OEMs are in a strong position to run a profitable car subscription service. Loopit discusses the market opportunity for OEMs in car subscription services, their unique advantages and the benefits of partnering with a technology provider.
July 12, 2022
Last updated on
February 15, 2023
The car subscription market is growing at pace, with Boston Consulting Group forecasting it to be worth $30 billion to $40 billion in the US and Europe by 2030. This staggering growth is fuelled by rapid change in consumer behaviour, with younger consumers coming into the car market keen to try out different brands without contractual handcuffs. Such behaviour coincides with the current inflationary period and inflated used car market that are prompting financially-savvy consumers to opt for affordable mobility options that would allow them to reassess their financial priorities.
Subscriptions offer motorists a simple and easily consumable package that includes flexible deposit levels and a simple monthly rental inclusive of insurance, car tax, service and maintenance. These all-inclusive offerings are proving to be an appropriate alternative to the traditional headaches of insurance brokers and price comparison sites. In addition to these flexible benefits, the subscription experience is becoming as digitally seamless as opening a Netflix subscription account; making it an attractive choice for any motorist wanting to get access into a car with ease.
The recent subscription success of Volvo, who reported that their car subscription service accounted for 15% of total UK retail sales and drove the uptake in new plug-in hybrid electric models ; as well as Jaguar Land Rover’s launch of a one-stop mobility shop, have sparked a subscription charge in the UK. More OEMs are progressively boarding on the adoption curve and taking their car subscription services to market.
However, there still remains a large market opportunity where the biggest brands in the UK are yet to engage. While emerging car subscription startups seem promising in delivering innovative solutions to the modern motorist, Cazoo's recent decision to cease subscription operations is indicative of the competitive advantages that OEMs have to dispose, but have yet to realise.
When it comes to car subscription operations, future-facing digital projects are generally handled in global headquarters for large groups like VAG and Stellantis. Here, requirements are targeted towards the most profitable markets and the specificities of local customers are sometimes overlooked. In an attempt to scale their car subscription services to meet growing demand, OEMs find themselves having to outsource digital and technical capabilities which is associated with potential bottlenecks such as legacy systems struggling to meet new digital requirements causing operational progress to become expensive and slow.
Despite the recent refocus from VAG and Stellantis on margins over market share, national sales companies currently find themselves fixated on shipments, volume targets and stock turn. With a lack of focus on testing and learning new ways to build long-term customer loyalty and value, OEMs are presented with this opportunity to leverage car subscription as the future of the automotive industry continues to take shape.
Adopting a new business model like car subscription does not require OEMs to undertake a complete overhaul of their current operations. Unlike other incumbents in the car subscription space, OEMs have four unique advantages:
OEMs can leverage these advantages by adopting a turnkey platform that would enable a configurable solution to suit the OEM’s specific needs. Loopit provides this with an all-in-one platform through the following features, which allow OEMs to cohesively manage their car subscription service and focus on creating long-term customer relationships.
By consolidating up to 12 different standalone software platforms into one cohesive and configurable mobility solution, Loopit enables OEMs to scale their car subscription with their ambitions and keep their brand at the forefront. Built by automotive leaders, Loopit also provides "subscription in a box" where we complement our leading software with the consulting, strategy and training needed to integrate the new subscription model into existing businesses.
To learn more about how Loopit can help power your own unique go-to-market strategy, contact the team for a free demo: www.loopit.co/contact
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