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Managing the Lifetime Revenue of Vehicles

By Simon Wilson, Chief Scientific Officer, GTS
FOURTH IN A FIVE PART SERIES

There has long been a customer problem for automotive OEMs and dealerships. When they sell someone a car there’s no guarantee they’ll ever see the vehicle again. There are warranties and service options but it’s a fragile relationship compared to other businesses that are using digital channels to continuously engage with customers around the products or services they buy. 

Tesla’s disruptive approach to the market has been a wakeup call with its direct sales approach and over-the-air software updates, but it’s not an easy model for established OEMs to replicate. Car as a Service, however, offers a way to shift the dial and fundamentally change the relationship between customer, vehicle and OEM. Unsurprisingly, all the major car brands are exploring the market possibilities. 

Using flexible ownership mobility models

Changing attitudes to car ownership are accelerating the OEM opportunity. According to McKinsey, the global consulting firm, a number of factors are converging: consumers are increasingly willing to share rather than buy; there’s a regulatory push to shift people from private-car ownership to alternative mobility options; the rise of autonomous vehicles is adding further impetus to a move to shared mobility. 

It’s not just the value of ongoing engagement with customers that will benefit OEMs with this shift, it’s the way they can manage their vehicles. By offering a range of services (usership models), such as car sharing, subscriptions, and rentals alongside car sales, they can optimize the lifetime value of a vehicle. 

At GTS, we’re working the numbers with clients on when it makes the most sense to move a vehicle from one service to another, or sell on into the used-vehicle market. If market data shows a spike in their value, it might make sense to take them out of a rental service and put them up for sale on the forecourt. If there’s a downturn in used car sales, there is more lifetime income in the vehicle by keeping it as a car share/rental/subscription vehicle.

Having different mobility models will help maximise the value of each car, as long as you have data to inform the right actions. Multiple factors need to be considered, like the age and mileage of a car, and different conditions in different markers. Every make and model is different and so is their rate of depreciation. Variables around petrol consumption, emissions and ongoing repair costs are also relevant.

Analysing vehicle data and Use Cases

1. Lifetime Value

The future lifecycle of a vehicle may look like the figure below.  The vehicle goes through several phases of different use, including simple private ownership; in many of these phases it is the OEM or its dealer that retains ownership of the car.  The OEM may have a vested interest in keeping connected to the vehicle and its owner to allow for proper retirement and recycling.  To that end, one of the data services we’re building into the GTS platform is alerts around vehicles that need to be reassessed in terms of role and profitability. This will help inform its lifetime value;  you might lease a new vehicle first as a premium product for three years, before moving it across into a carshare system for another two. Then you may rent it out to someone who’s doing a ride-hailing service for a couple more. After that, it may be time to sell it on as a used car.  

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2. Environmental Sustainability

Rather than risk an old car being disposed of improperly, an OEM might choose to retain ownership of the car and see that it’s recycled correctly at end of life. This will strike a chord with the growing number of consumers who make decisions about brands based on their ethical positions on environmental sustainability.  It represents a much better ending for everyone, customer and manufacturer alike, than the vehicle being abandoned or incompletely recycled.

The possibilities are almost endless. The point about collecting and collating the data is that it gives you the opportunity to find out which lifecycles work best for your company.

Next: Large Language Models (LLMs) and Mobility