As the auto industry shifts from an ownership model to an Mobility-as-a-Service subscription model, the industry can learn a lot from Adobe. On April 23, 2012 when Adobe announced the Adobe Creative Cloud SaaS (Software-as-a-Service) model, the company billed the service as a radical new way of providing tools and services.
This was a radical move at the time but in hindsight, it was a brilliant initiative by Shantanu Narayen, Adobe CEO. During the first years of the transition to this new model, investors questioned the decision as net income dropped by almost 35% in 2013.
Almost a year after the initial announcement, Adobe announced it would no longer sell the Creative Suite software. Consumers would have to subscribe to the Adobe Creative Cloud to be able to use the software. This caused a considerable amount of uproar amongst Adobe customers, including over 50,000 Change.org signatures demanding the company to abandon the subscription model.
Some would argue that Adobe was actually helping small businesses and the average consumer as the company eliminated the thousand dollar investment to buy the software. Setting aside the Creative Suite software also played a part in countering the piracy market.
Today, Adobe’s business is growing 22% year-over-year and the stock is up over 327% since the initial announcement in April 2012.
The same thing will happen in the auto industry when auto manufacturers stop selling vehicles to the public and transition to Mobility-as-a-Service subscriptions. Initially, publicly traded auto manufacturers will report large drops in income as vehicle sales will fall considerably and subscription revenue will not offset the drop in revenue.
There will be a considerable amount of uproar considering the vehicle will no longer belong to an individual and that individual will not be able to drive the vehicle. To help alleviate the uproar, vehicle manufacturers selling Mobility-as-a-Service subscriptions should host autonomous vehicle demo days in cities around the world to introduce the public to the service and explain the benefits.
Mobility-as-a-Service vehicles will be fully autonomous (SAE Level 5) with no steering wheel and no way for a human driver to take control of the vehicle. This will cause a certain amount of anxiety among individuals who are accustomed to driving a vehicle on a regular basis.
These vehicles will be shared and summoned on-demand when needed. The vehicles will not park at an individual’s residence, school or office: instead, they will always be in use. When an individual needs a vehicle, they will simply summon one with a click in an app or a voice command to their voice assistant such as Alexa. Depending on the activity, individuals will be able to summon an SUV or a coupe.
Mobility-as-a-Service subscriptions will be billed to a credit card on a monthly basis with a cancel anytime policy, eliminating the need for credit checks, down payments and repossessions. In short, this will lower the overall risk to the underwriter of the vehicle.
Today, we are starting to see the early signs of a Mobility-as-a-Service subscription model with Cadillac’s BOOK service. The BOOK service is a way for Cadillac to model behavior prior to rolling out an autonomous vehicle subscription service.
When a Mobility-as-a-Service such as Cadillac’s BOOK is introduced, the subscription will travel with individuals from city to city, having a negative impact on the overall car rental market.
In 2016, the total U.S. car rental market generated over $28 million in revenue from car rental operations. On average, there were 2.3 million rental cars in service in the United States in 2016.
As we move towards Mobility-as-a-Service, revenue generated from car rental operations will dramatically decrease as consumers opt for subscriptions instead of rentals.
The transition to Mobility-as-a-Service will occur slowly at first with accelerated adoption rates in select markets. When this transition occurs, the future of transportation will be ushered in giving on-demand mobility to every individual around the world.
While we are still in the early days of Mobility-as-a-Service experiments and autonomy, Adobe has clearly demonstrated that the road from a traditional business to a subscription service is fruitful and can lead to profound organic revenue growth, profits and return on investment for shareholders.