By 2025, over 400 million related automobiles will likely be on the street. Automotive leases and fleet managers can use related automobile knowledge to handle their autos extra successfully and improve income. An enormous a part of that strategy is said to dynamic pricing – a data-driven approach enabling you to set the most effective costs in your service. Let’s take a look at how your enterprise can profit from dynamic pricing and related automobile knowledge.
Automobiles generate tons of priceless info. Most of it comes from their engine management models (ECUs) that gather knowledge from many various sensors throughout the engine and controller space networks that allow microcontrollers and units to speak.
Because of knowledge coming from these and different sources, the automobile rental firm can have rapid entry to telemetry knowledge, together with:
- The particular automobile’s location
- Its present engine standing and velocity
- The automobile’s standing (e.g., if the automobile is locked) and so on.
As a by-product of the telemetry knowledge, you can even perceive the driving model of a given driver.
Curiously, the related automobile penetration has already surpassed that of non-connected automobiles (over 50% market share in Q2 2022)[1].
As a result of related automobile knowledge gives automotive companies with helpful enter (particularly when mixed with internet and market knowledge), automobile leases and fleet managers can use it to regulate their presents and, thus, develop income. Right here, dynamic pricing is essentially the most distinguished answer.
What’s dynamic pricing?
In a nutshell, it’s a data-driven technique that exploits clever algorithms (steadily based mostly on machine studying and automation) to set and preserve the most effective costs inside particular market circumstances.
Dynamic pricing algorithms regularly analyze the obtainable knowledge (coming from the web site, the market, and the autos themselves) and use it to robotically alter costs and different service circumstances obtainable in your web site or in your app.
In consequence, costs for renting a automobile may be optimized a number of instances every week (or perhaps a day) relying on:
- Present demand and automobile availability
- Time of day
- Visitors circumstances
- Gasoline costs
- Earlier driving historical past of a given person
- And even the chance {that a} given particular person will likely be pleased to pay extra for the service (e.g., as a result of they’re working out of battery of their cellphone and they should organize transportation rapidly)
Dynamic pricing is prevalent in each giant automobile leases, rideshare firms, and mobility-as-a-service suppliers, akin to Uber. And talking of Uber, a while in the past, Forbes printed an article explaining how Uber’s pricing works. They use a complicated dynamic pricing algorithm based mostly on AI and a number of worth factors to find out the optimum worth every person sees of their app.
In consequence, Uber can cost the optimum price for each experience, which helps them make more cash. An analogous answer may be launched in any automobile rental firm.
However the worth of the service is only one puzzle piece. Relating to automobile leases, there are different circumstances and charges renters have to concentrate on earlier than signing on the dotted line. Right here, related automobile knowledge will also be of assist! Let’s dig a bit deeper.
Dynamic pricing, related automobile knowledge, and the query of the insurance coverage
Renting a automobile entails extra charges, primarily insurance coverage, which is nearly all the time necessary. It stands to cause that this price also needs to be depending on a given driver and their expertise and driving habits.
Insurance coverage firms have been accumulating knowledge about drivers’ behaviors for years. And sure, they’ve been utilizing it to calculate insurance coverage premiums and supply reductions (so-called usage-based insurance coverage – UBI). At this time, it’s potential because of cell functions that must be all the time on when driving a automobile. Such an app can observe every driver’s conduct on the street. Quickly, although, related automobile knowledge will change these apps altogether.
Though this concept continues to be in its infancy, we are able to anticipate that it will likely be shortly doable on a big scale, particularly given the truth that the variety of related autos is regularly going up (the worldwide related automobile market dimension is projected to achieve nearly USD 192 billion by 2028 – CAGR of 18.1%[2]).
The primary functions enabling the implementation of dynamic pricing in automobile insurance coverage are already right here. Because of thousands and thousands of related automobiles providing trillions of information factors, automobile rental firms can perceive their clients and their driving behaviors.
This information can be utilized to supply cheaper insurance coverage and different rental charges to renters with a confirmed historical past of protected driving. One other thought price contemplating is utilizing knowledge from related autos to enhance reward and loyalty applications (a protected driver may get reductions to lease a automobile or get extra loyalty factors).
Nonetheless, there are nonetheless some challenges that must be addressed.
The challenges of benefiting from related automobile knowledge…
As McKinsey explains of their recent report, “many OEMs have struggled with connectivity or associated software program developments, leading to poor buyer critiques and delayed begin of manufacturing”. Automotive producers and different OEMs wrestle with convincing clients that car-connectivity companies ship extra worth. Add poor execution of companies and communication points to the combination, and it turns into apparent that customers are nonetheless a bit reluctant in the direction of such companies. It’s the identical story with usage-based insurance coverage.
In 2021, there was a survey performed in Canada regarding UBI. 77% of Canadians are involved about potential price hikes. And 51% are hesitant in case it negatively impacts their present insurance coverage charges[3].
After which, there may be the information administration subject. McKinsey estimates that you must entry 1 to 2 terabytes of uncooked knowledge per automobile every day to completely profit from related automobile knowledge. Meaning enormous knowledge facilities able to processing all that info day by day.
…and the inevitable future
The way forward for the automotive business is software-centric, and automobile leases and fleet administration firms are not any exception. Because the variety of related autos goes up, we can profit from extra superior data-driven options.
At GrapeUp, we tirelessly work on them daily! We develop customized options for each OEMs and automobile rental firms that allow accumulating knowledge, seamless processing, and even distributing it additional. All to permit you to make more cash.
When you run a automobile rental firm, we will help you implement the options mentioned on this article. To search out out extra, see our supply for the automotive sector.
[1] https://www.counterpointresearch.com/global-connected-car-market-q2-2022/
[2] https://www.globenewswire.com/en/news-release/2022/08/17/2499966/0/en/World-Related-Automotive-Market-Dimension-to-Hit-USD-191-83-Billion-at-a-CAGR-of-18-1-for-2021-2028-Fortune-Enterprise-Insights.html
[3] https://www.ratehub.ca/weblog/ubi-saves-money-but-87-per-cent-not-trying-survey-data/
