Alexander Pershikov, the transportation evangelist, founder of GetTransfer.com, serial entrepreneur and a metaverse visionary.
The sharing industry has introduced consumers to the subscription business model. Generations Y, Z and Meta already live in a world of subscriptions. They subscribe to music platforms and use streaming services and professional software, making monthly payments as a hygiene standard. Thus some do not value ownership the same way as many people from older generations do. Today, subscription algorithms are becoming a part of our daily life, changing the usual approach not only to the consumption of goods and services but to the provision of them as well.
Some experts say we are witnessing the extreme popularity of the subscription business due to millennials. This generation often stimulates the growth and development of e-commerce, which today has led us to the boost of subscription services and goods. Apple Music or Netflix subscriptions have already become a must-have. As the CEO of a car rental company, I’ve noticed car rental, a.k.a. car subscription services, seem like something mystical for many customers around the world. Today many car subscriptions are based in the U.S., such as Borrow and Hertz. Global brands such as Porsche, Hyundai and others also provide subscription products as an important strategic incentive.
Let’s analyze the pros and cons of car subscription services. A subscription can be a good solution for those who can’t afford to buy a car or don’t want to pay a big sum for it in the beginning but need it on an ongoing basis right here and right now.
New Car Subscription
Here are the main pros of a subscription service for new cars.
• Minimal commitment: The subscription model allows clients to rent a car for a long time, for instance, for a month or a year or maybe a season, without all the commitments of owning a car.
• Maintenance and insurance are included: The client gets rid of all headaches and payments related to regular maintenance or insurance of the car; the owner typically takes on these responsibilities and costs.
• Short-term savings: Regular rental payments are often lower than a one-time payment for buying a new car.
• Flexibility: Clients can have a summer car in the summer and a winter car in the winter.
However, even the ideal new car subscription scheme has its cons.
• High costs in the future: Very long-term car subscriptions can make clients lose money that could have been invested in buying their own vehicles.
Used Car Subscription
Subscriptions to used cars are also getting more popular among drivers. (Disclosure: My company offers used car subscriptions.) This option can help to deal with rising prices and inflation. However, a used car doesn’t mean bad service or fewer advantages. The client subscribes to a vehicle that fits their monthly budget and offers the same flexibility as a new one. They can rent a two-year-old model at a lower price than a new car. Insurance and maintenance costs are often still covered.
Here are the main pros of subscription for used cars.
• Save more: A subscription for a used car can be the most cost-effective option.
• More options: This type of subscription often offers even more cars available to rent.
On the other hand, a subscriber for a used car may face some inconveniences.
• More maintenance needs: A used car may have more troubles the client does not even know about than a new vehicle.
• Perception: Customers who choose used car subscriptions miss out on any benefits that come with the perception of driving a new car.
The Impact On Industry Leaders
The subscription business model is becoming increasingly popular as it offers a flexible and affordable way to use a vehicle. However, the rise of subscriptions may have ripple effects on other businesses in the automotive industry. For example, as more people subscribe to vehicles instead of owning them outright, this could reduce demand for new vehicles. This could, in turn, affect businesses that manufacture or sell vehicles.
Subscriptions may also have an impact on businesses that provide services related to ownership, such as insurance and maintenance. These companies will sell to enterprises offering subscriptions, which can lead to lower margins for subscription companies.
I believe the subscription model is here to stay, and it’s already changing the way people think about car ownership. This shift has major implications for businesses across the automotive ecosystem, from manufacturers to dealerships to suppliers. Here are three things business leaders can do now to position their companies for future success.
1. Get ahead of the trends so you can adapt your strategies accordingly. That means keeping an eye on new entrants to the market and tracking the latest developments in car-sharing, ride-hailing and autonomous driving technology.
2. Focus on customer experience. That means providing flexible payment options, transparency around pricing and fees and convenient locations to connect with customers.
3. Build a data-driven organization. Collect data so you can optimize pricing models and improve marketing campaigns.
Every day the subscription industry develops and offers customers more and more options. And this process is not likely to stop tomorrow or next month. People all over the globe are getting used to this new system of “ownership” of goods and services, choosing it over actual purchasing. And we can continue to observe how the subscription business model changes the car ownership system.