An Outlook on the Car Subscription Market

The car subscription market is set for substantial growth, driven by changing consumer preferences, technology, and the automotive landscape. Offering flexibility and convenience, car subscriptions attract urban dwellers and tech-savvy consumers, with major players like Volvo and BMW leading the charge and enticing more disruptors to enter the market in 2023.

George Skentzos

Head of Customer Experience

Published on 

April 27, 2023


Last updated on 

April 27, 2023

Key Takeaways

Car subscriptions have been making waves in the automotive industry in recent years, offering consumers an alternative to the traditional car ownership model. It was reported earlier that the car subscription market has experienced an uplift in investment activity - reaching a record total of $395m USD globally. With this model gaining traction, it is important to understand what car subscriptions are, how they work, their benefits, key players in the market, market trends and growth drivers, as well as the challenges and barriers to adoption.

Understanding the Car Subscription Model

What is a Car Subscription?

A car subscription is a service that provides access to a vehicle for a monthly fee, without necessarily owning it. Think of it as a hybrid between leasing and car rentals, as it provides flexible and convenient access to a car without committing to a long-term lease or the upfront costs that come with buying a car.

Car subscriptions have become increasingly popular in recent years, with many people seeking more flexible and affordable ways to access a vehicle. Instead of being tied down to a long-term lease or the hassle of buying a car outright, car subscriptions offer a more convenient and cost-effective alternative.

Benefits of Car Subscriptions

The benefits of car subscriptions include flexibility, convenience, and affordability. Unlike traditional car ownership, a car subscription allows you to adjust your vehicle according to your needs, with no long-term commitment. The subscription includes maintenance, repairs, and insurance, which adds to the convenience of the service. Additionally, car subscriptions tend to be more affordable than leasing or buying, particularly for those who only need a car for a few months or a year.

Another benefit of car subscriptions is the variety of vehicles available. Subscribers have access to a fleet of vehicles, from compact cars to luxury SUVs, and they can swap cars according to their needs. This allows subscribers to choose the perfect vehicle for their lifestyle without the hassle of buying or leasing a new car every time their needs change.

How Car Subscriptions Work

Car subscription services vary in their offering, but generally, they follow a similar structure. Customers pay a monthly fee that covers the vehicle's depreciation, along with maintenance, repairs, insurance, and roadside assistance. The subscription typically includes a mileage cap, with excess fees applied for mileage overages. Subscribers will have access to a fleet of vehicles, and they can swap cars according to their needs. The terms of the subscription typically range from several months to a year or longer.

Car subscriptions are particularly popular among young professionals who may not want to commit to a long-term lease or the upfront costs of buying a car. They offer a more affordable and flexible alternative that allows them to access a vehicle when they need it, without the hassle and expense of traditional car ownership.

Overall, car subscriptions are an innovative and convenient way to access a vehicle without the long-term commitment and upfront costs of buying or leasing. With a variety of vehicles available and the added convenience of maintenance, repairs, and insurance included, car subscriptions are a great option for anyone seeking a more affordable and flexible way to access a car.

Key Players in the Car Subscription Market

The car subscription market has been gaining traction in recent years, as consumers seek more flexibility and convenience when it comes to car ownership. In this article, we will explore the major players in the car subscription market and the various models and services they offer to customers.

Major Automakers and Dealerships Offering Subscriptions

As the demand for car subscription services grows, some automakers have entered the market to provide customers with an alternative to traditional car buying. These companies include Volvo, Mercedes-Benz, Porsche, and BMW, offering a range of models and packages to fit different needs and budgets.

Volvo, for example, offers its Care by Volvo subscription program, which allows customers to choose from a selection of vehicles and pay a monthly fee that covers insurance, maintenance, and other services. Mercedes-Benz offers a similar program called the Mercedes-Benz Collection, which provides customers with access to a range of vehicles for a monthly fee.

Automakers aim to use subscription programs to encourage customer loyalty and provide a new revenue source. By offering flexible and personalized subscription options, they hope to attract a wider range of customers who may not be interested in traditional car ownership.

Dealerships are also major incumbents in the car subscription market due to their inherent advantages. Dealerships can utilise their existing customer-facing advantages such as showrooms and service facilities, as well as their customer segments who may not qualify for finance. In addition to this, dealerships who have established relationships with automakers can leverage their supply chain to acquire their subscription the fleet. An established partnership often translates to discounts and guaranteed buyback programs which can be pivotal in the overall vehicle disposal strategy at the end of the subscription lifecycle.

Startups and Disruptors in the Space

While major automakers have entered the car subscription market, a number of startups and disruptors have also emerged, offering innovative models and services.

These companies typically partner with dealerships or fleet management companies to offer various subscription packages. By partnering with established players in the automotive industry, they are able to leverage existing infrastructure and resources to offer a wider range of services to customers.

Partnerships and Collaborations

Partnerships and collaborations are common in the car subscription space, with companies aligning to offer customers a wider range of options and services. For example, Volvo partnered with car-sharing platform, Care by Volvo, to offer subscribers access to a range of vehicles, providing a more flexible and convenient service.

Collaborations between car subscription services and rental car companies, insurance firms, and maintenance providers are also common in the space. These partnerships allow companies to offer customers a more comprehensive and integrated service, covering all aspects of car ownership.

As the car subscription market continues to grow, we can expect to see more players enter the space, offering innovative models and services to meet the evolving needs of customers.

Market Trends and Growth Drivers

The car subscription industry is rapidly growing, with changing consumer preferences, technological advancements, and environmental and sustainability factors driving its expansion. In this section, we will take a closer look at each of these growth drivers and their impact on the market.

Changing Consumer Preferences

Consumer preferences are continuously evolving, and the younger generations are looking for more affordable and flexible alternatives to car ownership. Owning a car can be expensive, with costs such as maintenance, insurance, and parking fees adding up quickly. Car subscription models offer a more affordable option, allowing users to pay a monthly fee that covers all costs associated with car ownership.

Moreover, the current economic situation has accelerated the shift towards car subscription models, creating new opportunities for companies entering the space. With the ongoing pandemic, many people are hesitant to use public transportation, and car subscription services provide a safe and convenient alternative.

Technological Advancements

Technological advancements are driving growth in the car subscription space, with many services utilizing online platforms to offer a seamless and convenient service to customers. Providers aim to use technology to enhance the customer experience, with features such as on-demand vehicle swapping, app-based booking, and automated billing.

On-demand vehicle swapping allows users to switch their cars whenever they need to, providing them with the flexibility they need. App-based booking is another technological advancement that makes the process of booking a car quick and easy. Automated billing eliminates the need for users to keep track of their expenses, as all costs are automatically calculated and charged to their account.

Environmental and Sustainability Factors

Sustainability and environmental factors play a crucial role in the future of the automotive industry. Car subscription models have the potential to reduce carbon emissions, as users can access more fuel-efficient models, and the service encourages users to drive less frequently.

Moreover, many car subscription services are incorporating electric cars into their fleets, which emit zero emissions and are more sustainable than traditional gasoline-powered vehicles. By promoting the use of electric cars, car subscription services are contributing to a more sustainable future. Thanks to the flexibility and affordability, subscription acts as a low-barrier entry for customers to trial EVs and the suitability for their lifestyle especially with the ongoing range anxiety. Many providers are also offering free charging as a bundle option as well as free swap fees to switch back to an ICE vehicle - making subscription a popular way to drive an electric vehicle.

In conclusion, the car subscription industry is growing rapidly, driven by changing consumer preferences, technological advancements, and environmental and sustainability factors. As the industry continues to evolve, we can expect to see more innovative solutions that cater to the needs of modern consumers.

Challenges and Barriers to Adoption

Regulatory and Legal Issues

Regulatory and legal issues pose another challenge for companies operating in this space. There may be licensing requirements, insurance regulations, and compliance concerns that companies must adhere to. Companies also need to consider state-by-state regulations in the US, which have varying requirements for vehicle registration and insurance.

Consumer Awareness and Trust

Finally, consumer awareness and trust are crucial to the success of car subscription models. Some individuals may be wary of using these services, particularly if they are unfamiliar with the subscription model. Providers must establish trust and transparency with their customers through reliable and responsive customer service, as well as transparent policies and procedures. While many automotive stakeholders have the

The Future of Car Subscriptions

Car subscriptions offer a promising alternative to traditional car ownership models, providing customers with flexibility, convenience, and affordability. It enables car subscription providers to offer innovative and unique services to their customers. While challenges remain, the adoption of subscription models is likely to increase as technology continues to advance, and consumer preferences continue to shift towards affordability and sustainability.

About the author
George is the Head of Marketing and Customer Experience at Loopit. Having originally started his career as a motoring journalist and founding team member for one of Australia's top automotive startups, George has a strong passion for automotive, business and growth marketing.
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