A new lease on car ownership
VW electric strategy to change traditional buying model
Leasing an electric vehicle (EV) is still a new concept in South Africa. Mini was the first to offer this option for its Cooper SE, which can be leased for a short-term period of between one to three years.
But earlier this year, Volkswagen South Africa told Business Day it would lease its upcoming electric ID.4, which would be the only way consumers could get their hands on one.
The ID.4 is one of the best-selling EVs in Europe. The vehicle is expected to make its way to South Africa within the next two years.
Steffen Knapp, head of passenger cars at VW SA says 95% of all its electric cars in Germany are being leased, and the company’s new concept called Guaranteed Future Value (GFV), along with a lease option, will allow customers locally to drive the ID.4 and future EVs.
Knapp says GFV means a customer won’t own a vehicle, which has historically been a problem in SA because of high inflation rates.
One of the GFV options is based on a residual value that will allow the customer to get a new car, which Knapp says would be a huge advantage for VW because it will be in possession of the EVs, thus allowing it to control the secondhand market.
“This is what we potentially got wrong in the past, we didn’t care about used cars, says Knapp. We didn’t know where our vehicles were being sold; they don’t come back to the dealer because they are not getting the best price.”
“With electric vehicles, the second owner is interesting to us because in the future, you will have a concept called functional demand,” explains Knapp. He describes a scenario BMW offers through its controversial monthly subscription – if you’re driving in Johannesburg during winter and need heated seats for three months, you can get it on its app store.
“That generates revenue for us, because EVs have massively lower maintenance costs or things to repair. There’s a big revenue stream going away from us, so we need to make sure we are selling these options to customers.”
Today, we don’t know who the second owner of our vehicles are, and therefore it’s important for us to know who the second, third or fourth owner will be, he says.
In addition to GFV, there will be the leasing option. “The leasing concept is interesting ’for t be an companies asset on their because balance the sheet.” vehicle won
Knapps says the offering makes sense strategically because they will get a better understanding of customer fears around residual values, have the cars come into their workshops, and get used to the concept of “using” cars.
He says using cars is the concept of the future and likens it to streaming music and movies versus buying CDs and DVDs. “With a using model, you only restrict your discussions around the actual total cost of ownership with the customer.”
There won’t be talks about price, but rather monthly instalments and cost to charge, with a maintenance plan built in. “That’s the idea of using, it’s easy. You only have to worry about plugging it in to charge and that’s it.”
Knapp believes the offering ties into current consumer life cycles across all industries that are moving at a faster pace. Consumers want to use; they don’t want to own but at the same time, develop wealth for their families with long-term goals, he says.
“The initial success of GFV will support customers who want a monthly instalment rather than owning something they must pay back. They will be willing if there is an interesting offer,” says Knapp.