk for them. That’s a big plus at the moment because a lot of new entrants are coming into the market and customers are concerned about product quality.”
Van Ettekoven acknowledges that the shift to usership has slowed by expects further solutions to be shaped by the demand for accessibility and sustainability as well as ongoing innovation.
Start-ups are powerful drivers of innovation in the mobility industry but often lack the financial resources to establish themselves as successful service providers. Michaël Grandfils, Co-Founder and MD at start-up studio Lab Box, says culture clashes frequently stymie collaborations with corporate partners.
Lab Box funds and supports several mobility start-ups including successful car-sharing firm Poppy, mobility platform Skipr, and car leasing company Lizy. The start-up studio is part of the D'Ieteren Group, a prominent automotive distributor in Belgium. Grandfils attributes the success of Lab Box to its ecosystem of diversified start-ups that encourages flexibility and collaboration while fostering growth and innovation. Partnerships are frequently critical to a mobility provider’s ability to deliver innovative usership solutions.
Although the strategies mobility providers will need adopt to overcome current short-term challenges will vary according to the companies’ capabilities and backgrounds, two key requirements are likely to be universal. Successful usership models will need to consider how to best monetize mobility assets and capture customer value.
Companies should apply the same logic to their approaches to usership that they apply to their overall mobility strategies, says CVA’s Bradley.
“They need multi assets with multi customers for multi products to make to their models work structurally and capture value in way it can be priced correctly.”
Which companies will eventually succeed in capitalizing on the long-term transition from vehicle ownership to usership is unclear. But executives who attended the Qorus-CVA online event point to some likely winners. When polled they picked rental companies (31%), leasing firms (23%), and OEMs and their captive finance providers (20%).
Mobility providers that can navigate the short-term obstacles on the route to successful usership solutions, and maximize the lifetime values of their assets and customers, will be well placed to lead one of the biggest megatrends shaping the future of mobility.
