Industry Voices | Scary Times for Vehicle Subscription Services
Just when you thought the whole subscription model was doomed, a new breed of survivors emerges from the shadows, leveraging learnings from the past to make quick progress.
November 5, 2024
Remember that classic horror movie trope? The seemingly unstoppable killer stalks their victims, picking them off one by one until only a lone survivor remains. Well, consumer automotive subscription version 1.0 looks a lot like that slasher flick, with Care By Volvo as the latest victim.
Volvo Cars’ recent announcement that it’s “pausing” its Care By Volvo subscription program has sent a message through the industry. But Care By Volvo isn’t the first to meet this grim fate. Remember these ill-fated subscription services aimed at everyday drivers?
BMW Access: Like the jock who thinks he can outrun the killer, BMW Access seemed invincible. But it was abruptly discontinued in 2020.
Cadillac Book: The “smart” one, Cadillac Book, tried to roll out the market. But it was unexpectedly axed in 2018.
Ford Canvas: The “popular” one, Ford Canvas, seemed to have it all. But it was suddenly killed off in 2023.
Autonomy: A mobility “beauty queen,” autonomy has seemingly had growth plans chopped to bits from a stated goal of 23,000 units, opting to maintain a fleet of 1,000 cars while its founder shifts focus to selling subscription technology through a new venture.
So, what’s behind this Subscription 1.0 bloodbath? Several factors are at play:
Profitability: Subscription programs, particularly early versions with multi-vehicle alternatives aimed at an affluent market, are difficult and many automakers have struggled to make them profitable and affordable. For example, BMW’s 2-tiered Access program cost either $2,000 per month or $3,700 per month.
Dealerships: Traditional dealerships often viewed subscriptions as a threat, since they were essentially acting as salespeople for a centralized OEM business, leading to resistance.
Consumers: While consumers crave convenience, at least U.S. consumers are slower to make changes when it comes to anything involving their cars, including the ownership process.
But wait! There’s a twist.
Just when you thought the whole subscription model was doomed, a new breed of survivors emerges from the shadows, leveraging learnings from the past to make quick progress. Electric-vehicle subscriptions, for instance, designed for businesses and consumers hesitant to make a long-term financial commitment to a new technology, are proving to be a different beast altogether. These EV programs offer a compelling solution for companies looking to:
Run EV trials: Subscriptions allow anyone to experience EVs firsthand before buying, working out charging infrastructure and other details before scaling. Switching to an EV demands more than a traditional test drive.
Fill the gap: Subscriptions provide a flexible option between lease ends and new-vehicle deliveries and other stopgaps.
Increase commercial-EV confidence: Offering employee access to EV subscriptions can drive wider EV adoption.
An On-Ramp to Ownership: If businesses or consumers find that fears of suitability are unwarranted, an easy ownership path can come from the EV subscription or micro-lease trial.
Another Opportunity Emerges: Subprime Subscriptions
In addition to business-focused models, another potential growth area for EV subscriptions lies in the subprime market. More accessible and affordable than most "buy-here, pay-here" schemes that offer 10-to-15-year-old 150,000-mile (241,500-km) “beaters,” a subscription offers those with limited cash or credit history the ability to drive, and then potentially buy, a quality vehicle. As one of the largest problems for entry-level workers today is reliable personal transportation, subscriptions provide a pathway to reliable and affordable transportation. Subprime EV subscriptions could play a crucial role in promoting economic mobility and social equity.
And there's another survivor lurking in the background...
... wielding a powerful weapon against the subscription slasher: technology. Companies like Loopit, Faaren, and to some extent traditional players, are providing the tools and infrastructure for the automotive industry to fight back. For example, technology providers like Loopit's SaaS platform empowers existing rental operators, EV OEMs and dealership groups to offer subscriptions and other mobility programs within a single platform. This allows them to:
Adapt quickly: Offer a variety of mobility solutions and adapt to consumer demands.
Simplify operations: Easily launch and manage subscription programs and scale with automation.
Boost profits: Optimize offerings and ensure financial viability as markets change.
The Future of Automotive Subscriptions
The automotive subscription landscape is evolving rapidly throughout the world. While mass-market consumer programs may be facing a bloodbath, specialized offerings for businesses, emerging opportunities like subprime EV subscriptions, and the new generation of mobility automation technology are proving to be a resilient force. The key to survival in this evolving market lies in understanding specific customer needs, offering compelling value propositions and adapting to the changing dynamics of the automotive industry. The final act is yet to be written, and it will be fascinating to see which players emerge as the ultimate survivors in this subscription thriller.
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