A growing number of automakers are adopting a new business model that could change how some customers get into the car market.
With Volvo, Porsche, Ford, Cadillac and others already on board, car subscription services offer customers something different than the traditional buying or leasing of a vehicle.
The subscription model works similar to a lease, but typically without the multi-year contract. Instead, customers can access vehicles on a month-to-month basis without a long-term commitment, all for the price of a subscription fee, which can vary in cost depending on mileage.
Most subscriptions also include maintenance, insurance and other perks.
Industry analysts say the new model is aimed at luring Millennial customers who are familiar with technology subscription services and who live in metropolitan areas where they might not need a car year-round.
Mike Wall, director of automotive analysis at IHS Markit in Grand Rapids, said the challenge with subscription services is that it isn’t “cheap to get into to.” On the higher end of the spectrum, the Porsche Passport program costs $2,000 or more per month, while Ford’s Canvas subscription starts at $429.
“Now maybe that will change,” Wall told MiBiz, noting that the cost may exclude many younger Millennials. “Mostly you’re going to see the potential for more of the Baby Boomer type generation, who are a little more well-heeled to be able to jump in and have that kind of flexibility.”
In the case of Ford’s Canvas subscription model, users choose a used car that’s less than three years old, a monthly mileage package ranging from 500 miles to unlimited, and benefits that include registration, warranty, insurance and roadside assistance.
Cadillac’s BOOK program offers subscribers concierge service, delivering them the vehicle of their choice at whatever location they choose, and allowing them to swap out cars up to 18 times per year.
With the exception of Volvo, which debuted its Care by Volvo subscription model nationwide in late 2017 for its XC40 crossover, most automakers have limited subscriptions to targeted cities, such as Los Angeles and Dallas in the case of Cadillac and Atlanta in the case of Porsche Passport.
“We are responding to new movements in the customer base, where owning the car is not something you absolutely need,” Volvo Car Corp. CEO Hakan Samuelson told Motor Trend as the company debuted the service at the Los Angeles Auto Show in November. “Mobile phones are done on a subscription basis. It’s hassle-free, with a flat fee, and in 24 months you get a new one.”
Wall sees the subscription model as a small niche for the short term, but once automakers bring the service down market into more mainstream vehicles, it could find more takers.
“I think we’ll see that more and more,” Wall added. “I think all the automakers are looking at it in some way, shape or form as another option to either get their fleet more utilized or to move vehicles.
“I think we’re going to see more of that, but it still feels like it’s in something of a ‘show me’ stage.”