Scenario Planning Analysis of Subscriptions in the Automotive industry - Future impact on profitability and loyalty

Abstract: The automotive industry is facing an ongoing transformation on many levels and the common denominator is the road to sustainability and zero greenhouse gas emissions. This has led to the developments of new drivetrains and the need for new business models has emerged. To be able to meet the requirements and challenges presented by the development of sustainable cars and usage of cars. This has introduced an openness to new ideas and innovations regarding business models and commercial operations. This change has led to a discussion of mobility rather than car ownership. This fundamental change has developed a discussion and an early attempt to sell cars through a subscription model and turn the commercial operations towards a more service-oriented business rather than wholesale. This research investigates the outlook of the subscription model for OEMs in the automotive industry and emphasizes how these different futures will impact both the loyalty as well as the profitability aspects of an OEM. The research investigates and identifies the factors to consider when evaluating the next coming ten years for the subscription model and what aspects will have a larger impact on the different outcomes. These factors are identified through qualitative interviews with experts and people involved in the development of the subscription model in the automotive industry. These factors are then used to generate potential future scenarios and the identified major uncertainties will be bundled together to create two dimensions that are flexibility and customer engagement. These two dimensions are then used in a scenario matrix to generate four potential future scenarios of the subscription model in the automotive industry. The four scenarios are the following: Love to compete, Rise and shine subscription, The good old days, and steady subscription. With the knowledge of these four scenarios, different strategic actions are identified as well as a core strategy to face the uncertain future of the subscription model and recommendations on how to navigate this unknown future. This knowledge is then used to present future impact on profitability as well as loyalty and how it will affect the future of the OEM. The research concludes that the OEM has to consider the large changes organizational-wise as a core focus and that either scenario that plays out the customer-centric approach as well as the online journey will have a large impact on the business and is well anchored within customer trends and demands. This will result in fundamental changes in profitability as well as how to meet and work with loyalty depending on what scenario that evolves. Therefore, is the aspect of being agile and prepared for different futures highly recommended and being able to adapt efficiently.