Automotive Blog

Will OEM new car subscription models gain acceptance in the short-term?

PH August Blog
Image: Beresa
As you may recall from the press, a number of so-called “car subscription models” have recently been launched by different OEMs in different markets, usually limited to a certain range of models.  It is important to understand the benefits of these for either private or business customer,s as a more flexible alternative compared to traditional car ownership, leasing or car sharing.  Subsequently, you will find our view on the present state of these offers – which are somehow similar to rental contracts – including some results of our European customer survey (n= 6,000 in France, Germany, Italy, UK) carried out this year by YouGov. 
Customer awareness and interest 
Currently, customers are almost unaware of these offers – only 15% of our sample know about subscription models.  This proves that they still fall under the radar and explains to some extent, the consumers’ limited interest.  Only 28% of customers we asked are interested or very interested in using such a scheme in the next 5 years. 
Customer expectations and advantages 
Besides paying in monthly rates, customers expect subscription models to offer a range of different brands (39% rate this important), and the ability to switch frequently, i.e. every 3-4 weeks (28%) and between different model segments (47%) during the subscription period.  Additionally, the selection of flexible durations, and the complete online transaction (for most offers) are clear advantages to leasing or full-service leasing.  It’s beneficial for companies that – besides paying only effective costs – they can avoid having company cars in the balance sheet (according to IFRS 16, all car contracts with a duration >1 year must be activated by 1st January 2019).
Existing offers 
Currently we see globally a range of different OEM offers including Porsche Passport, Book by Cadillac, Care by Volvo, Carpe (JLR), Mercedes-Benz Collection or Mercedes me Flexperience, all with small differences in choice of cars or the ability to switch between cars.  The latter is one of the most recent offers launched in Germany and piloted in cooperation with the major dealer groups Lueg and Beresa.  Customers can select and drive up to 12 different new cars per year – each for different requirements.  Repair and maintenance, tyres, insurance and a mileage of 36k kilometres per year are included.  The dedicated Mercedes me Flexperience app allows handling all aspects of the subscription at any time. 
Costs 
According to our survey, 3 in 5 who stated to know their current cost of running a car, expect subscription models to be cheaper.  This is unrealistic, especially when comparing with PCP/PCH offers in UK starting with monthly rates below £100. Comparing the basic offer price of the subscription models named above, the cheapest one starts at €699 (Volvo XC40) – the others are much more expensive.  Clearly these are OEM-premium brand offers, but it is unlikely that a volume brand 's offer might be priced below PCP/PCH levels. 

In general, we see opportunities in the short-term to increase awareness and usage of subscription models, but the industry needs to achieve a turnaround of the customer mindset – mainly in price and availability expectation – to gain real market acceptance.  Further, it is questionable whether OEMs will really be best placed to offer an appealing subscription service – maybe a wide product offer and frequent switching is more appropriate for daily rental companies? 

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