Car as a Service (CaaS)
The rapid advancements in technology have changed the fundamentals of many industries. The increase in connectivity, as well as digitalization, is also affecting the automobile industry. Just like other industries, car customers also want to be spoiled for choice. This is the reason that the industry is being forced to rethink its traditional business models. It seems like the new frontier for the automobile industry has arrived. This industry will no longer be only about selling cars.
Instead, companies are now planning to change their product based approach and move towards a full-service approach. Since this approach is more consumers oriented, it is more appealing to the millennial customers. Many companies like Volvo, General Motors, and Ford, have already launched their car subscription services on a small scale. However, if the experts are to be believed, the market for car subscriptions is likely to witness a boom in the near future.
What is The Car as a Service Model?
Car as a Service (CaaS) model is being touted to be an improvement over the existing car leasing model. The current model is heavily focused on assets. The contracts bind the customers with vehicles for long periods of time. The lease period agreed upon at the beginning of the lease is inflexible. Any changes made to the lease attract severe penalties and financial losses from the customers point of view.
On the other hand, Car as a Service (CaaS) program provides flexibility in the hands of the customers. They can change and upgrade their vehicles as and when they want. Like lease contracts, subscription to a car does not bind the customer for many years. Simply put, the Car as a Service (CaaS) program works like a Netflix subscription. Customers can subscribe to cars on a month-to-month basis.
In this article, we will have a closer look at what the Car as a Service (CaaS) model is. The pros and cons of this model will be discussed in this article.
Advantages of the Car as a Service (CaaS) Model:
Disadvantages of the Car as a Service (CaaS) Model:
The bottom line is that Car as a Service (CaaS) model has become a reality. Right now it is only a small segment of the automobile market. However, trend analysis indicates that the usage of this model will see an upward trend in the future.
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