Rethinking the Luxury Auto Business Model 3

The automotive industry can benefit from a radically different business model, one that involves less waste, higher customer loyalty, and significantly improved profits. In this report, we propose strategies luxury automobile makers can implement that can revolutionize their business. Instead of selling cars for a one-time profit, manufacturers should switch to a servicebased long-term lease business model. Instead of losing touch with customers after the initial sale, manufacturers should collect back used vehicles years later to be remanufactured into new vehicles. These are examples of Circular Economy strategies (explained in the next section), whereby manufacturers efficiently recycle and remanufacture their products without sacrificing quality. Ultimately, this leads to a more sustainable business model and environment. Circular Economy strategies could help firms dramatically increase profits while conserving environmental resources. In the illustrative case of Mercedes Benz, implementing these strategies could increase profits by up to nine times within five years.