Subscription Automotive Services: threat or opportunity?

Unless you’ve been under a rock for the last few years, you probably belong to at least one subscription retail service. It seems that almost everything available at traditional retail can now be subscribed to. From the literal razor-and-blades business model of Dollar Shave Club to the ubiquity of streaming services like Netflix, retail via subscription is present within nearly every space of the post-Everything-as-a-Service world of the future we inhabit. Mobility-as-a-Service is nothing new either. From ridesharing to the scooters popping up in downtowns across the country, to –this is real, I promise– pogo sticks as last-mile mobility solutions, alternatives to the paradigm of single end users driving themselves are more widespread than ever.

Photo from Cangoroo

Combinations of these two models were bound to appear in the auto industry sooner or later, and indeed, subscription-based services have started appearing in a few different guises in just the last couple of years. Some are OEM initiatives, such as Care by Volvo (so far the only nationwide OEM service) and the recently “paused” Book from Cadillac. Rental agencies have also joined in, offering alternatives that fill the gap between a brief rental and a traditional lease. Third parties such as Clutch and Mobiliti offer yet another choice, usually in partnership with a local dealership.

The Automotive industry is often quick in adapting new technologies to the vehicle market. GPS and infotainment screens were rare twenty years ago but are ubiquitous now. Changes to the business paradigm are sometimes slower to take hold: though not an entirely new concept at the time, the auto lease as we know it was only making tentative steps toward the mainstream as recently as the late 1980s. Leases are almost as common for cars as for apartments these days.

The subscription model as applied to the auto industry is just beginning, and while there is no standard yet for how a dealership can best take advantage, there are some things to consider. A subscription service could act as a “stepping stone” to attract customers who aren’t quite ready to commit to ownership. By offering a more flexible option than a traditional lease and including registration, taxes and insurance in the subscription price, an opportunity exists to engage customers who aren’t ready to buy outright yet but might well in the future. Meanwhile, by providing scheduled maintenance and structuring mileage allowances into a subscription plan, a dealership can keep tabs on lucrative vehicles with high demand on the used market, similar to off-lease vehicle sales in the “standard” sales model. Adding value, convenience and transparency into a subscription service could build a relationship of trust, creating loyal advocates of customers that otherwise might go unserved.

Given how omnipresent it’s become, it’s remarkable that the subscription model hasn’t featured more prominently in the Automotive space so far. It perhaps shouldn’t be surprising, however, since dealers are still figuring out how the subscription model fits into automotive retail- when they’re considering it at all. While there are some in the industry who question the profitability of subscription automobile services for dealers, others see new opportunities to use such services as a way to fill budget and lifestyle niches for customers- as well as a new path to profits.  With sales in an overall slump recently, for some dealerships the subscription model may be worth a fresh look.

Either way, while car ownership is not going away, what ownership looks like to some end users may change. Subscriptions aren’t going to replace the current sales or leasing models but could potentially add a third alternative with the added benefit of more frequent customer engagement. The total customer experience will continue to be of utmost importance. Dealers play a crucial role in placing customers in vehicles and servicing them after the sale, whatever form that sale takes. Dealers adept at seeing opportunities as opposed to threats while remaining adaptable will thrive, as always.

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