Preludes to Premium Mobility Services

Moving toward a world where individual vehicle ownership gives way to automated mobility services, automakers and service providers run the risk that their differentiated products will become commodities. In an industry that already runs relatively thin margins on top of high capital costs, the thought of becoming a commodity is a nightmare scenario. That is why companies like Ford and General Motors (GM) are experimenting with models that could feature different price points and margins.

Differentiation Necessary

If you use one of today’s basic ride-hailing services, it doesn’t matter if you use Lyft, Uber, Gett, or one of the numerous small services that operate regionally. Using luxury tiers like Uber Black gets users a premium vehicle, but otherwise the service is essentially the same and the prices are usually close. In order to charge a premium price that can generate the profits needed to sustain a business, companies will have to find ways to differentiate.

In a world where the car you ride in becomes random, the overall customer experience of the service will become crucial. That may include being able to specify what type of vehicle you want, guaranteed shorter wait times, access to added services like picking up the dry cleaning or groceries, and more.

In January 2017, GM’s Cadillac division launched Book, a service that enables customers to pay a flat monthly fee and get access to any of the vehicles in the brand’s model lineup. A subscriber may opt to spend the week commuting in an XT5 crossover, switch to an ATS-V performance coupe for a weekend jaunt in the country, or get an Escalade for a family road trip. Cadillac takes care of insurance, detailing, and maintenance.

At the New York Auto Show in April 2017, Lincoln announced its Chauffeur service. As the name implies, Lincoln provides its customers with access to a professional driver when owners cannot or don’t want to drive—such as on a special date night or to pick up the kids from an event. Lincoln screens the drivers and they arrive at the customer’s location on request to drive the customer’s car. Lincoln Chauffeur debuted in Miami and is now expanding to San Diego.

An Automated Future

Hypothetically, 5 to 10 years from now when both of these brands (and others) are offering a range of automated vehicles, it’s easy to imagine a scenario where services evolve to take advantage of that automation. The Cadillac of your choice appears at your doorstep on demand; for certain models like the high performance V series, GM can offer the option for the customer to drive if they choose while others may be automated only. Similarly, Lincoln Chauffeur could be utilized with automation for vehicles that customers buy, lease, or subscribe to on a weekly, monthly, or annual basis. Tesla CEO Elon Musk has also articulated a vision where his customers could make their vehicles available for short-term rentals when not being used.

These and other varieties of services will mean dramatic changes for the automotive retail business, as well the automakers and customers. The choice of whether to lease or buy gets expanded into additional types of payment plans, including by the mile, hour, month, and more. The possibilities will be limitless for affluent customers. For example, a customer may not need to decide what color car they want in their garage; they can order one coordinated to their outfit for the evening. No doubt there will be many more experiments from automakers over the next several years as they seek to navigate their way through a changing transportation landscape.