Electric vehicle manufacturer, Rivian launched on the New York Stock Exchange and was valued above $100 billion despite the company having delivered less than 200 vehicles to clients.
Why such bullishness?
Well, the fact it’s a 100% electric company in a world quickly leaving fossil fuels behind is vital.
And so is its niche – at the moment it’s focusing on utes, SUVs and vans. But I think there’s another factor at play here: Rivian is heavily invested in a subscription-based business model.
That’s important for a number of reasons, none more than value.
Owning a car is an expensive business. On top of the vehicle itself there’s compulsory registration, insurance, fuel, maintenance and repairs. That’s all before we get to depreciation.
But depreciation is more about value than upfront cost – and that’s a crucial distinction. Few people complain about the cost of a product or service if it serves them well over a long time.
For some people whose work necessitates them to do lots of driving, a car in this instance becomes a very essential part of daily life its value remains high as long as it stays roadworthy.
For many others, though, the value equation is quite different because according to a Morgan Stanley survey findings, the average automobile is used for less than an hour a day.
Automobiles therefore have a utilisation rate of just 4% and when compared with the frequency with which people use their mobile phones and laptops the variation in numbers is stark.
Am I comparing apples with oranges here?
Mobile phones depreciate fast and in the same way you can’t drive a car without rego and petrol, you don’t get much out of a phone without power and access to a network and data.
Remember that vehicles, just like phones, have been operating with softwares for decades.
This scenario is similar to acquiring a brand new mobile phone and then accepting that you’ll be unable to upgrade the operating system or any of the apps you depend on each day.
Until recently, the gap between cars and other essentials for life in the digital era was vast.
A fitting example is if an individual indulged in purchasing a brand new vehicle in 2017 and it was not a Tesla, the individual surely bought software that was never going to change.
For an average Aussie driver, you purchased a product that was going to sit in a garage for 96% of the time and would not adjust its performance to suit new needs and expectations.
That’s all about to change
I intentionally mentioned Tesla previously because the company was doing things differently.
They introduced over-the-air (OTA) updates way back in 2012. OTA is the technology that automatically and wirelessly upgrades your phone’s operating system or patches any glitches.
And this brings us back to Rivian
Just like a mobile phone, a Rivian vehicle comes with multiple pre-installed systems – kind of like phone apps. They can be updated and upgraded as part of your Rivian subscription.
Rivian vehicles are innovatively facilitated with a hands-free driver assistance system, a driver monitoring system, battery management, thermal management and telematics.
This ideology, pioneered by Tesla, has become a standard among electric vehicle new comers and traditional OEMs as it goes a long way towards solving the problem of car value.
Volvo only recently revealed that an OTA update to their very first fully electric vehicle will not just improve the electronic system but increase the car’s charging speed and its range.
Any product that continues to improve over the course of its lifetime is self-evidently more valuable than products and services that remains exactly the same as they were originally.
The problem of utilisation has subscriptions covering it in an even more comprehensive way.
Options for discontinuing your subscription as your needs change indicate that you are currently not owning a vehicle, but you are able to leverage and harness a service with the car.
Additionally, as part of that service you are facilitated with the software updates as I have explained before and you also get customisation to meet the preferences of a single owner.
A usership model focused on personalisation facilitates a single car to have multiple users with tailored connected services and software but with different parameters for each subscriber.
This is good for the car’s users as it enables sustainability because it extends the asset’s life.
Rivian and innovative companies that share some of its ideologies and strategies are showing the world a glimpse into the future of cars which will be electric and software enriched.
Automobiles in the near future will be brought to drivers via customisable and potentially multi-user subscriptions. The car as a costly product will be replaced by mobility as a service.
Nick Cherrier is helping businesses shift to the Subscription Economy. He is a specialist in revenue growth and marketing, with over 10 years of experience across strategy consulting and digital advertising.