The automotive companies used to track their performance by increasing or decreasing the shipment size. This methodology is expected to be sidelined in the future with the introduction of new revenue streams by creating additional customer benefits, particularly to compensate for higher initial investments for vehicle ownership.
Recently, the automotive industry has bundled up new products and services in a unique way by engaging with non-traditional partners to open up a new revenue stream — showcasing ads in the connected cars. In the current situation, industry performance is tracked with the help of shipments, but this is expected to be sidelined in the future because of the change in business scenario.
According to Automo analysis, more comprehensive mobility solutions will be introduced in the future, thus moving the businesses from product based to complete service based businesses. Electric Vehicles, hydrogen powered fuel cells, connected cars, self-driving cars, and others will have a vast monetization potential with different revenue streams. Thus, to be future ready and to measure the performance of the industry, Automo has developed a new indexation and a metric called vehicle revenue per user (VRU).
Traditionally, manufacturers have focused on production of physical goods, in which the value is realized when the ownership is transferred to the customer. The customer is further responsible for product servicing and other related costs such as part replacement, downtime risk, and defects, which are not covered under the warranty. Through new technology developments in electric vehicles and connected cars and through new methods of product offerings such as leasing and ride sharing, the automotive industry will radically alter the long standing business model.
Vehicle revenue per user or VRU is employed to measure per user basis revenue as per the designated vehicle. VRU is calculated as recurring income right from the ownership stage. The revenue calculation for later sources is done by in-car services per user and by the aftermarket sales and services per user. Thus, VRU is the simple addition of various services opted by the active user, from leasing a vehicle to the services used in the next three years and at the end of the vehicle lease period.
According to latest recent survey by Automo, higher percentage of Gen Y population will lease cars in the future.
Automo has drawn customer response and based on our analysis, we have understood the customer requirements. The requirements from the end users have further helped us to deduce the matrix to calculate services and be prepared for the future offerings to update our tracker.
We have considered all options in leased vehicles such as buy back and early termination. These factors help us to keep a keen eye on the companies and industry performance. The metric also takes into account the fees paid at the beginning of the lease period such as title fees, acquisition fees, and security deposit. Furthermore, at the end of the lease expenses such as purchase option fee, disposition fee, mileage fee, and wear and tear fee are also taken into consideration. This further helps us to calculate the vehicle average revenue per user (VARU).
VARU is used to measure the average operating revenue attributable to each designated service on a per user basis. In the case of vehicle purchase, VARU is calculated by dividing revenue items included in the operating revenue by the number of active buyers of the relevant service. The active user comprises both the full owner of the vehicle and the partial owner of the vehicle.