RLGC x Automotive Club: The Future of Mobility

This year, RLGC is very excited to introduce a collaboration series, where the club sits down with other student clubs at London Business School to explore ideas in our spaces. In this first instalment, our writer Charmaine Leong sits down with the President of the Automotive Club, Koray Kayhan, to have an open discussion on what the future of travelling might look like and how this impacts luxury car brands. This article is not meant to be prescriptive, but instead raise some questions on the key trends facing the mobility sector.

The Future of Mobility on Luxury Cars

What is luxury? Quality is king, followed by other characteristics such as superior experience, distinctiveness, history, timelessness and exclusivity. It therefore should not be a surprise that luxury cars are considered to be one of the most, if not the most, luxurious luxury sector: Household names including Rolls Royce, Bentley, Porsche and Ferrari still prompt a sense of extravagance and awe in many consumers. In fact, in 2018, Rolls Royce was ranked first for quality and Lamborghini for distinctiveness and experience. However, with technological innovation and the consequent evolution of mobility, the luxury automotive sector is set to be disrupted and the definition of luxury challenged. Luxury car brands therefore have the opportunity now to redefine and futureproof themselves, or risk obsolescence.

The Evolution of Car Ownership

When thinking about the future of mobility, one thing is clear: people are going to own fewer cars. A survey conducted by KPMG in 2018 showed that 74% of car manufacturing executives believed that over 50% of car owners today would not own a car in future. This trend can be explained by consumers’ move towards the sharing economy, be it ride-hailing platforms like Uber, or ride-sharing ZipCar and Turo. The growth of the global sharing economy has been staggering, with the market forecasted to grow from $15 billion in 2014 to over $335 billion in 2025, of which 47% is driven by new mobility models. Technology advancements have made it easier to use these innovative services, and Millennials’ desire for flexibility and convenience have boosted their receptiveness towards these alternative ownership models.

As owning a car in future will not be the norm (and might even become so rare like a ‘luxury’), luxury car companies have to contend with the issue of how to retain market share in a time when traditional car ownership is being challenged. While there is likely to remain a customer who has the means to purchase (multiple) luxury cars for enjoyment, the importance of the aspirational Millennial customer who desires flexibility and convenience cannot be ignored. Similar to the luxury fashion market, luxury car companies have two choices: they can either shun the apparent disruption to the market, or learn to engage with this shift and differentiate themselves to retain their brand position. This can be a tough decision to make, as luxury brands have to balance the democratisation of luxury arising from technology and its implied notion of exclusivity.

Ultimately, successful brands have to pick strategies that make sense to their customers and that are consistent with their brand DNA. Stella McCartney is a great example, as its focus on sustainability and extending the luxury product’s lifecycle is consistent with its partnership with luxury resale platform The RealReal. In the realm of luxury cars, Bentley Motors is notable in its experimentation. The brand piloted its Bentley On Demand service in 2017 as part of its Bentley Network app, where existing Bentley owners could rent the same or another Bentley model when travelling abroad. Although this initiative did not wholly adopt new mobility trends seen in mass market segments, it represents a step in the right direction for luxury car brands thinking to engage with this space.

Experience the Ride

Experience is a key concept that every luxury brand, regardless of sector, has to master. But what makes the automotive sector especially exciting is how autonomous cars may impact this. At some point in the future, driving licences might even become obsolete. While maintaining superior customer experience throughout the customer journey is crucial, two aspects of experience that we draw attention to are the experience of driving and the experience of riding. Although self-driving cars are some time away from full commercial deployment, we argue that there are segments of the luxury car market, such as sport cars, which are less likely to be affected by autonomous vehicles, simply because of the joy from the drive.

However, for other types of luxury cars, redefining the experience of the ride may be a point of differentiation for brands. Plenty of premium and luxury car brands have begun researching and conceptualising the autonomous luxury car of the future, from Mercedes’ F015, Roll Royce’s 103EX to BMW’s Vision iNext. Common themes explored revolve around time as the ultimate luxury, connectivity and private living spaces in a public area. What stood out in the course of our research however, was that the vision of luxury self-driving cars was very similar across brands. It is therefore back to basics for luxury car brands, as they will have to find meaningful, nuanced ways to communicate their brand history, tradition and values amidst a highly technological and almost uniformly ‘hyped-up’ vision of autonomous cars. This is a very interesting thought to consider, as it may create opportunities for future collaborations between brands from different luxury sectors. Consider a Louis Vuitton autonomous vehicle pod as a means travel as a symbol of its heritage travel trunk.

Get Ready for Mobility Revamped

Technology has enabled so much change in so little time. An explosion in the number of startups tackling autonomous vehicle and car-sharing technology is but a drop in the ocean of disruption. What new propositions and new players will enter the market in the next 5 to 10 years? Brands and companies we have not even conceived of yet are likely to become household names in the next few years (think of Uber 7 years ago), and even existing brands currently unrelated to mobility might enter this space. With so much movement, growth and innovation, traditional players, including luxury car brands, will have to find authentic ways to keep up with the times and stay on track.

Written by Charmaine Leong and Koray Kayhan

Charmaine is a fashion-tech and luxury enthusiast currently reading the Masters in Management 2019 and participating in the Walpole Programme. In addition to gaining a BSc (Hons) in International Fashion Management at the London College of Fashion prior to LBS, she also has experience in digital consulting, merchandising and fashion-tech incubator projects with Microsoft.

Koray Kayhan is a Masters in Management 2019 candidate who, prior to LBS, studied Mechanical Engineering at San Diego State University. Highly passionate about technology, cars and startups, he has experience in operations engineering in a startup serving the visually handicapped, product development and building electric race cars for his college team.