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The growth of the Internet of Things, and research being done on autonomous cars and self-diagnostics, and growing interest in a car-as-a-utility model is about to change the auto rental industry.
In the foreseeable future, auto rentals will no longer be limited to something offered to consumers who are traveling. Instead, the industry will shift towards a utility model where consumers will have the option to not own a car at all, and instead have a subscription to use one whenever needed.
A simple example of the concept is already popular for bicycles, with the LimeBike system in several major U.S. cities. The ubiquitous green bicycles are located throughout the city in popular locations, and users simply tap into a smartphone app when they want to use one, and then just leave it when they're done. The same sort of system could – and likely will – apply to automobiles.
This transformation will depend on a combination of universal standards, built-in connectivity, and the Internet of Things.
Forrester Research says that by 2020, 90 percent of all new cars will have built-in connectivity platforms. Manish Mistry, VP of IoT at Infostretch, a provider of digital transformation services, sees cars becoming "smart phones on wheels." Mistry says, "Leveraging the powerful combination of IoT and location, consumers today are able to order and pay while driving, receive location-specific relevant ads, and do many more things while they're on the go." The ability to incorporate advertisements into a new type of automobile subscription product will not only drive revenue to the providers, but may also work towards reducing the subscription price – potentially offering a two-tiered rate common to some media sites, where users pay a lower fee for an ad-supported subscription.
Car dealers will sell subscriptions to cars
In the future, a car will be less of a personalized home on wheels, and more of a subscription-based commodity. The value will not be in the steel – rather, it will be in the apps and utilities which run on the car's operating system. Companies like Sierra Wireless are already developing IoT applications to facilitate improved fleet management, connected cars, and allowing car manufacturers to get ahead of the curve on subscription-based car sharing.
John Ellis, CEO of Ellis Associates and Advisory Board Member for AutoMobility LA, is also former Global Technologist for Ford's connected car business unit. "Cars are the top products in the 'sharing economy,'" he says, "Mainly because the drivers don't need cars 90 percent of the time they own them." Ellis is author of "The Zero Dollar Car," which explores the big changes big data will bring to the auto industry in the very near future.
IoT-enabled cars are inevitable, and one thing that IoT brings is data, and lots of it.
Automakers are likely to move into the data collection business, as cars increasingly turn into commodity items. Many retailers are seeing the benefit of data collection – grocery stores, retailers, and any type of business which sells their product on a subscription basis collect a vast amount of data, and that data is useful on two fronts: For improving the customer experience and better understanding how the customer interacts with the product and what they want; and for sharing that data with other industry partners – and possibly selling it. Ellis says, "Companies that make products of any kind, including cars, have an opportunity to collect valuable data from their customers and monetize it. Companies that haven't realized this will get left behind.
Auto rental agencies joining the IoT revolution
Companies like Hertz and moving towards the IoT revolution in a big way. The company's 24/7 hourly vehicle rental service provides IoT-enabled cars, which business travelers can book, pick up, track and drop off through an app. Voice services are built directly into the vehicle, and remote diagnostics are built in.
Standardization across multiple platforms will have to be settled before automotive IoT becomes mainstream, and Hertz is already on the forefront. In Europe in particular, a unified IoT automotive operation is challenging, because each European country requires a different local SIM card to work. Hertz has expanded the limits of its IoT-enabled fleet to allow for management between countries.
"Traditionally, auto rental agencies are located in high-traffic areas, especially in airports and near major hotels," said Chris Rivett, Travel Expert at HotelsCombined. "A shift away from ownership and to a subscription-based model will not only transform the auto rental agency business, it will also make those subscription-based cars more readily accessible." Rivett notes that hotel concierge operations are always looking for new ways to add value to the guest experience, and partnerships with automobile subscription companies would be a perfect fit.
Ride sharing and cars-as-a-utility gets more precise
A challenge with ride sharing and the car-as-a-utility concept is that while the technology is available to collect data, the industry still needs to refine their approach to doing so, to decide what data is most important, and to understand what to do with it. Companies like Arity, a startup born from Allstate Insurance, is helping the industry along with its own predictive data and insights platform, which is built from more than 27 billion miles of driving data. So what do companies like Arity do with that much data? The company is partnering with insurers to adopt usage-based insurance, which measures rates based on driving behavior, which is measured in real time.
"Increasingly, we're seeing hotels partnering with luxury retail brands and service providers, and the addition of a car subscription service is the next logical step," said Rivett. "Self-driving car technology would even allow a subscription car to deliver itself directly to the hotel's front door."