The automotive industry is being turned upside down. The traditional distribution model involving the automaker, an importer and a dealership network is being replaced by direct distribution either by automaker-owned dealerships, pop-up stores, or digital sales.
In Norway, the average number of dealership visits when purchasing a car has gone from four to 1.1. The decision is now made at home, on the sofa watching carwow reviews on YouTube.
Europe is turning electric, and the development is fast. EU lawmakers recently backed a new proposal effectively banning the sales of new gasoline and diesel cars starting in 2035.
We must quickly turn the consumer toward EVs. Fortunately, there is a supplementary business model for automakers that thrives in this space: car subscriptions.
This model also fits the modern consumer perfectly. Younger generations are used to subscribing to services, not owning things. The average car subscription customer is 37 years of age, which is why car subscriptions are “The Netflix of cars.”
In a rapidly changing automotive industry, car-subscription schemes are excelling by digitizing the customer experience and bundling services to ensure profitable cash flows for the providers.
Car subscriptions, because of this, are expected to have a substantial impact on the industry.
Automakers and analysts estimate that between 20 to 30 percent of new cars being “sold” in 2025 will be on car subscriptions.
Players such as Care by Volvo have already accounted for 15 percent of the company’s overall registrations in several European markets.
Car subscriptions are a flexible alternative to leasing or owning a vehicle. Consumers subscribe for flexible periods as short as a month, with the ability to cancel at any time. Car subscription concepts often include additional services.
They can be all inclusive or modular add-ons such as maintenance, insurance, tire change, the option to swap a car, and many other services.
Consumers love car subscriptions and often empowers them to make sustainable choices. Car subscriptions help make the green shift from ownership to usership and lowers the barrier to EVs.
In Europe, there are seven times more EVs on car-subscription schemes than cars powered by fossil fuels. A possible reason for this is that flexibility beats uncertainty.
Many consumers are still uncertain about EVs. Their concerns include charging and usage patterns, the fast evolution of the technology and that many EV makers are new to the market.
Car subscriptions allow consumers to test EVs, finding the right one for them, without long delivery periods or putting large sums of money down.
Companies offering car subscriptions are capitalizing on the subscription generation, which has established a lifestyle around pay-as-you-go.
They want to have access to the right form of mobility at the right time and they are extremely focused on sustainably. By automakers providing consumers with a fleet of vehicles that can fit various lifestyles, a long-term relationship is built on the premise of flexibility within the fleet.
Car subscriptions are also a way for non-traditional players to capitalize on offering forms of mobility.
The automotive industry is a large economy, making it attractive for non-industry players such as energy, insurance, and telecommunications companies to launch their own car subscription concepts, positioning them with direct end-user contacts within the mobility ecosystem.
Automakers that implement car-subscription programs as a supplementary business model will not only keep up in this evolving industry, but they will gain a competitive advantage. The time to act is now.
