Vehicle Subscription Model Still Work In Progress

This post was previously used in an earlier version of Drive Time.

At its recent annual pre-Detroit auto show breakfast, Cox Automotive analysts were bullish about the prospects of vehicle subscription services in 2019.

The company has its own subscription technology platform, Clutch, and has also invested in Getaround, a consumer car-sharing platform that empowers users to instantly rent and drive cars shared by people in their city.

Research by Cox shows consumer attitudes about the necessity of vehicle ownership are gradually changing, with 39% of respondents saying access to mobility is necessary, but owning a vehicle is not, a 5% increase since 2015. For urban consumers, 57% indicate access to mobility is more important than vehicle ownership, a 13% increase since 2015. This means increasingly more consumers are prioritizing technology solutions that provide easy mobility over traditional vehicle ownership.

Gen Z and millennials are the most open to adopting alternative modes of transportation, says Isabelle Helms, Cox Automotive vice president of research and market intelligence, who adds that affordability increases consideration of mobility alternatives since owning and leasing are becoming too expensive for some consumers, particularly younger ones. 

But how long will it take to be offered nationwide and at an affordable rate?

Currently, it seems only luxury brands can offer such a subscription option, since the cost to consumers has to be upwards of $1,500 a month for automakers to make any money, due to what it costs automakers to maintain and insure a fleet of vehicles, according to Hyundai CMO Dean Evans.

And who wants to pay $1,500 a month for a non-luxury car, even with the prospect of insurance included and the option to switch out models? priced 10 car subscription plans from five programs — Access by BMW, the now defunct Book by Cadillac, Care by Volvo, Mercedes-Benz Collection and Porsche Passport — against the cost to lease, insure, maintain and pay associated taxes and fees on typical cars in those respective plans. found that besides Care by Volvo, which starts at $650 a month, subscription programs run anywhere from 28% to 102% more per month than the equivalent cost to lease, insure and maintain a typical car therein — and that doesn't even account for the onetime fees to join such subscription plans, which range from $495 to $575.

Cadillac CMO Deborah Wahl tells MediaPost the luxury automaker plans to bring back its currently shuttered Book by Cadillac in the second quarter. She wasn’t ready to offer a lot of details about how Book 2.0 would work or what the price would be. But Cadillac President Steve Carlisle told that in its first iteration, which cost $1,800 a month, subscribers weren’t swapping into different vehicles, which has led Cadillac to rethink how it approaches such a service.

The $1,800 a month was a good deal for customers who primarily wanted the Escalade, Wahl points out. 

“That was actually lower, by the time you add insurance and taxes and everything else in, it was a lower price point,” she says. “I think you have to have that balance and then it's working with consumers too, about what do they really value, what extra do they want, and how much ease are they willing to pay for, or not. And then how do we supply that?”

Lexus vice president Cooper Ericksen points out that different automakers might have different concepts of what “subscription” even means. 

“So does a subscription mean you're making one payment and everything is included, or does a subscription means you have the ability to swap from one car to another?” asks Ericksen, who was previously vice president of marketing for the luxury brand but is shifting to product planning. “If so, is it one car to a whole portfolio of cars? Are those cars that you swap to then-used cars, or do you get a new car? It’s very complicated. I can tell you we are actively investigating different forms of that.”

Lexus is preparing to launch in February its Lexus Complete Lease for the UX model only in major metro markets in seven states.  The program will offer two-year agreements with a 20,000-mile limit for one nonnegotiable price tag that includes the lease payment, car insurance,  maintenance including tires and wheels, and all connected services such as WiFi and satellite radio. The price will vary depending on the market because of differing insurance rates, Ericksen says. 

Hyundai’s Evans says another factor is  that dealers don’t want all the capital outlay of having to maintain a fleet of subscription cars and would rather sell the vehicles outright. He says that while a subscription model might sound attractive in theory, most consumers actually don’t want the hassle of switching their belongings from one car to another. 

“When you need to go to the mountains and go skiing three times a year, well, then, go and rent a vehicle for that,” Evans tells MediaPost.  “I think we've forgotten about a lot of things and we got really caught up in 'this is the new way to go.' But most automakers in mainstream can't afford to do it. You can't do that for $800, you can't do that for $600. We lose money.  And I don't think you're going to find automakers that do anything that loses money for too long.”

Next story loading loading..