Drive the Andes: The Flexible Car Subscription for South American Adventures!

The demand for car subscriptions in South America is on the growth due to economic considerations, urbanization, and changing consumer preferences. As of 2023, major cities like Buenos Aires, S?o Paulo, and Bogotá are encountering substantial population growth, leading to augmented traffic congestion and limited parking availability. For instance, S?o Paulo's metropolitan area has a population surpassing 21 million, putting immense pressure on transportation infrastructure.

The cost of vehicle ownership remains high, with new cars averaging about US$ 20,000, making it less accessible for many consumers. Also, the average annual maintenance cost for a vehicle in the region is about US$ 1,200. These factors contribute to consumers looking for flexible and cost-effective alternatives like car subscriptions. The rise of the digital economy, with more than 300 million internet users in Latin America, enables easy access to these services.

The economic structure of the South America car subscription ecosystem is still evolving, and a report by Astute Analytica Projects that the?South America car subscription market is expected to reach a market size of US$ 1,776.7 million by 2032, with a compound annual growth rate (CAGR) of about 26.20% during the forecast period from 2024 to 2032.

A brief about the market: -

Argentina and Brazil are leading the car subscription market in South America. Brazil, being the largest economy in the region, boasts a vehicle fleet of more than 46 million units as of 2023. The Brazilian market is valued at about US$ 1.2 billion, contributing significantly to the regional market. Argentina follows with a vehicle fleet surpassing 14 million units. The country's car subscription services have gained traction, specifically in urban centers like Buenos Aires with a population of more than 15 million. Colombia is appearing as a strong market, with more than 7 million registered vehicles and increasing consumer interest in flexible mobility solutions. In Chile, the number of active car subscriptions has reached about 25,000 in 2023, reflecting a doubling over the past two years.

High Vehicle Ownership Costs Leading Consumers to Prefer Subscription Models Over Buying

In the South America car subscription market, the escalating costs of vehicle ownership in 2023 have become a key factor influencing consumer preferences towards car subscription services. The average price of a new car in Brazil is approximately US$ 25,000, while in Argentina, it hovers about US$ 22,000. Given that the average annual income is approximately US$ 8,500 in Brazil and US$ 9,000 in Argentina, the financial burden of buying a vehicle is substantial. Interest rates for car loans are high; for instance, in Colombia, rates have reached up to 12% in 2023, significantly growing the overall cost of financing a vehicle. Also, vehicle registration fees can be as high as US$ 1,200 annually in countries like Chile. These considerable upfront and ongoing costs are making conventional car ownership less accessible for many consumers.

Operational expenses further exacerbate the financial strain of owning a vehicle. In 2023, South American car owners expend an average of US$ 1,500 per year on repairs and maintenance. Fuel prices have also surged, with gasoline averaging US$ 1.25 per liter in Peru and similar rates across the region. Insurance premiums add to the burden in the car subscription market, costing between US$ 800 and US$ 1,000 annually depending on the coverage and vehicle type. Urban parking fees are substantial as well; in cities like S?o Paulo, monthly parking costs can reach US$ 200. Tolls on major highways can add another US$ 500 per year to a driver's expenses. Collectively, these costs make vehicle ownership a less viable alternative for many, prompting a change in consumer behavior.

Car subscription services deliver a financially attractive option by consolidating these expenses into a fixed monthly fee. As of 2023, the average monthly subscription cost in South America is about US$ 400, which includes insurance, maintenance, and in some cases, other benefits like roadside assistance. This model eliminates the requirement for a sizable initial investment and decreases the unpredictability of ownership costs. The number of active car subscriptions in the region has grown to more than 250,000 in 2023, indicating strong consumer adoption. Flexible subscription terms, ranging from 1 to 24 months, cater to varying requirements and financial abilities. This shift towards subscription models is a direct response to the prohibitive costs related to owning a vehicle in South America.

Automakers Partnering with Subscription Services to Expand Customer Reach Significantly

In 2023, a substantial trend in the South American car subscription market is the strategic collaboration forming between automakers and subscription service providers. Major manufacturers such as Ford, Volkswagen, and Toyota are collaborating with local companies to deliver their vehicles via flexible subscription models. For instance, Volkswagen has collaborated with Unidas in Brazil to deliver popular models like the Polo and T-Cross through subscription plans. Similarly, Ford has teamed up with Movida in Argentina, allowing customers to subscribe to models like the EcoSport. These alliances allow automakers to tap into the increasing market of consumers who prefer access more than ownership, thereby extending their customer base.

These partnerships in the car subscription market have led to a substantial increase in the number of manufacturer-backed vehicles available via subscription services. In 2023, more than 40,000 vehicles supplied directly by manufacturers are part of subscription fleets across South America. Toyota's Kinto One service in Chile has reported more than 5,000 active subscriptions, up from 3,000 in 2022, showcasing substantial growth. By integrating subscription models into their sales strategies, automakers are augmenting vehicle utilization rates and reaching demographics that might not opt for conventional ownership. For consumers, these collaborations usually mean access to the latest models with added advantages like manufacturer-backed maintenance and customer support.

Innovation is a key outcome of these collaborations, leading to diversified offerings in the South America car subscription market. In Colombia, Renault established a program with RentaAuto to deliver electric models such as the Zoe via subscription, attracting more than 1,000 subscribers in the first half of 2023. Hyundai, in collaboration with Localiza in Brazil, presented a flexible subscription plan allowing customers to swap vehicles every six months, gaining more than 2,500 subscribers since its launch in early 2023. These initiatives not only improve customer choice but also help automakers to adapt to changing consumer preferences. By partnering with subscription services, automakers are particularly extending their reach and staying competitive in a rapidly evolving market.

Recent Launches and Developments: -

In 2024, General Motors established the new?Chevy?vehicle subscription program in Brazil, via its specialized fleet division GM Fleet, present in that country since 2023. The automaker’s Brazilian subsidiary reported the launch of the new Chevy vehicle subscription program in the South American country, where the brand’s new electric and premium vehicles are now available via GM Fleet. The fleet service delivers flexible plans of up to 36 months that deliver a reduction in operating costs of up to 60 percent for the contracting company. “GM Fleet depends on the credibility of General Motors, the most advanced Chevrolet vehicles, and the brand’s extensive service network throughout Brazil,” said Director of GM Fleet at GM South America, Maximiliano Fernandes. “This whole structure allows customized service and qualified advice to the customer, allowing for functioning costs up to 60 percent lower than conventional fleet management models,” he added.

In 2023, car?sharing?is a global trend model. Car subscription in Latin America, which had its?boom?during the pandemic due to the change in behavior about transportation and mobility, started in Brazil, then Argentina, and now in Chile. The automotive industry proposes to go from selling cars to being a service provider, that is, delivering the user all the benefits of a car without the requirement to buy one and including all the associated requirements, such as technical inspection, patent, insurance, and maintenance, among others. Moreover, considering the report of the Mexican Association of Automotive Dealers (AMDA) in conjunction with the information provider JATO Dynamics and the global consulting company Urban Science (2022) on automotive financing and the fact that brand-name financial companies monopolize 80% of this, the economic advantages presented by the subscription are attractive.

The Brazilian Association of Car Rental Companies (ABLA), in a balance that only includes vehicles belonging to its members, suggests that the fleet destined for the subscription car service of the country's rental companies grew by 16.4% in 2022, a total of 106,000 units at the end of September, compared to 91,000 in the same month in 2021.

Closing Note: -

As South America adopts the future of mobility, car subscriptions are appearing as the ultimate solution for flexible, cost-effective transportation. With major urban centers grappling with congestion and high ownership costs, consumers are increasingly attracted to subscription models that deliver access without the burdens of ownership. The impressive growth of this market, estimated to reach about US$ 1.8 billion by 2032, highlights a change in consumer behavior propelled by economic realities and digital convenience. By partnering with automakers and delivering diverse vehicle choices, car subscription services are transforming how people explore the rich terrains of South America, unlocking adventures for all. Adopt the journey ahead.