Using first principle thinking to stress test your technical architecture
Somo's Technology Director shares his thoughts on First Principle Thinking and how it can be applied to Technical Architecture.Read more
Electric vehicle (EV) sales are up over 50% from 2020, and with a growing market share (+4.1%), it’s safe to say that the world is moving toward electric vehicles at a rate not seen in the past.
The government investment in EV infrastructure could be one of the reasons more people are buying into the electric vehicle market – with hundreds more charging stations being planned each year, it’s now becoming more viable to drive further and without fear of getting stuck in the middle of nowhere.
But as electric cars become more popular, is the way buyers are purchasing vehicles changing? And what could the future of ownership look like?
As the sales of EVs have increased, the way people buy cars is changing dramatically. Currently, the most popular method of purchase is a PCP (Personal Contract Purchase), where the buyer pays a monthly sum each month and then an optional final payment to pay the rest of the balance off at the end of the contract. Alternatively, they can hand the car back and the contract is over.
PCPs are becoming more popular and many financial institutions are looking into digitalisation of their systems to give buyers better access to the deals that are on offer. Businesses who can digitalise solutions that offer consumers PCP agreements with ease will almost certainly see an increase in customers – with websites like CarWow and Cazoo becoming more popular, the future of car buying is heading towards a fully online experience.
Until recently, car finance through a dealership or finance provider was the main method of purchasing a vehicle but there is a movement within the automotive industry that sees brands exploring new ways of selling cars, and more so electric vehicles:
Leasing is essentially like renting your car. You pay a set monthly fee which often includes servicing and warranty, and hand the car back at the end of the contract – usually 3 or 4 years after the start. This method is the most similar to PCP finance and is used heavily today but often not advertised by dealerships due to the lack of financial freedom in early contract termination. In a PCP, you can pay the remaining finance at any point but in a leasing agreement, you have to pay a large sum (often a percentage of the remaining money owed) in order to get out of the deal. You also don’t ‘own’ the car, so you can’t sell it in order to help you pay that fee. That being said, as the EV market share goes up rapidly in the next few years, we might see more leasing agreements due to the business benefits and low monthly payments that some consumers can enjoy, helping to tackle one of the key barriers to electric vehicle purchase: higher price as compared to non-EV cars. Leasing also makes sense with electric cars due to the battery life problem – handing the car back at the end of the lease would allow it to be maintained and replaced if necessary.
Brands offering leasing deals could benefit massively from improving their online presence. With the increase in leasing deals, more people are looking to initiate and manage their leasing agreements online, looking for easy and seamless ways to make their life admin more manageable from the comfort of their sofa.
Vehicle on-demand services give access to cars, without actually owning one. When you need the car, you rent it for a certain time and return it at the end. This is currently a popular option in London through services such as ZipCar, with big potential to grow further elsewhere in the country. The rise of self-driving electric cars could see this trend being adopted even more in the future – the car could drive itself to your house, allow you to use it over the agreed term and then drive itself back to a charging destination. Self-driving cars are a long way off, but this is an option that could be very popular once the trend takes off, and once both the technology and regulatory landscape are ready for the full launch, not just allowing autonomous driving on highways, but in the cities too. There would be significant cost benefits for those who don’t use their car very often and this would provide a perfect, eco-friendly way of car sharing.
There are two options available before self-driving cars are on the road:
1) Human delivery: a staff member drops off and picks up the car
2) An increase of cars on standby: think of the electric scooter rental industry and this would work in much the same way. Currently, companies are only allowed a certain number of parking spaces in London so that they don’t congest the city too much. Outside of London, parking is usually less of an issue but there would still have to be an increase of cars sitting around waiting for users to rent them.
These two methods both have large disadvantages and so, until we get self-driving vehicles, this option of ‘ownership’ is unlikely to become very popular beyond the current usage of ZipCar and other similar platforms.
These on-demand services go hand-in-hand with digital technology. The popularity of ZipCar came directly from the easy-to-use mobile app they developed. Future on-demand services would need to follow this trend and develop their own technology in order to gain the traction needed to kick-start this method of ownership.
Some manufacturers are now offering subscription services that allow customers to have regular access to new cars that you can keep for a certain amount of time before handing it back to pick up a new(er) car. The cost of this is usually significantly higher than a PCP, but for those who wish to drive a brand new car every few months, it’s a very cost-effective way of driving the latest and greatest the brand has to offer. For manufacturers with electric vehicles, this could be a great way to keep batteries conditioned and well maintained as well as offer new cars for car buyers to trial, with the used car subsequently sold on the second-hand market a few months later. It would also help to battle the battery range anxiety, as customers would know they can swap easily whenever a car with a better range is released.
Jaguar Land Rover (JLR) has recently launched their subscription service named Pivotal which promises subscribers a new vehicle every six months or sooner. The service includes maintenance of the vehicle as well as 1,500 miles per month of use. But at a minimum of £850 per month, it’s more expensive than a PCP offer with the same models.
Currently, subscription services haven’t caught on, but with the rise of EVs, we might see an increase in these services. Prices may have to come down for consumers to really be interested but for the early adopters of electric cars, it’s a perfect way to access the latest technology that’s often shipped with EVs.
Allowing customers to manage this experience online is essential. As users are likely to swap cars every six months, the logistics needed to support this nationally are far too great for a human-based system to manage effectively. An app where users can select the car they want next, the date of hand-over and changing their subscription would be a necessary feature.
While electric vehicles are trending up and predicted to heavily take over the petrol-powered alternatives in the next few years, there have been other developments that could see a different future within automotive. Porsche, Bosch and others are investing heavily in synthetic fuel research which the industry hopes will allow existing petrol-powered vehicles to stay on the road while emitting net-zero carbon emissions. This process would take carbon dioxide from the atmosphere and use it to create combustible fuel for petrol-powered vehicles. While this would release carbon dioxide, it would only release the same amount as it was originally collected to create the fuel; hence the carbon-neutral element of synthetic fuels.
Obviously, the process of manufacturing synthetic fuel is very energy-intensive and to make it a viable, sustainable solution, it must use green energy such as wind farms and solar panels in order to be worth the investment. Porsche has chosen Chile to develop the new factory as the wind and sun come in plentiful amounts. The next challenge is shipping that fuel around the world with an eco-friendly method. It’s worth a note that cars are not the only machines that will use this new fuel type, as airplanes, ferries and ships will all benefit from the more sustainable methods.
Battery-powered vehicles will slowly take over a large proportion of cars in the UK. With the advance of synthetic fuels, it’s likely that not everyone will be driving an EV in the future. Those who do own one might do so in a very different way than today – leasing, subscribing or renting them for short periods of time. Developments of self-driving vehicles could change the way these services work further to mean that many people do not even own a car but still have access to one for whenever they want.