The Future of Car Ownership: Subscription-Based Models

Welcome back to the second edition of Driving The Future - a newsletter to keep you ahead-of-the-curve in the rapidly transforming automotive industry. Whether you’re a casual automotive reader or a serious enthusiast, working in the industry, or simply curious, I hope you’ll enjoy this newsletter and learn from it.

In my last newsletter, I spoke about The Battle for In-Car Connectivity: how tech titans like Apple and Google, manufacturers like BMW, and start-ups like holoride are battling for the attention of passengers and drivers alike as we move toward a future of self-driving cars. In this article, I’ll be exploring a topic which is equally disruptive to the industry and is already changing the way people purchase vehicles: through subscription-based models.?

The Future of Car Ownership: Subscription-Based Models?

For many years, car ownership has been a traditional and necessary part of life. But with the rise of subscription-based models, that is beginning to change. Companies like Volvo, Audi and BMW have already adopted subscription services as an alternative to traditional ownership, and more automakers are expected to follow suit. Dealerships are also getting in on the action. So what does this mean for the future of car ownership? Let’s take a look.

What is a Subscription-Based Model??

A subscription-based model is an alternative way for consumers to access goods and services without having to purchase them outright. Instead of buying cars, users can pay a monthly fee in order to use them for a predetermined period of time. This allows customers to enjoy the benefits of owning a car without shouldering the responsibility for it—anything from regular maintenance to insurance can be included in the subscription fee. It also means that users can switch cars whenever they want with no long-term commitment.??

Subscription-Based Models in The Market Today

Automotive manufacturers and dealerships are both getting in on the subscription action.

Let’s start with looking at Care by Volvo. Care by Volvo offers two types of packages. ‘Care by Volvo Fixed’ provides cars on a three-year term, with no deposit or sign-up fee. ‘Care by Volvo Flexible’ is based on an open-ended, three-month rolling contract, following an initial risk-free 30-day trial period; after that time, the customer can change their car or end their subscription with three months’ notice.

Fully launched nationwide in the UK on 2 September 2020, Automotive World reported the following year that Volvo had enjoyed “exceptional first-year UK performance”, with Volvo claiming subscription-based purchases make up almost 15% of all Volvo retail sales, equivalent to 7% of the brand’s total UK new car sales. This is comfortably beyond the initial 5% total targeted for the service at the end of its first year. Notably, Care by Volvo is proving a highly effective tool for new business, with 91% of its customers being new to the Volvo brand.

MyCarDirect is one of the UK’s leading subscription-based dealerships, offering a range of cars from sleek city runners, to top of the range SUVs, and all the latest electric vehicles. Duncan Chumley, Mycardirect CEO, said: “2022 was an extremely encouraging year for us, and I’m very confident that 2023 will build on last year’s success with record revenues forecasted.” Mycardirect is expecting to double its revenues this year as demand for vehicle subscriptions continues to grow.

The Benefits of Subscription Services?

Subscription services offer customers numerous benefits over traditional car ownership models. For starters, they are much more cost effective because customers don't have to worry about additional costs such as insurance or repair bills—all of these expenses are rolled into one monthly payment. Additionally, since there is no long term commitment required, users are free to switch cars at any point if their needs or wants change over time—unlike traditional car ownership where buyers are stuck with their purchase until they decide it's time for something new (which usually involves selling their current vehicle). Finally, subscription services offer customers peace of mind knowing that if anything were to go wrong with their car, it would be taken care of by the service provider—something that cannot be said for traditional car ownership models where buyers are often left footing the bill for repairs or other issues that may arise over time.?

What’s Next? ? ? ? ? ? ??????

It’s clear that subscription-based models represent an exciting new way forward when it comes to car ownership. As more automakers embrace this new trend, we can expect subscription services to become increasingly popular in the coming years and as an industry, we have to consider what implications that might have on different businesses. For example, vehicle part retailers may have to think about forging partnerships directly with dealerships, given that replacing parts and car maintenance will no longer be the responsibility of the driver.?

All in all, this is a development that is gaining speed quickly. Early movers are already seeing explosive growth in interest and revenues. It’s only a matter of time before more dealerships and manufacturers embrace this model. Automotive audiences should keep an eye out for what’s happening in this space in order to stay ahead of the curve!

Subscribe for More

If you enjoyed this article, please share it with your network and let me know what you found interesting! And if you’re not already subscribed to this newsletter, join 1600+ others in subscribing so you’re notified of future releases. We’ve got exciting content lined up.

-

Autofixa Solutions is the first provider to offer a holistic suite of marketplace solutions for the automotive industry. We manage marketplace stores for some of the world’s largest automotive brands and retailers as well as creating direct to consumer platforms for brands like BMW. If you’re an automotive brand or retailer considering what role online marketplaces might play in your future, get in touch with me to schedule a free consultation.