Usership versus ownership - is car subscription the way forward?

Vehicle subscription services have been gaining popularity in recent years, and for good reason in my opinion. According to a recent McKinsey European Auto Finance Consumer survey the UK is most open to this relatively new concept in automotive financing.

These services offer a flexible and convenient alternative to traditional car ownership and leasing, making it easier for people to get around without the stress and hassle of maintenance, insurance, and other associated costs – sounds too good to be true, right?

What is a vehicle subscription service?

Simply put, they are car rental services that offer flexibility, convenience, and a hassle-free customer experience. Instead of owning or leasing a vehicle, customers can subscribe to a service that provides them access to a vehicle of their choice for a monthly fee. Typically, these services allow customers to regularly swap vehicles according to their needs without any additional costs.

In the long-term, subscription will be a stand-alone usership channel where the customer journey will need to be seamless and enjoyable.

What are the benefits of vehicle subscription services?

There are several reasons people are more attracted to the idea of subscribing to their vehicles rather than owning or leasing:

1. Flexibility: Unlike traditional car ownership or leasing, vehicle subscription services offer customers greater flexibility. They can swap their car as often as they like, giving them the perfect vehicle to suit their needs and lifestyles.
2. Convenience: Vehicle subscription services take care of all the maintenance, insurance, and other associated costs, making it a hassle-free experience for customers. No need to worry about getting the oil changed or insurance sorted – simply swap the vehicle.
3. Cost savings: For customers who do not use their vehicles often, vehicle subscription services can offer significant cost savings compared to traditional car ownership or leasing. Remember the cost of the vehicle, insurance, maintenance, and other associated costs quickly adding up!
4. Environmental benefits: By sharing vehicles, subscription services can help reduce the number of cars on the road, thereby reducing carbon emissions and helping the environment. This sustainable model is likely to be the reason it gains most traction and support over the coming years – particularly in a city environment.

Examples of popular OEM led vehicle subscription services:

1. Care by Volvo: Care by Volvo is a subscription service that offers customers access to a range of Volvo cars. Customers can choose the car they want to drive and enjoy a hassle-free experience that includes maintenance, insurance, and roadside assistance.

2. Book by Cadillac: Book by Cadillac is a luxury car subscription service that allows customers to drive a Cadillac for a monthly fee. Customers can swap their cars as per their needs and enjoy a range of benefits, including unlimited mileage, insurance, and maintenance.

3. Porsche Passport: Porsche Passport is a subscription service that offers customers access to a range of Porsche cars. Customers can choose from a range of plans that offer different vehicles and features, making it a flexible and customisable experience.

There are other examples of successful non-manufacturer specific subscription services such as Onto (UK), Finn (Germany) and Autonomy (USA).

Challenges to be addressed

Unfortunately, as with all disruptions within a sector, there have been a few casualties. Evaluating their learnings, it’s clear that there could be a few points being overlooked when launching a vehicle subscription service:

Vehicle diversity

As mentioned above, one of the major attractions of joining a vehicle subscription service is the flexibility to chop and change the car or van to suit your requirements. One month you may want to drive something economical for a long trip up the motorway to visit family but next month you might want a stylish convertible to enjoy endless headroom. The time has come to move some heavy furniture out of storage, and you’d rather have a van for a little while. The ability to access all these vehicles under one subscription is vital.

Pricing

This will play a major role in determining whether someone decides to use a vehicle subscription service rather than buy or lease. It is important to offer a compelling price point without neglecting profitability.

Remarketing

It’s undeniable that most, if not all rental/subscription and leasing companies make their real profit during the disposal of their fleet. There needs to be strong residual value (RV) analysis to determine the optimum disposal cycle for each vehicle. Factors such as vehicle age, mileage and condition all need to be considered. Where the vehicle is sold onto could also play a major role in achieving the best return. Defining a clear and thorough remarketing strategy is vital to success.

Original Equipment Manufacturers (OEMs)

Recognising that most OEMs view emerging subscription service providers as disruptors or, dare I say, a threat to is key. This is a new route to market for them and their dealer network. It is important they work with OEM partners to establish a clear definition of the service and the value it could add to their brand and dealer network.

Technology

Fundamentally, what sets a winning subscription service apart from the competition is their customer journey. Today’s consumer wants flexibility, value for money and a great experience. By recognising the significance of providing a seamless user journey by investing in a well-developed digital infrastructure, businesses can optimise their operations and gain a competitive edge. Embracing new technology enables efficient integration of service providers, streamlined customer service, pricing optimisation, integrated financing solutions, and comprehensive reporting and analytics.

The experience of selecting a new car, however it is financed, needs to be straight forward and enjoyable. A service provider that can keep customers excited about ordering their next car because it’s so easy and hassle-free is likely to have a large group of loyal customers and a high NPS (net promoter score).

How can we help?

At CGI, we are committed to driving innovation in mobility and asset finance. By leveraging vehicle data using emerging technologies like AI, machine learning, and conversational AI, we aim to empower our clients with advanced solutions that enhance customer experience, optimise operations, and drive sustainable growth.

If you are interested in learning more about our capabilities and the exciting solutions we have in development, please contact us today.