Will you "Netflix" your next car?
People are less and less interested in owning cars, but still want to drive them. That opens the door for flexible solutions, in particular the car subscription model. Will you 'Netflix' your next car?
BMW and Mercedes have recently joined the select club of manufacturers offering cars on subscription. What exactly is it, why is it being offered, who are the players, and how relevant will it be to corporate mobility?
Let’s start with the What. The three characteristics of the subscription model are: flat fees, no hassle, easy termination. For a fixed monthly amount, you get a car that is easy to exchange, plus a bundle of services, on a contract that can be cancelled on short notice.
That’s the convenience customers recognise from similar retail formulas, for Spotify, Netflix or just about any smartphone subscription. Translated to cars, the subscription model lets customers avoid the downsides to both ownership (large down payments, high insurance premiums) and leasing (long contract runs).
Which brings us to Why. Manufacturers are pioneering the subscription model to keep their increasingly restless clientele from defecting wholesale to shared-mobility solutions that have eliminated the need for ownership – think Uber, Lyft and more. To keep selling cars, they’re selling subscriptions to service packages, with car included.
By taking out the hassle and adding the option to change models, the subscription model could prove very popular with consumers. However, there is a drawback: because of the services and options it typically includes, it’s generally more expensive than other solutions.
It’s no wonder that the first OEMs experimenting with the formula in North America and Europe are premium manufacturers. But the subscription model is not the sole preserve of OEMs. Start-ups, disruptors and lease companies are also getting into the game.
How car subscription will change mobility
- More flexible than typical leases. This could help OEMs push up sales, regaining the initiative from ride-hailers.
- As switching cars becomes the norm, customers will want to subscribe to a brand, rather than own a particular car.
- As such, CaaS will become a vital ingredient of MaaS.
- The formula’s popularity will be limited by its price. The million-vehicle question: How much more will users pay for the convenience of a subscription?
|This is an excerpt of an article was published in Fleet Europe 97, a special issue on Smart Mobility. Read the full article online!|
Image: the Volvo XC40 can be bought outright but is also available through Care by Volvo, a subscription service.