Scrappage scheme signals Ford's intention to lead a business model 'revolution'
EXCLUSIVE: Ford's decision to offer a scrappage scheme for older, more polluting vehicles is part of a "menu of initiatives" that the carmaker is introducing as it attempts to lead the industry on a business model "revolution" that captures new service-based markets.
Ford announced last week that it would offer drivers £2,000 to trade in vehicles from any manufacturer registered before December 2009 when purchasing newer models. The scrappage scheme, which runs until the end of 2017, is designed to improve air quality levels in the UK and builds on similar initiatives launched by Ford in Germany.
For Ford’s vice president of sustainability of Europe, Middle East and Africa (EMEA), Bob Holycross, the scrappage scheme serves to highlight how the carmaker is moving beyond offering products, instead providing services that assist with the electrification of the transport sector and help improve air quality levels.
“If you sit still and continue with the same business model you're eventually going to make yourself irrelevant,” Holycross told edie. “When you take the business model beyond just producing the asset and start to also package services, those become business opportunities. That's where this revolution is underway, as the broader industry competes with each other to get a share of these new opportunities.”
Holycross believes the scrappage scheme can offer “immediate benefits” for the UK’s Air Quality Plan to tackle pollution. In fact, Holycross said that Ford would “be at the table” if the UK Government decides to rollout a scrappage scheme as a nationwide policy.
The Government distanced itself from a diesel scrappage scheme as part of the Air Quality Plan, opening it up instead as part of the consultation to follow. A technical report revealed that applying the scrappage scheme to all pre-Euro 6 diesel cars and vans in the UK in 2019 (eight million cars and two million vans, with grant levels of £6,000 and £6,500 respectively) could cost the Government £60bn.
Ford will assess the success of the scheme in early 2018, once the offer expires, although Holycross claimed that the initial launch was a “first step”.
“It's important for us as an industry to be at the table and participate in discussions, including the overall Air Quality Plan,” Holycross said. “It becomes a menu of different initiatives to address air quality and which ones can be done in the short term or the long term; you can't just flip a switch.
"When it comes to the scrappage programme, it can have immediate benefits by getting vehicles off the road today. If we're asking the Government to look at something like this, doing something first is a logical step. Depending on how that conversation goes, we'll definitely be a part of it.”
Business model ‘revolution’
One of the benefits Ford wants to generate through the scrappage scheme is to raise awareness of new technologies and vehicles to consumers that still lack confidence over issues such affordability, recharging and driving range of electric vehicles (EVs).
The company unveiled a $4.5bn investment to create 13 new EVs by 2020, earlier this year. The company is also running a year-long project in London, which uses 20 plug-in hybrid Transit Custom vans to improve air quality in the capital.
The initiatives highlight Ford’s commitment to the ongoing electrification of the transport sector, but it’s the company’s pivot towards offering services as well as products that will allow consumers to experience the benefits of zero-emission vehicles.
Holycross claimed that any customer concerns surrounding range and recharging could essentially be “taken out of the equation” by using hybrids and EVs as part of ride-sharing and delivery platforms.
Last year, Ford created a new City Solutions team and reached an agreement to purchase the San Francisco-based, crowd-sourced shuttle service Chariot, as well as agreeing to collaborate with bike-sharing provider Motivate.
These services, which Holycross revealed would be launched in Europe, provide consumers with low-emission transport around major cities such as Austin and Texas. For every shuttle that is placed into service during peak travel conditions, Ford-commissioned research from KPMG claims that congestion could be reduced by up to 25 vehicles.
“To me, when you start to combine mobility solutions with the technologies that we can put into these vehicles, that's where this gets the most exciting,” Holycross said.
“The challenge with EVs has been customer acceptance, whether its range of recharging, but when you look at more targeted applications like ride-sharing or fleet applications and delivery type services, those types of questions can be taken out of the equation as the product is tailored for a particular use. It not only demonstrates the technology but can also build confidence.”
The move into the ride-sharing sphere reflects Ford’s desire to grasp new markets that are emerging as part of the automotive “revolution”. The traditional automotive market generates around $2.3trn in revenue annually, with Ford taking home a 6% share.
Wider transportation services, such as mass transit, taxis and ride sharing, total $5.4trn in revenue and are predicted to grow significantly in the next 15 years. As these modes of transport become more attractive and convenient for consumers, Ford – along with other automakers - hopes to capture new revenue streams by expanding its business model.
Holycross also commented on the release on Ford’s latest sustainability report, which showcased that the company is within touching distance of a 30% carbon reduction goal originally scheduled for 2025. His thoughts on the progress can be read here.