The rise of flexible vehicle ownership

By Jan-Philipp Hasenberg, Dominik Löber, Carsten Küst and Elena Yakushkina

Why buy a car when you can lease one, rent one, or subscribe to a service that lets you access one whenever you need it? It's an obvious question – and one that more and more drivers are asking themselves. Today's consumers want flexibility and, in these difficult economic times, they want to avoid a major one-time cost that potentially puts a burden on the entire household. Different players in the motor transportation market, from OEM captives – also known as automotive banks – and financing companies to independent rental companies, are developing offerings to meet demand from drivers. But until now, these players have lacked a comprehensive view of market dynamics and reliable insights into the market opportunities open to them.

This is where Roland Berger comes in. Using our expertise in two key areas – the automotive industry and the financing sector – we have modeled the true scale of the flexible ownership market. For the first time, we have also calculated how we think the market will develop in volume terms over the coming years. Our conclusion? In the six core European markets of France, Germany, Italy, Spain, the Netherlands and the United Kingdom, flexible ownership is set to grow by around eight percent a year, achieving a market value of approximately EUR 94 billion by 2030.

A dynamic sector

At Roland Berger we divide mobility solutions into three major classes: Car-as-an-Asset (in other words, vehicle ownership), Car-as-a-Service (CaaS) and Mobility-as-a-Service. CaaS includes financial, operational and full-service leasing, as well as more recent car subscription services, which are the most flexible approach to car ownership. In subscription models, drivers have constant access to a specific vehicle, but without the long-term commitment associated with leasing or purchasing – they pay a monthly fee that covers not only the vehicle itself but also associated costs such as insurance, maintenance and roadside assistance.

Our calculations predict eight percent growth of flexible ownership in the six core European markets through the end of the decade. Within this, subscription will likely emerge as the contract type of choice for consumers in online transactions, with a forecast compound annual growth rate (CAGR) of approximately 25 percent between 2023 and 2030. However, subscription will still only represent around eight percent of the European CaaS market; traditional concepts such as financial and operational leasing, which have a forecast growth rate of around seven percent, will continue to dominate the flexible ownership market.

Market drivers

What is driving the future shape of the market for flexible ownership? On the consumer side, our research reveals a significant shift in customer preferences from long-term ownership to usership. According to previous research, more than half of consumers would consider a flexible ownership model in the future, especially young people and individuals living in downtown areas of cities. This change in preferences is driven by multiple factors, including overall recessionary tendencies in European economies (making a monthly fee more attractive than making a large, one-time purchase), the rise of subscription services with short contracts in other areas of modern life, and the expansion of online channels (including third-party platforms hosting a variety of brands and ownership models). As battery electric vehicles (BEVs) increasingly penetrate the European market, flexible ownership also gives drivers a chance to try out such vehicles – effectively giving them an extended, risk-free test drive.

At the same time, OEMs and other players are also promoting BEVs in an effort to meet their CO2 goals, in line with stricter regulation. Market players are also looking for solutions to the problem of residual value, and flexible ownership models such as used-car leasing and subscription are a way to avoid having to selling vehicles at a low price. This is part of a new "vehicle lifecycle" drive by OEMs, in which they keep vehicles on their books longer and thus increase their margins on BEVs over the entire vehicle lifecycle.

Recommendations for market players

The leasing and subscription landscape is made up of many different players. Four major types exist: OEM captives, bank-affiliated leasing companies, independent leasing companies and pure subscription players. Each has its own areas of strength, from the ability to offer cutting-edge solutions or expertise in asset management knowhow to a global brand reputation or a local distribution network.

Our recommendations differ for each of these groups. To take just a few examples, we advise OEM captives to capitalize on their close ties to their OEM, building on its brand reputation, sales network and direct access to vehicles; developing innovative digital solutions hand-in-hand with the vehicle manufacturer will help them expand their market presence. Bank-related leasing companies should, among other things, exploit cross-selling opportunities within the consumer finance segment, or form partnerships with independent leasing companies; this will help them extend their business model to include new specialized services and pave the way towards digital offerings. Independent leasing companies would be well advised to use their knowhow in fleet management and remarketing and ensure scaling and access to data; if they need additional refinancing, they should seek out partnerships with other leasing companies or banks. For pure subscription players, it will be crucial to build on existing digital capabilities, optimize customer acquisition costs, ensure the efficient sourcing and operation of vehicles, and manage residual value risk.

Want to find out more about how your company can unlock opportunities in this rapidly developing market? Contact our experts to find out how we can support you.

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