TheRiseofSubscriptionModels:RevolutionizingTruckOwnership

Exploringthebenefitsandacceptanceofflexiblefleetsolutions

Executivesummary

Arecentsurveyoftruckcustomers

conductedbyCapgeminisupports

majortruckOEMs’existingbeliefs

andexpectationsforsubscription

models,particularlythoserelating

toelectricvehicles.Theresearchalso

addsimportantinsights,forexample

thatmanycustomerswouldprefer

toobtainsubscriptionsdirectlyfrom

manufacturers,andthatsubscriptionscouldhelptoovercometheperceptionthatelectricvehiclesarenotaffordable.Inthisreport,wecommentonthe

resultsandproposeactionsthattruckOEMsshouldbeinitiatingnow,suchascreatingastrategytoaddresskeycustomerconcerns,andinforming

customersbetteronissueslikethe

respectivetotalcostofownership/useforconventionalandelectrictrucks.

2TheRiseofSubscriptionModels

Contents

Introduction5

Researchmethod6

Summaryoffindings7

Findingspart1:marketacceptabilityofthesubscriptionmodel7

Findingspart2:marketreadinessforcommercialelectricvehicles12

Discussionandrecommendations15

HowCapgeminihelpsclients17

implementsubscriptionmodels

Authors19

3

“Inthepassengercarsector,wecan

alreadyobservethatmovingfromICE

vehiclestoEVsisassociatedwithamovefromownershiptousage–implyingthatsubscriptionmodelswillbecomemore

popular.Ournewstudysuggeststhat

thistrendcouldbeevenmoresignificantfortrucks,partlybecauseofaffordabilityissuesbutalsobecauseofuncertainty

aboutEVsandtheirimpactonresidual

values.Thestudyalsopointstothe

potentialofsubscriptionstoaccelerate

uptakeofzero-emissionvehicles.This

findingshouldgeneratefurtherdiscussion

andapossiblerethinkofcurrentapproachestopromotingEVs.”

LaurenceNo?l

HeadofGlobalAutomotiveIndustryCapgemini

4TheRiseofSubscriptionModels

Introduction

Majortruckmanufacturersareactivelyexploringnewownershipmodels,includingsubscriptionmodels.Inthesemodels,customerspayforthe

useoftruckswhilethemanufacturerorotherserviceproviderretainsownershipoftheassets.Therearevariantswherecustomerstake

ownershipofthevehiclesbutobtainbatteriesonasubscriptionbasis.

However,thereisalackofharddataaboutthelevelsofacceptanceforthemodelsamongtruckcustomers,andaboutcustomerexpectationsandpreferences.

Toshedlightonthesequestions,Capgeminirecentlyconductedasurveywhichexploredtheacceptabilitytotruckcustomersofsubscription

services,alongwithrelatedissuessuchaswillingnesstopayapremium,andwhichservicesshouldbeincludedinthesubscriptionmodel.

Wealsoinvestigatedourrespondents’preferencesforelectricvehicles

(EVs)versusinternalcombustionengine(ICE)vehiclesandusedtheresultstohelpusinterpretthefindingsaboutsubscriptions1.Wediscoveredsomeinterestingdifferencesbetweenthepreferencesofthesetwogroupswithrespecttosubscriptions.

Overall,thefindingsconfirmwhatwealreadyknewaboutsubscriptionsforcommercialvehicles,andsomajorOEMswhohavealreadygoneaheadin

thisareacanbeassuredthattheyarebroadlypursuingtherightstrategies.Butwealsomadesomesurprisingandpotentiallyhelpfuldiscoveries,whichwarrantfurtherinvestigation.

Thisreportoutlinesandcommentsonourresults,beforemakingsomerecommendationsforfurtherresearchandactions.

1.Pleasenotethatinthisreportweusetheterm“EVs”tocoverbothbatteryelectric

vehicles(BEVs)andhydrogenfuelcellelectricvehicles(FCEVs),unlessotherwisestated.

5

Researchmethod

NinetyrespondentsfromtruckcustomersinGermany,allofwhomwereascertainedtohaveastrong

engagementinthismarket,tookpartinthisonline

survey(Figure1).WedecidedtoresearchGermany

initiallybecausethismarketisespeciallyreceptiveto

newsalesmodelsandhasastrongimpetustomove

tozeroemissions.InthefuturewearekeentoexpandthisresearchtocoverthewholeofEurope,andperhapsNorthAmericaandChina.

Figure1:Backgroundtothesurvey

Surveyobjective

Theprimaryobjectiveofthesurveywastogatherdataontheacceptanceand

preferredimplementationofthetrucksubscriptionmodelintheGermanmarketanditsreadinesstouseelectricvehicles.

Surveyscope

andrespondents

Respondents’country

Numberofrespondents

90

Useofthefollowing

inrespondents'companies

?Heavyvehicles

?Bigbuses

?Tractors

?Specialvehicles

6TheRiseofSubscriptionModels

7

Summaryof

findings

Findingspart1:marketacceptabilityofthesubscriptionmodel

First,weexploredourrespondents’generalviewsonthesubscriptionmodel,andwhattheythinktheadvantagesanddisadvantagesfortheircompaniesare.

Perceivedadvantagesanddisadvantagesofsubscriptionmodels

Figure2:Reasonsforacceptanceofsubscriptionmodelsfortrucks

20%

Betterabilitytoplanexpensesduetoshortercommitmentperiods

25%

Abilitytotestaparticularvehiclemodel(e.g.anEV)overalongerperiodoftime

42%

Flexibilitytoabsorbshort-termcapacitypeaks

Thebiggestreasonforwantingtoadoptthe

subscriptionmodelistogaintheflexibilitytoabsorb

short-termcapacitypeaks(atechniquecalled“peak

shaving”),mentionedby42%ofrespondents(Figure

2).Thisfindingreflectsthefactthattheirbusinesses

habituallyfacefluctuatingdemand–perhapsmorethanusualgivencurrentlevelsofeconomicuncertaintyanddisruption,particularlytothesupplychain.Peakshavingisalsoanimportanttoolfordealingwithseasonal

demand,forexampleintherun-uptoChristmas.

Otherreasonsforacceptanceincludethedesiretotryoutspecificvehiclemodels,whichprobablyreflects

aninterestinexperimentingwithnewtechnologieswithoutlong-termcommitments.Themodelisalso

seenasusefulforplanningexpenditure,thankstotheshortercommitmentperiodsinvolved.

Whenaskedabouttheirreservationssurrounding

subscriptionmodels,respondentsoftenmentionthe

perceptionthatsubscriptionsareassociatedwith

highcosts–afindingthatreflectsthismarket’spricesensitivity(Figure3).

Tofindoutmore,theresearchinvestigatedhowlargeapremiumcompaniesarepreparedtopayforasubscriptionmodeloveralong-termlease,

Figure3:Objectionstosubscriptionmodelsfortrucks

25%

Complexityinprocessing/

62%

administrationHighcosts

andanalyzedtheresultsaccordingtowhetherthe

respondentisconsideringEVsornot.AsFigure12

shows,amajorityofrespondentsareconsideringEVs,atleasttosomeextent.

Interestingly,potentialEVcustomersarewillingto

paya10-15%premium,whereasthosewhopreferICEvehiclesareonlypreparedtopay5-10%(Figure4).

Figure4:Howmuchpremiumarerespondentswillingtopayforasubscriptionmodel?

15%

RespondentsconsideringEVuse

5%

RespondentsNOTconsideringEVuse

Asanotherpotentialobjectiontosubscriptions,respondentsalsomentioncomplexityof

administration,suggestingthattheydonotyet

associatesubscriptionswiththestraightforward,user-friendlymodelsthattheyprefer.

Preferredapplicationsforthesubscriptionmodel

Wealsotookamoredetailedlookathowrespondentsenvisageusingsubscriptionmodelswithintheir

businesses,withrespecttotheclassofvehicle,range

Around53%ofrespondentsareconsideringintegrating

BatteryElectricVehicles

(BEV)andFuelCellElectric

Vehicles(FCEV)intotheir

fleets.Thisgrowinginterestineco-friendlyoptionsis

accompaniedbyareadinesstoinvestinpremiumservices.ThoseconsideringEVsof

eithertypearewillingto

paya15%premiumfora

subscriptionmodel,whereasotherswillpayjust5%

premium.

overwhichtouseit,andsubscriptionperiod.WeagaincomparedtheresponsesforthoseconsideringEVs

versustherest.

Figure5:Optimalvehicleclassforsubscriptions

RespondentsconsideringEVuse·RespondentsNOTconsideringEVuse

Veryheavytrucks

HeavytrucksMedium-dutytrucks

LighttrucksLightcommercialtrucks

22%13%

19%21%15%

21%

Veryheavytrucks

25%

29%

29%

HeavytrucksMedium-dutytrucks

26%

LighttrucksLightcommercialtrucks

8TheRiseofSubscriptionModels

AsshowninFigure5,respondentsconsideringEVs

optforlighttomedium-dutytrucksbecausethey

haveenoughpositiveexperienceandknowledgeto

integratethosetrucksintotheirdailyschedulesand

routes.ThosepreferringICEvehiclesaremorelikely

inthelong-haulbusiness;thisexplainstheirdifferent

viewsregardingvehicleclassessuitableforsubscriptionmodels.Overall,heavytrucksareslightlylessfavoredcandidatesforsubscriptions,possiblyduetotheir

highercostsorspecificusagepatterns.Thisresponsemightalsobeduetothefactthatplanningtheusageoflong-haultrucksisofteneasierforcompaniesthanplanningmorelocalactivities,andsotheyarenot

lookingforabetterwaytodoit.

Questionedaboutthedistancerangeswherethey

wouldbelikelytoadoptsubscriptionmodels,

respondentsindicatethatthesemodelsareapplicableacrosslocal(upto50km),regional(51-150km),andlong-distance(151km+)ranges,withregionalusagelikelytobehighest(Figure7).Thissuggeststhattheflexibilityofsubscriptionscouldberelevanttoarangeofbusiness

needs,fromlocaldeliveriestolong-haultransportation.

Figure6:Preferreddistancerangesforadoptionofsubscriptionmodels

30%28%

LongdistanceLocalarea

42%

Regionalarea

Takentogether,thisandthepreviousfindingmay

implythatsubscriptiontrucksareseenasmostusefulforthetrafficbetweenregionaldepotsandtheend-

customeror(insomecases)localhubs.Itisgenerally

known–andconfirmedbythird-partyresearch–thattruckcustomersenvisagesimilarapplicationsforEVs,suggestingsynergiesbetweensubscriptionmodelsandelectrictrucks.

Whenitcomestocommitmentperiods,respondentsdemonstrateapreferenceforathree-monthperiod(Figure7).Thisfindingsuggeststhatbusinessesvalueshort-termcommitmentsforbetteradaptabilityandfinancialplanning.

Figure7:Preferredperiodforwhichtocommittoasubscription

15%

12

1%

9

24%

6

32%

3

7%

2

11%

1

Wefindthisresultslightlysurprisingaswewould

expectrespondentstopreferashortercommitmentperiodformaximumflexibility,especiallyinthelightofthedesireforpeakshaving.

Months

ThewillingnessofrespondentsconsideringEVstopaya

significantpremiumfor

subscriptionsindicatesarobustmarketpotentialforthismodel

amongfleetoperatorsprioritizingsustainabilityandinnovation.

9

Preferencesfordeliveryofthesubscriptionmodel

Next,weaskedformoredetailabouthowcompanieswouldliketoobtaintrucksubscriptions–including

whotheywouldliketoprovidethesubscriptions,

whethertheypreferafixedoraflexibleoffer,andtheirexpectationsaboutleadtimes.Wealsodiscussedwhattypeofenginetheywouldbelookingforinavehicle

obtainedbysubscription.

Figure8:Whoshouldofferthesubscriptionmodel?

Newsupplier,e.g.start-up

LeasingcompanywithwhichIdonothaveabusinessrelationshipyet

LeasingcompanywithwhichIalreadyhaveabusinessrelationship

Manufacturer

6%

11%

21%

49%

Interestingly,respondentsshowamarked

preferenceforobtainingsubscriptionsdirectlyfrom

manufacturers,with49%choosingthisoption(Figure8).Leasingcompaniesandnewsuppliersbothranksomewaybehindmanufacturers.

Formanufacturers,thispreferenceisaheartening

finding,andnotjustbecauseitlikelyindicatestrustinOEMs’establishedqualityandservicestandards.Italsoopensuppossibilitiesforfuturerevenuestreams.

Theseideashaveautomotivesustainabilitybenefitsaswellascommercialones,andwe’llreturntothemlater.

Slightlymorethanhalfofrespondentspreferaflexibleofferwithselectablemodulestoafixedone(Figure9).

Figure9:Shouldcustomersbeabletochoosedifferentmoduleswithinthesubscriptionmodel?

54%46%

Fixedo?erwith

prede?nedservicemodels

Flexibleo?erwithfreelyselectablemodules

Thispreferencealignswiththedesireforcustomizable,adaptablesolutions,seeninallsectorsoftoday’s

automotiveindustry.

10TheRiseofSubscriptionModels

11

Figure10:Mostexpectedcomponentsinasubscriptionoffer

Maintenanceand

wearandtear

Insurance

24/7customerservice

Whenrespondentsareaskedwhichspecific

componentscompanieswouldliketoseeincludedin

theoffer,maintenanceandmakinggoodwearandteararethefirstchoice,followedbyinsurance,andthen

24/7customerservice(Figure10).

Whenitcomestoexpectationsabouttheleadtimefordeliveryofavehicleiftheytakeoutasubscription,themajoritypreferaleadtimeoflessthan1week(30%)tolessthan4weeks(24%).Thisindicatestheimportanceofquickserviceandhighvehicleavailabilitywhen

planningasubscription-basedoperation.

Wenowcometotheimportantquestionofwhatformofenginerespondentswouldchooseinrelationto

subscriptions.

Figure11:Preferreddrivetrainsforsubscriptions

28%

Pureelectric

42%

Diesel

9%

21%

Gasoline

Hybriddrive

Dieselaccountsforthehighestshareoftheresponses(42%overall),probablyreflectingitscurrentdominanceandampleinfrastructuresupportratherthanany

entrenchedpreference(Figure11).

Infact,pureelectricandhybridmodelstogetherarechosenbyevenmorerespondents(49%),suggestingconcernaboutenvironmentalconsiderationsand

opennesstonewtechnologies.(And,ifweconsideronlythelargestcompanies’responses,pureelectricemergesasthemostpopularoption.)

Theseresultspaintanencouragingpictureofthe

prospectsforelectrification.Theproportionof

respondentspreferringpureelectric–28%–might

seemlowatfirstsight,butitissignificantlymorethanpureelectric’sshareofthecurrentfleetinGermany.

Pureelectricandhybridmodels

togetherattract49%of

respondents,reflectinggrowingenvironmentalconcernsand

interestinnewtechnologies.Amongthelargestcompanies,pureelectricvehiclesarethemostpopular.

Findingspart2:marketreadinessforcommercialelectricvehicles

Respondents’interestinelectricvehicles

Aswehavejustseen,ourresearchrevealsencouraginglevelsofinterestinelectricorhybridvehiclesinthe

contextofasubscriptionmodel.Thenextsegment

ofourresearchprobesthisinterestfurther,byasking

abouttheextenttowhichorganizationsareconsideringEVsandwhattheyseeasthemainadvantagesand

barriersassociatedwithelectrification.

Figure12:AmajorityofrespondentsarealreadyconsideringtheuseofEVsintheirfleets

22%

40%

Notconsideringatall

Somewhatconsidering

▲

13%

25%

StronglyconsideringNotconsideringmuch

Whenquestionedinthisslightlydifferentway,asmanyas22%ofrespondentssaytheyhavenotconsidered

electrificationatall,while25%haveonlyconsidereditalittle(Figure12).Thisseemsratherdisappointinggiventhemanyreasonstoconsiderit,including

environmentalconcerns,regulatorypressures,andadvancementsinEVtechnology.

Askedabouttheadvantagesofelectrification,manyrespondentsemphasizelocalemission-freeoperationandimprovedimage,highlightingenvironmentalandsocialresponsibilityconsiderations(Figure13).

Figure13:PerceivedadvantagesofusingEVs

Locallyemission-free,especiallyinurbanareas.

Improvedimageduetotheuseofenvironmentallyfriendlycommercialvehicles.

Mediaattentionandadvertisinge?ectivenessasaperceived?rstmover.

11%

8%

25%

12TheRiseofSubscriptionModels

Figure14:PerceiveddisadvantagesofusingEVs

Lowrange

Highacquisitioncosts Longidletimes(chargingtimes)Lowerpayload(duetobatteryweight)Highelectricitycosts

Highmaintenancecosts

33%

28%

18%

4%

37%

37%

Highacquisitioncostsandrangeanxietyremain

significantbarrierstoEVadoption,alongwithconcernsaboutchargingtimesandpayloadcapacity(Figure14).

Drillingdownintothedatauncoverssomeinterestinganglesonthisfinding.Forexample,ifwelookonlyat

respondentswhoareactivelyconsideringEVs,then

highercostsareabiggerconcernthanrange,whereasthosewhoarenotconsideringEVsaremoreconcerned

aboutrangethancost.Thissuggeststhatmore

knowledgeaboutEVs,includingtheiradvantagesandchallenges,leadstogreateracceptance.

Itisalsoworthnotingthatconcernsaboutacquisitioncostscouldbeusedtoargueforthesubscription

model.Indeed,Capgeminiresearchforvarious

commercialvehicleclientssuggeststhat,withbroad

usageofaholisticecosystemofservicesaugmentingtheEVtruck,thetotalcostofuse(TCU)couldbemuchlowerforEVsthanforconventionalICEvehicles.ThisobservationcouldhelpOEMstosellbothEVsand

subscriptionmodels.

13

GainingacceptanceforEVs

Finally,weaskedthoserespondentswhoare

consideringEVsaboutfactorsthatwillsecuretheir

acceptance,andspecificallyabouthowtheyprefertopayforcharging(flatrateversuspaymentperkWh).

Whenchoosingfactorsthatwouldsecuretheir

acceptanceofEVs,respondentstendtoemphasize

rangeandprice,suggestingthatpracticalityandcost-

effectivenessarekeytowideradoption(Figure15).

However,inbothcasesthepicturemayalreadybemorepositivethancompaniesrealize,soaswe’lldiscusslater,OEMsmayneedtoputmoreeffortintoinformingtheircustomers.

Figure15:MostimportantfactorsthatwouldconvincerespondentstouseEVs

Range

Price

PayloadCharginginfrastructure Chargingspeed PerformanceSustainability

TCO/TCU

13%

7%6%

4%

2%2%2%

21%

Chargingforenergy

Overall,numbersaresplitalmostequallybetween

RespondentswhoareinterestedinEVsfavorseparate

wantingtopayforelectricityaspartoftheusagefee

chargingforenergyconsumption,whereasthosewho

orbeingbilledseparatelyforit.Butaninteresting

wanttostaywithconventionalICEvehiclespreferanall-

pictureemergesfromanalyzingtheresultsaccordingtowhethertherespondentsareconsideringEVsorpreferICEvehicles.

inclusivesubscriptionthatincludesenergycosts(Figure16).

ig

Figure16:Shouldchargingbebilledseparatelyorincludedinthesubscriptionfee?

RespondentsconsideringtheuseofEVsRespondentsNOTconsideringtheuseofEVs

All-inclusivechargingcardwhereelectricityisincludedintheusagefee

Chargingcardthatisbilledandpaidforseparately

26%

21%

18%

30%

14TheRiseofSubscriptionModels

15

Discussionand

recommendations

Subscriptionmodelspresentimportant

opportunitiesforcommercialvehicleOEMs

TheseresultstellusthatthemajorityoftransportationcompaniestrustOEMsoverotherstoprovidethem

withasubscriptionmodel.Offeringsubscriptionscanthereforebeanexcellentstrategyformaximizingtrucksales.

Themodelpresentsarangeofadditionalopportunities,forexample:

?Offeringservicesthataremoreeasilypossible

withsubscriptionsbecausetheydependonthe

OEMowningthetruck.Examplesincludebattery

swapping,energygridservices,andtransportationasaservice.

?ReducingtheTCUfornewdrivetrains(seepanel),perhapsbyexploitingscalingeffectsnotaccessibletotheircustomers,includinglargerfleetsandgrid-relatedserviceslikeuploadingelectricityfromEVbatteries.

Reducingtotalcostofusefornewdrivetrains

PreliminaryresultsfromresearchconductedbyCapgeminiinFrancesuggestthatwithadigitalserviceecosystemforthetruckitis

alreadypossibletobringtheTCUforvehicleswithelectricdrivetrainsdownbelowthe

costofconventionalvehicleswithICE.ThisisachievedbyoffsettingthecostofproducinganEVwiththerevenuesfrom,forexample,energygridservices.ThisiseasiertodowiththesubscriptionmodelbecausetheOEM

canretainownershipofthevehicle.Itmightevenbeachievableifthecustomerownsthevehiclebutthebatteriesarecoveredbya

subscriptionservice.

?Providingsustainabilitybenefitsthathelpcustomersreachtheirtargets,e.g.byensuringthatcircularityprinciplesarefullyexploitedatend-of-lifefora

vehicleorbattery.

OEMsneedtodevelopsubscription-basedsolutionstomeetmarketexpectations

Ourfindingsdemonstratethatthereisamarketfor

rapidvehicleprovisionsolutions.Webelievethat

OEMsshouldalreadybeworkingontheirstrategies

forsatisfyingthismarketthroughsubscriptionmodels.Theymustinnovaterapidlytooffersolutionsthat

aretailoredtosatisfyemergingbusinessneedsandenvironmentalgoals.

Indoingso,theyshouldleveragewhatisknownaboutthemarkettoensurethattheirsolutionsarefitfor

purpose,andspecificallythatthey:

?Simultaneouslysupportbothsubscription-basedusageandelectrificationgoals.

?Addresscustomers’concernssuchascostandrange.

?Satisfyspecificdemandssuchasshortleadtimes(ideallylessthanaweek).

Solutionsmustbuildonresearchtoidentifyneedsandblockers

Companiesshouldmakefulluseofresearchdatato

explorethenuancesofcustomers’needsandblockers(e.g.thedifferencesbetweengroupsintermsof

attitudestoEVpriceversusrange,andthevarying

preferencesregardinghowenergyshouldbechargedfor).Thiswillhelpthemtooptimizetheirproductsandalsoimprovethewaytheyaremarketed.

Ofcourse,customers’preferencesandbeliefsarenotalwayssetinstone.Forexample,inthecaseofrangeanxiety,OEMscanhelptheircustomersunderstandthatwithtoday’srouteplanningtechnology,range

concernscaneasilybeovercome–andofcoursethatthevehiclesofferedwillexploitthistechnology.In

general,OEMsshouldaimtoinformthemarketabouttherealitiesoftoday’sEVs,includingbothadvantagesandchallenges,sincetheindicationsarethatthiswillcreategreateracceptance.

AnotherareawhereOEMsshouldeducatethemarketisincentivesforelectrification.Thisisacomplex

topic,becauseeveryregionandcountryhasitsown

arrangements.Francecurrentlyhastheworld’shighestCO2taxes,butGermanyhasalsointroducedaCO2

chargeinrelationtoautobahns,forinstance.And

theEUoffersa“payloadbonus”whichallowsEVsto

weighmorethanconventionaloneswithoutpenaltytocompensatefortheweightofthebattery(28%ofourrespondentswereunawareofthis).

Sustainabilityshouldbepartofthepackage

Asnoted,ifOEMsretainownershipofassets,itmaybeeasiertocreatecircularity,potentiallyhelpingbothOEMsandtheircustomerstofulfilltheirsustainabilitygoals.

Betterenergyuseisanotheropportunitythatariseswhenmanufacturersretainownershipoftrucksandbatteries.Theyshould,forexample,beabletoexploitfuturebatteries’capacityforbidirectionalcharging.Atruck’sbatterycouldstoreenergyfromsolarpanelsonitsroof.Whenthereisasurplus,consumersina

nearbybuildingcouldbesuppliedwithenergybya

stationarytruck,ortheenergycouldbefedbackintotheelectricitygrid.Inthisway,thevehiclecanactasamobileenergystore.

Manysustainabilitymeasureswillalsohave

commercialbenefits,sincetheyreducewasteandmakebetteruseofresources.

“Subscriptionmodelsoffera

practicalandattractivesolutiontotheprimarybarrierofhigh

upfrontcostsassociatedwithzero-emissionvehicles.By

spreadingoutthecostsand

providingcomprehensiveservices,thesemodelsmakeiteasierfor

truckingcompaniestoadoptgreenertechnologies,therebyacceleratingthetransitiontoamoresustainablefutureinthetransportationindustry.”

RenataObradovic

GroupClientPartnerCapgemini

16TheRiseofSubscriptionModels

HowCapgeminihelp