It’s hard to believe but owning a car is not for everyone.
While that might seem seditious talk on a website celebrating the joys of being a petrolhead, there is an emerging trend towards car subscriptions as an alternative to ownership.
As consumers we are owning less stuff than we used to. When was the last time you bought a CD, DVD boxset or book? They can all still be enjoyed but without the physical clutter that used to go with them; although one man’s clutter is another man’s collection.
Research across 12 countries and 13,500 adults carried out by the Harris Poll, which has been tracking consumer trends since the 1960s, for Zuora, the cloud-based subscription management platform (which, naturally, has an interest in these matters) concluded that we are witnessing a new commercial era defined by “The End of Ownership.”
The report found over half of the respondents (57%) wished they could own less stuff, while two-thirds (68%) said a person’s status is no longer defined by what they own.
Respondents were asked about their interest in using subscription based “automotive services”, 14% said they were. The highest rate was recorded in China with 36%, followed by Singapore 22% and Italy 18%. Although old habits are proving harder to shift elsewhere with the US at 13%, UK 8% and Germany 7%.
Frost & Sullivan, the influential international market research firm, reckons by 2025-26 car subscription programmes will account for nearly 10% of all new vehicle sales in the US and Europe. It also suggests by then 16 million vehicles will be part of vehicle subscription services, one in five of which will be new vehicles.
“Working on the assumption of a minimum average of $300/vehicle/month for the over 16 million vehicles likely to be in subscription programmes by 2025, participants would be looking at an opportunity worth almost $100 billion a year,” said Sarwant Singh, Frost & Sullivan’s Senior Partner, Head of Mobility & Visionary Innovation Group.
No wonder OEMs around the world have been launching their own services including Porsche (Passport), Jaguar Land Rover (Carpe), Jeep (Wave), Ford (Canvas), Lincoln (Canvas), Chevrolet (Book), Audi (On Demand) and Volvo (Care). While BMW and Daimler’s recent pooling of mobility services will see the premium giants combine their car sharing offerings into SHARE NOW, further opening up the pay per month concept.
Frost & Sullivan also points out that the car subscription eco-system is looking crowded with services also launched by rental companies (Hertz, Budget and Sixt), leasing companies (ALD, Alphabet and Arval), shared mobility companies (Lyft and Mavern) as well as start-up tech companies (Drover, Wagonex and Flexdrive).
Although car subscriptions tap into the fixed monthly payments zeitgeist popularised by Netflix and Spotify, they are not dissimilar to more traditional Personal Contract Hire (PCH) leasing schemes which bundle together all-in monthly costs, including maintenance, to provide usage over an agreed period with the title never being passed to the driver.
However, car subscriptions are cooler and more flexible than PCHs, although the extras come with a higher monthly price.
Take the Care by Volvo service. Initially launched in Europe before being rolled out to other markets, it is available through Volvo’s dealer network as a nil deposit scheme which covers insurance, service, maintenance, some repairs, road tax, tyre replacement and breakdown cover. Customers can also change vehicles for short periods. When it was launched in the UK prices started at a hefty £799 a month.
How much dealers want to promote these schemes is a moot point. I recently enquired about a subscription in a Volvo showroom. The salesman was surprised I was aware of this alternative and deftly steered the subject back to a finance package which would result in a commission, rather than a handling fee.
Volvo’s American dealers have been more vocal. In January 2019 the California New Car Dealers Association, the trade body representing 1,000 franchised car retailers, filed a complaint with regulators citing existing state laws prohibiting OEMs from competing with their own dealers.
This conflict will not be an issue for the emerging digital-savvy start-up companies offering specialist subscription services.
One of the leading players in this new field is the London-based Drover, initially launched in 2015 to provide cars to Uber drivers operating in the capital, the model has since been rolled out to provide a multi-marque online service direct to customers.
Vehicles are sourced from leasing companies keen to utilise idle cars acquired on bulk order deals or contracted cars returned early. While dealer groups are finding it a useful outlet for monetising pre-registered stock.
The company has also partnered with OEMs – including BMW, Mini, Lexus, Fiat Chrysler Automobiles, PSA Groupe and Volkswagen – to provide their UK subscription platforms.
Speaking to DriveTribe Insights, Matt Caudle, Drover’s Vice President for New Ventures, said the appeal of subscriptions is broad with the average age of customers being 37.
“Millennials are a core demographic for us. They like the online user experience which is in tune with what they are used to with Spotify and Netflix. But there are other customers whose needs we meet including expanding young families and those facing uncertainty in a more transient project-based workplace where previously company cars might have been offered,” he said.
And then there’s petrolheads. According to Drover there’s a growing number of enthusiasts who have spotted an opportunity to chop and change premium cars whenever something shiny and new becomes available.
So maybe owning a car isn’t for everyone after all – including some petrolheads!