ALL-ELECTRIC CAR SUBSCRIPTION

Transcription

1 ALL-ELECTRIC CAR SUBSCRIPTION Car ownership is losing its value as status symbol. To an increasing number of people the car is just a way to transport themselves between different locations. It is access to a car that is important, and not ownership of one. As a consequence interest in different carsharing services and private leasing of cars are rapidly accelerating. All-electric cars have trouble attracting the mainstream car customer. Very few have practical experience of all-electric cars and it might also be difficult to compare the costs of an all-electric car with the costs of a regular internal combustion engine (ICE) car. The much higher purchase price of the all-electric car might be compensated by the relatively low operating costs, but uncertainties about lifespan of batteries and expected residual value makes the calculation difficult. Using all-electric cars in carsharing services means more people gets the opportunity to form their own opinion about electric cars. A positive experience from driving an all-electric carsharing car might serve as a gateway to getting an all-electric car of one s own. To achieve a competitive calculus for an all-electric car it has to be used quite a lot. A suitable application area for the all-electric car could hence be for commuting. Combining the all-electric car s suitability for commuting with the positive effects that could be expected from using electric cars in carsharing services has resulted in the allelectric car subscription business model.

2 THIS IS HOW IT WORKS The subscription includes all costs of the car, even electricity (fuel). The subscriber does not have to worry about services, reparations and maintenance of the car. If the subscriber takes the car to the carwash, service garage or equal, this is rewarded with a reduced subscription fee. All-electric car subscribers also have full access to the public carsharing service. This gives the subscribers easy access to a conventional car when the all-electric car is not sufficient, for example for longer trips. The subscriber pays the ordinary carsharing service fee for using a conventional car, but has no costs for the subscription during the time and hence no double car costs occur. All car booking is easily handled through an application available for smartphones. A positive effect of having subscribers commuting by carsharing cars is that they at the same time are moving cars to where the demand for cars is. During the days the cars will be parked in areas where many people work, and during the evenings and weekends the subscribers bring the cars to suburbs and areas where many people live. This movement of cars helps extending the market for the carsharing service. The all-electric car subscription offers access to a car when you need one and when you don t need the car, regardless if it is during your workday, your vacation, or something else, it will instead be available for others. This way as a subscriber you ll never have to pay for a car that you don t use. The all-electric car subscription is a service offered by a company also offering a public carsharing service. The all-electric car subscription is though directed to people who need access to a car more or less every day. Today s carsharing services are too expensive to be able to compete with car ownership for these customers, but the all-electric car subscription can offer a competitive alternative. The customer defines the extent of their car access needs, as well as when and where they need access to a car. The subscription then includes access to a car at this agreed level at a fixed monthly fee. If the subscriber needs to use a car more than agreed in the contract, excess usage will be charged corresponding to fees paid by regular carsharing customers. When the subscriber has not booked the car it is available for the regular carsharing customers. The all-electric car subscription allows the subscriber to use an all-electric car for commuting. Normal commuting distances in Sweden allow the car to be used for more than just commuting without need for more charging than the ordinary overnight charge, and the all-electric car subscription therefore also profits from making the cars available for other customers while they are not used by the commuter. When using the all-electric car for commuting t is possible to keep it at home during the night and as long as it is fully charged in the morning the subscriber does not have to pay for the car during the night. If the customer does not want to have the car parked at home it is also possible to park it at one of the charging spots provided by the service. Charging spots can be found centrally in the city, close to large work sites, and in selected locations in the suburbs. Illustrations: Stefan Pihlgren

3 BUSINESS MODEL IN DETAIL In this section the all-electric car subscription is described based on the business model canvas 1 developed by Osterwalder et al. CUSTOMER SEGMENTS CUSTOMER RELATIONSHIPS KEY RESOURCES KEY ACTIVITIES The all-electric car subscription is primarily directed to customers who today are car owners. They use their cars virtually every day for commuting and to get to and from different recreational activities. Typical customers live in a suburban area at a distance of about km from their work. Some customers have access to two cars in their household. Typical for the customers is that they do not think car ownership is important. Still the car is a necessary tool in their everyday life. They re not interested in caring for and maintaining a car, they simply want a car that does the job without hassle. Customers also have some interest in environmental issues and values being associated with services and products that have an environmental friendly image. The target group is also to some extent prepared to pay a little extra for perceived convenience, safety and flexibility and would not chose a cheaper alternative if that would mean more trouble for them. The business model also includes a traditional carsharing service directed towards customers of traditional carsharing services. Customer relationships are mostly the same as for public carsharing services today. Customers are to some extent encouraged, but not obliged, to take part in taking care of the cars by offering fee reductions for customers who take the car to the carwash or the car service station. KEY PARTNERS Close cooperation with a manufacturer of all-electric cars could be advantageous. The all-electric car subscription could serve as an important marketing channel for the all-electric cars, not least since they are driven by many people. The marketing value could be enhanced by parking places in strategic locations and by painting and/or striping the cars. Cooperation with different providers of parking spaces and charging places, with utility companies providing electricity for the all-electric cars and with companies offering maintenance and reparation of cars, will also be necessary. The key resources in this business model are the cars and the digital booking system, on which the carsharing service is based. DISTRIBUTION CHANNELS Same as today s public carsharing companies. Most customer communication is handled through the digital booking system that can be easily accessed via an application for smartphones or via web. Cars are available at dedicated carsharing locations. REVENUE STREAM Incomes are generated from subscription fees and from fees for traditional carsharing. Using the cars for advertising purposes could probably generate extra incomes. The main activities in the all-electric car subscription business model are the same as for other public carsharing businesses; rental and maintenance of cars, both allelectric and others. VALUE PROPOSITION The all-electric car subscription is a crossing of an ordinary carsharing service and private leasing of an allelectric car. How much the customer needs access to a car and the customer s driving pattern (which places he or she is travelling between) determine where on the scale between these different solutions the offered solution can be found. COST STRUCTURE Cost structure is about the same as for a traditional public carsharing company and largely consists of leasing fees for cars, car maintenance, insurance, maintenance of the digital booking system, electricity and fuel for the cars and marketing. 1 Available at (read )

4 BUSINESS MODEL SENSITIVITIES BUSINESS MODEL DEVELOPMENT The business model is based on an assumption that the subscriber will be prepared to pay a subscription fee corresponding to what the cost would be for owning and driving an equal ICE car. This assumption is justified by that the subscriber, even though not having access to the car full time, have access to the car when needed, and also avoids responsibility for care and maintenance of the car. Considering the low, and decreasing, fuel consumption of many modern fuel-efficient cars it will be even more difficult for the all-electric car to compete with ICE cars in the future, unless fuel prices rise correspondingly. Rising fuel prices as fuel consumption decrease are essential for the competitiveness of all-electric cars, and hence for this business model. Of equal importance is that price level of electricity remains stable. Occupancy rate of the cars are critical for the viability of this business model. The low operating cost and high purchase price of all-electric cars means that the more the car is used, the better the viability. The depreciation of the all-electric car is another critical factor. The calculations for this business model assume the residual value of the all-electric car to be zero when the battery warranty expires. Since the car is so highly utilized the mileage limit of the warranty is reached rather soon. This severely limits the earning opportunities of the business. If the battery warranty was extended, or if it was concluded that the all-electric cars will normally be functional even after the warranty has expired, it would have a very positive impact on the viability of this business model. This business model is developed within the BeliEVe project (Business model innovation for Electric Vehicles). More information about the project can be found at www. viktoria.se/projects/believe. The idea about the all-electric car subscription is based on the fact that very few people are interested in buying electric cars. By offering the electric car by private lease the influence of some of the factors that easily can scare off customers from buying could be decreased. However, the purchase price of a normal electric car today makes the lease cost for such a car too high for the offer to be attractive to a large group of customers. When combining thoughts about private lease for allelectric cars with the fact that an all-electric car has to be used a lot to be profitable, an idea occurred about facilitating for private leasers of all-electric cars to rent out their cars when they re not using them themselves. This way rent incomes could cover parts of the cost for the car. After discussions with representatives for the carsharing business we came to see the benefits of using the privately leased all-electric cars as additions in an already existing public carsharing service. This way an existing customer group could be utilized to create demand for these cars. A number of interviews with potential customers have also been completed during the development of this business model. One thing that emerged from the interviews was that the interviewees with experience from carsharing services were less positive to renting their own car to others than were the interviewees who had no experience from using carsharing services, the interviewees feared their cars would not be treated with proper respect. Some of the interviewees also expressed a greater amount of security about renting a car that belonged to and was maintained by a company than about renting a car owned and maintained by an individual. Based on data from the interviews adjustments of the business model were made. The offering now presented has far more in common with a conventional carsharing service than the original idea, which was more of an extended private lease offer.

5 SPONSORED BY: VIKTORIA SWEDISH ICT AB LINDHOLMSPIREN 3A, SE GÖTEBORG, SWEDEN