Reinventing the wheel – servitization and the automotive industry

As automobile manufacturers continue to wrap subscriptions around their products, Information Age analyses servitization and the automotive industry and what it means for IT.

Last week Mercedes announced their foray into servitization. The German car company’s service is called Collection, and it puts them as the latest in a long line of car manufacturers to offer access to their vehicles via a subscription.

The app-based service is being rolled out to customers in Nashville and Philadelphia and has three pricing tiers ranging from $1,095 to $2,995 a month. Subscribers will get access to SUVs, coupes, cabriolets and high-performance AMG cars.

“We’re always looking to stay ahead of our customers’ needs and wants, as well as to bring new people to the brand,” said Dietmar Exler, president and CEO for MBUSA.

“We know there is a market opportunity for people who would like the ability to move in and out of vehicles, depending on what they need or want at a particular point in time, or who don’t want to own a vehicle right now.”

Race for supremacy

Mercedes will be challenging its biggest German rival, BMW, head-on after they too launched their subscription service in Nashville.

Just last week, Fiat Chrysler Automobiles announced its plans to enter the burgeoning subscription market in 2019 under its Jeep Wave membership program. While Porsche AG piloted an app-based service in Atlanta, last year.

Arguably one of the most significant things about Mercedes’ new service launch is the fact that it is much cheaper than most of its competitors.

>See also: Digital transformation in manufacturing is driven by customers

For comparison, subscription services by BMW range between $2,000–$3,700 per month, for Porsche it’s between $2,000–$3,000, and for Cadillac it $1,500 per month.

Indeed there are cheaper subscriptions, such as Volvo; nonetheless, Mercedes’ pricing seems very competitively charged.


The proliferation of subscription offerings in the automotive industry is no coincidence, nor is it isolated to this sector specifically.

Across the globe, many organisations that would have traditionally only sold products are trying to now wrap services around their offerings as a way to future-proof them from commoditization.

Software vendors, who at this stage are used to as-a-service business models, are aware of this multi-sector trend and are offering their solutions.

Luxoft has recently partnered with Pegasystems to create a mobility services platform for carmakers.

>See also: 5 tips to make goods-as-a-service a success 

Driven by car-as-a-service companies like Uber and Lyft, this platform aims to shift the focus to using software to alter the in-car user experience to create a holistic customer experience that covers every customer touchpoint, from sharing services to UX platforms.

Mikael Söderberg, Senior Technical Director, of Luxoft Automotive, said: “Carmakers today have an opportunity to take control of the entire customer journey.”

“This platform acts as a blueprint that allows them to own the customer experience by making more out of their customer data. By taking control of their software, carmakers can shape how people interact with their brand from the point of purchase.”

The IT departments role in servitisation

A recurring revenue business model will radically transform an organisations operations in every single department.

Perhaps most significantly, it will heighten the need to focus on service after sales.

Therefore, looking at ways to improve customer loyalty, up-sell and provide seamless billing will become critical concerns.

>See also: 5 factors defining digital transformation in 2018 – Information Age

The IT department can indeed lead in this instance. IT leaders can optimise software and tech to establish long-term, individualised customer relationships, as opposed to strictly transactional ones.

The onus will also be on IT leaders to keep up with an optimised relationship between external partners, such as leasing companies, insurance companies and road assistance.

With servitization, the IT department must solidify these new relationship dynamics.

Cars-as-a-service is a burgeoning trend, but it looks like it’s catching fast and we could see a significant readjustment concerning what manufacturers are popular. Keeping agile and customer-centric will be vital to staying ahead.

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Andrew Ross

As a reporter with Information Age, Andrew Ross writes articles for technology leaders; helping them manage business critical issues both for today and in the future

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