From Internal Combustion Engines to On-Demand Electric Autonomous Vehicle Subscriptions
The days of the motor that powered the growth of the suburbs is coming to an end as the benefits of electric vehicles far outway those of the internal combustion engine.
UBS is predicting that by 2025, 14% of vehicle sales will be electric up from 1% today. While some would say that UBS is bullish on their call, others would argue that UBS is undervaluing the autonomy economy. Between 2025 and 2030 society will hit the tipping point with autonomous vehicles, as a majority of vehicles will no longer be sold to consumers.
Instead, consumers will subscribe to autonomous vehicle brands and summon vehicles on-demand. No longer will vehicles sit idle 95% of the time costing the owners/leases of the vehicle money. The average cost to own and operate a large sedan in the United States driven 15,000 miles a year costs consumers $9,451 a year, equaling $0.6300 a mile.
While the cost to own and operate an electric vehicle costs $8,439 a year equaling $0.5626 a mile. Even with traditionally higher costs, it is still more cost-effective to own and operate an electric vehicle than an internal combustion engine vehicle today.
As autonomy matures and manufacturers start to shift their business models to subscriptions from selling vehicles, the cost of transportation for individuals in a vehicle will plummet as a majority of vehicles will be shared.
While vehicles will be shared, there will not necessarily be multiple individuals in the vehicle at the same time. The concept of UberPool and Lyft Line is not the future of transportation. It’s an idea and a concept that appeals to a niche group, not the public as a whole.
Consumers like their independence and the convenience vehicles offer them for their lifestyles. Subscribing to a brand will allow individuals to summon the vehicle that fits their need for that time and place. For example, if a family of four is heading to the beach, they can summon an SUV. If mom and dad are going out for dinner, they can summon a sedan.
The vehicles consumers subscribe to will be electric and operate on a software platform that is fully integrated into the lifestyles of the brand’s customers. Brands such as Aston Martin have announced that every new vehicle by the middle of the next decade will be hybrid or electric.
A quarter of these vehicles will be 100% electric. As Andy Palmer, CEO of Aston Martin positions the iconic brand for the future, a subscription service will not be far behind as he is in the middle of a strategy to reposition the brand for the future.
In its 105-year history, Aston Martin has only sold roughly 70,000 cars. Which is a remarkable number considering the prestige of the brand. Over the course of history, Aston Martin has only sold 667 cars a year on average.
With the shift to electric and the advancements of autonomy, Dr. Palmer could strategically announce that one will no longer be able to buy an Aston Martin, instead, one will have to subscribe to the brand.
The starting price to purchase an Aston Martin today is $118,650. In the future, with a subscription, this price could possibly drop as low as $2,000 a month with no insurance, maintenance or charging costs as Aston Martin would self-insure and all ancillaries would be bundled into the monthly subscription.
Today, if a consumer were to buy an Aston Marton, the insurance would cost $232.06 a month on average. The annual oil change (10,000 miles) costs $1,400 in addition to tires, brakes, etc which will set consumers back a few thousand more a year. Factoring in gas and parking, the average yearly cost to own and operate an Aston Martin is well over $5,000.
High costs make the brand unattainable for most individuals. In the future, when you remove the cost of entry, the internal combustion engine and the monthly costs to operate, the Aston Martin brand becomes attainable to a larger percentage of the population.
When the brand becomes more attainable and multiple individuals are subscribing to vehicles, profits will increase which will allow Aston Martin to scale the brand. This scenario is only possible today due to the breakthroughs in electric and autonomous technologies.
As a society, we are just beginning to scratch the surface of the true benefits that an electric, autonomous future will offer us.
Whether you are interested in a luxury subscription or a traditional sedan, the end of the internal combustion engine will dramatically lower the cost of vehicles as society shifts towards a subscription model.