By on December 4, 2017

Care by Volvo subscription service

Automakers are throwing everything they currently have at the wall to see what sticks. The concept of “mobility” is now so broad that it encompasses automation, electrification, vehicle connectivity, alternative modes of transportation, driving aids, ride-sharing, ride-hailing, and even subscription services — and plenty of companies are giving them all a shot.

Last week, we talked about Volvo’s new car subscription service. Most of us had difficulties rationalizing the price based on how the product is being offered. A lot of companies are testing those waters right now, especially luxury brands. Lincoln recently launched a subscription initiative that is extremely similar to Cadillac’s, and Porsche has been buzzing about its own “Passport” service. However, mainstream brands like Ford and Hyundai are also trying their hand — albeit very differently. 

For the premium brands, the concept is to provide customers with a range of fleet options they can swap in and out of for a monthly fee. Cars are typically ordered and then chauffeured to a previously agreed-upon destination, where the customer can take time to enjoy a run-through of the car’s features before being given an branded swag bag. For Porsche, that costs about $2,000 a month (to start) while Cadillac now charges a $1,700 monthly fee. Lincoln plans to offer its subscriptions at a “significantly lower rate,” according to marketing head Robert Parker.

How is it working out for luxury automakers? Well, in the limited areas they’re willing to test these services, apparently very well. But the secret is achieving a competitive price point, maintaining additional perks, and figuring out which models work best. “Long-term leases will obviously play a role in our overall portfolio, but in the spirit of effortlessness, there is a consumer out there who doesn’t really need a three-year lease,” Lincoln President Kumar Galhotra told Automotive News at the L.A. Auto Show last week. “We’re coming up with a different ownership model for them.”

That’s easier for the premium brands. Those automakers can afford to price services higher because they’re offering much more than a standard lease. But it’s a little more complex for the mainstream nameplates. Currently, Hyundai and Volvo are only offering subscriptions on a single model each. Meanwhile Ford launched its own Canvas service that allows customers to swap between cars month to month and General Motors has Maven Reserve. While not particularly inexpensive, these services do include maintenance, insurance, and (at least for Maven) parking. But nobody seems to have figured out a way to price these offerings in a way that would make them a superior alternative to leasing.

2017 Cadillac CT6 - Image: Cadillac

“Automakers are experimenting with a lot of different models to see what customers will accept or want and how much they are willing to pay for it,” explained Sam Abuelsamid, a senior analyst at Navigant Research. “The thing about all of these plans is that for the OEM, by bundling, if they price it right, they can also build in some revenue to fund things like ongoing support for software and map updates. While this isn’t a big thing today, going forward, it will be more important.”

Still, certain demographics may find subscription services more appetizing than others. Urbanites, who don’t need a car 365 days in a row, may find that a long-term rental is the perfect solution in some instances. But then, if you only need a car a handful of weeks out of the year, it might be cheaper to go with a traditional rental than a subscription service.

Automotive News reported a survey of consumers by technology advisory firm Gartner found that nearly half of all respondents would consider using a subscription service for access to a car — and 12 percent would “strongly” consider it.

“However, among people who already use mobility services like Uber or Lyft frequently, the response rate is about double,” said Michael Ramsey, research director at Gartner. “Cost is not going to be the primary motivation for getting people to switch from personal ownership. It will be because subscribing is easier than owning.”

I don’t care what Gartner says — cost will always be a factor. But you can’t ignore convenience and, with a lot of these services, that’s exactly what you’re paying for. But the further you get from a densely-packed metropolitan area with limited parking the less sense this all starts to make.

That said, manufacturers are claiming that they’re little tests are performing better than one might think. Hyundai is trying to reel in potential EV buyers with its Ioniq Unlimited subscription service and thinks it might be able to do the same with its Genesis brand. “[Our plan] happens to be a combination that really has worked for our buyers,” said Brian Smith, COO of Hyundai Motor America, “and I would like to figure out how we can offer it in a couple of different iterations. So something for Genesis would look different than what we did with Ioniq.”

Klaus Zellmer, Porsche Cars North America CEO, said the sign-up for the brand’s small, month-to-month Passport subscription pilot in the Atlanta area has been “overwhelmingly positive.” In addition to bringing in a younger-than-expected clientele, Porsche says over half of its subscription customers opted for the most-expensive package. “[Younger people] do not want to engage with a commitment for three years,” Zellmer said. “They want to change their phones; they want to change their TV channels. It’s all about subscriptions.”

That’s what these types services are most reminiscent of — purchasing a new phone plan. Volvo even markets its package by saying it’s “as hassle free as having a mobile phone.” The contract involves limited term and includes more than just a physical product. But the end result is something you spend a lot of money on and are expected to replace in a few years.

Will it work in the long term? It certainly has for cellular providers, but the automotive industry is a very different beast and is currently undergoing a lot of changes. Dealers have plenty to say about the service (most of it understandably negative), while other premium automakers, like Jaguar Land Rover, are intentionally avoiding subscription services until other companies can figure out the recipe.

There is reason to be cautious. Certain outlets have dubbed Book by Cadillac an abject failure, despite General Motors having expanded the service to more regions earlier this month. However, brands like Lexus are a little more eager to jump in and see for themselves, especially if it means luring younger customers.

“I think there’s just a generation of people who find that it won’t necessarily be cheaper, and it may actually be more expensive,” said Brian Bolain, general manager for Lexus’ marketing, “but it’s simple.”

[Image: Volvo Cars, General Motors]

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38 Comments on “Are Car Subscription Services Going to Become the New Normal?...”

  • avatar

    “Cost is not going to be the primary motivation for getting people to switch from personal ownership. It will be because subscribing is easier than owning.”

    This, this is it. As long as I don’t have to maintain it and own something, I don’t care what it costs.

    Rent your luxury apartment
    Rent your car
    Rent your phone
    Rent your gig job

    Is the Payment Plan Life coming of age, where desire and pride of ownership goes down the toilet? Yes.

    But let’s not worry about being able to own or maintain anything. Just make everything disposable. No worries.

    • 0 avatar

      It practically makes sense, when everything is built to be disposable. Why buy, when your machine is designed to be obsolete and break down once it hits the two year mark?

      The people who want to buy quality, long-lasting goods don’t have many options anymore. Other than buying something that came out 10-15 years ago, and learning how to keep it running forever.

      • 0 avatar

        I don’t expect things to break down every 2 years. Phones yes, but not a car, appliance, etc. If anything I expect most things to last longer. It is important for automakers for things to last longer, or its more expensive for them to maintain the services.

    • 0 avatar

      Could you be any more melodramatic or alarmist? The average age of cars on the road and the average time people keep cars are both at record highs. Largely due to the fact that cars have never been more mechanically reliable. Even with that in mind, it makes no sense to build cars that last 15 years when the average new buyer isn’t keeping it for half that amount of time. In any case I’m confident you can buy a Corolla today and drive it until retirement with nothing but regular maintenance.

      • 0 avatar

        Says the Accord driver :D (kidding, I thought you were in a TSX)

        “Even with that in mind, it makes no sense to build cars that last 15 years when the average new buyer isn’t keeping it for half that amount of time.”

        Geez, why even paint them since the lifespan is so short?

      • 0 avatar

        Yes, I could!

        I just see where things are headed. The term of ownership is that long because nobody has any money…

        Because they’re spending it all on payment plans.

    • 0 avatar

      Depreciation vs ownership.

      Proles voluntarily choose depreciation, or debt. The devolution continues.

      Start learning Mandarin.

    • 0 avatar

      Ownership will be something only the top 10% can aspire to.

      That’s practically the case when it comes to homes now. Stagnant wages and uncontrolled rents which consume 40-50%
      of a person’s monthly income ( for whatever reason like limited space, wonky property tax laws and so on) have left the bulk of the people in the US with no ability to purchase a home and instead stuck in a cycle of renting with the inability to save for a house.

      Private ownership of a vehicle is going the same. In my area even with “tax abatement” a vehicle with an adjusted value at a paltry 27,000 dollars will require 2,000 dollars are year in property taxes on top of insurance, maintenance, and operating costs including travel costs such as tolls.

      We’ve entered an age where a 1,000 dollar cell phone will become the new normal ( can imagine if net neutrality goes away such devices will get preferential access and cheaper devices despite good processing power will be no more useful than an old 14.4k dial up connection ).

      That doesn’t even consider costs like healthcare which are absolutely swallowing any discretionary income ( for me personally it’s scary enough I’ll pass on living in the “greatest” country in the world for a socialist hell by dint of probably saving up to a 1/2 million in medical and insurance costs over my retirement lifetime ).

      • 0 avatar

        “Ownership will be something only the top 10% can aspire to.”

        “That’s practically the case when it comes to homes now”

        I tend to agree, as much as that’s a terrible scenario. The amount of liquid money I have gone through in the past three months is absolutely staggering. They call it the American Dream because you have to be asleep to believe it.

        “We’ve entered an age where a 1,000 dollar cell phone will become the new normal”

        $1,000 circa 2017 USD for a disposable cell phone is and never will be normal, friend. I would also add to anyone reading, this concept of “new normal” is a re-framing technique. They are trying to get you to accept something which you know not to be normal, as “normal” or acceptable. Trust your instincts in these cases and know they lie to you every day. Resist the mind warping and its ends.

        “can imagine if net neutrality goes away such devices will get preferential access”

        Now you’re talking like a conspiracy theorist ;)

      • 0 avatar

        Or, you could just move away from the incredibly expensive coastal areas. And/or buy a reasonably sized house. Yeah, you make more money in those expensive areas but not in proportion to the increased cost of living.

        I relocated to a perfectly nice little 760sq/ft place for $90K on the gulf coast of FLorida. The savings in taxes vs. my previous residence in Maine makes the house effectively free, with a strong possibility of turning a “profit”. And I will never shovel snow again. And Maine isn’t even all that expensive compared to urban areas.

        You are nuts if you think anyone with a brain thinks a $1000 cell phone is normal. That is largely the province of idiot kids with nothing better to spend money on, and those with more money than they know what to do with. And those caught in the Apple Reality Distortion Field, of course. I’m an IT geek and about as tech-savvy as it gets, and the most I have ever paid for a phone was $350 (Motorola Moto-X). It’s 2+ years old now, and it will not be replaced until it dies.

        I have to think eventually this country will get a clue on the ridiculous healthcare situation.

  • avatar

    Not just millennials, baby boomers with no cash but want to live large by the year would like this too. They can switch cars every year instead of stuck with a V8 Buick or Cadillac after they break their heaps or lost their licenses.

    My father in law (72) was tempted to trade in a 20 year old Camry to lease a new fully loaded one, and they only drives 5k miles a year….

  • avatar

    Rent-a-life culture is poisoning our existence. Leasing is nothing more than a car subscription with no end. To be honest, I can’t believe there is not more powerful incentive laden market mechanisms to deter people from buying cars and using them for 15 years. Nearly every industry is transitioning towards a more contracted consumption model that only serves to squeeze the middle class into leisurely but indefinite servitude. This is the natural result of a world where market share is the primary driver and not buy-it-for-life quality. While many income levels can easily afford to enjoy the luxuries of the constant 2 year product cycle it is philosophically incorrigible.

    • 0 avatar
      Menar Fromarz

      This may have appeal to the crowd that wants to align the life of their iPhone to the relevant “connected” life of their smart phone mobility app (car) as the planned obsolescence of both are more and more parallel, however, to me, its a big pass. And Im no luddite, I do like some newer tech that is installed in vehicles today, but if I really wanted to rent a car, I’d rent a car. Not enter into some tarted up lease, as we all know just who benefits from those. I do find its interesting that they are not doing this with high value/ volume trucks, but niche high end cars. Im sure there may be some tax bennies for some folks in this plan, as it extends out the costs to include normally variable expenses, but you would think it would be more of a draw for some contractor who wants the newest and best BroDozer and can write it off.

    • 0 avatar

      The ownership society does not require direct ownership of everything. If you have an asset base that generates unearned revenue, and you siphon off part of the revenue to lease assets, rather than using principle to acquire assets, it’s not really a problem.

      The problem is the misapplication of basic financing theory by the average populace and by credit shills posing as experts. These people tell Americans it’s smarter to finance a vehicle at 0% interest than to purchase the vehicle outright. They never bother to explain that 0% interest is a marketing ruse, not a real interest rate, and they espouse this nugget of “wisdom” to consumers who often have negative net assets or assets (like homes) that tend to generate considerable negative cash flow. As a result, lots of people doing “smart things” are actually introducing the specter of economic cataclysm ala 2008.

      • 0 avatar

        I agree with you but would point out the percentage of citizens with an asset base generating unearned revenue is slim. Most of the buyers here are the sort with negative cash flow.

  • avatar
    Arthur Dailey

    For those with the money and desire to do it, particularly those driving high-end ‘prestige’ vehicle then certainly nothing wrong with this. The Old Man leased Lincolns and Cadillacs (when they were considered prestigious) on one year leases for over 25 years.

    For millenials and urban dwellers, car sharing services are increasingly becoming the norm. We currently have 4 vehicles in our driveway for 5 licenses drivers, yet we also have 3 car sharing memberships.

    If you are an urban dweller in a high insurance area, with limited or expensive parking and access to public transit, then car sharing is the way to go. They cover your insurance, parking, maintenance and gas. And you get to select from different vehicles depending on your need and or mood that day.

    As for those decrying auto leasing. I have calculated the cost of leasing versus buying for our family since 1986 and it is basically a ‘wash’. Purchasing is certainly less expensive if you either drive a limited number of miles or very high miles, live in a ‘salt free’ zone, perform most vehicle maintenance and considerable repairs/replacements yourself,do not mind the thought/inconvenience of sporadic breakdowns/no starts, and are willing to ‘drive it into the ground’ or sell it privately. If you use your vehicle for business, then leasing becomes more attractive.

  • avatar

    The future is CAAS (get it?). As soon as fully autonomous cars are more commonplace, this will be the new norm.
    I envision that you will have a few ways to choose, not unlike any sort of subscription plan. You can choose the type of car, coupe, sedan, CUV, SUV, truck, pick the level within each, basic, premium, luxury, etc. Then you can choose your subtypes such as single user or get a lower cost shared plan. You can tack on options for letting Uber use your car after hours to additionally drive down your payment.
    The cars will, much like children’s car seats, have an expiration date after which they go back to the manufacturer for recycling and disposal. Gone are the days of cars that are 10+ years old and falling apart. Insurance will get in on the game and charge a premium for anything that’s not covered as part of a manufacturer’s current offering (aka, antiques).
    The mobile phone model of the 2005 era will be brought forward except that most people won’t want to ever buy or own their own phones/cars. The advantage for the consumer is 100% hassle free ownership–pay your bills and you have a car in your driveway when you need it. Save money by sharing or renting it out to Uber. If it needs service or maintenance, it drives itself back to a service center (the dealer of course, indies will be a thing of the past). When the car’s service period is complete, it drives itself back to the manufacturer. Maybe it gets a recondition and it put into service as a fleet delivery vehicle or full time Uber duty. Maybe it goes to a second plan buyer on an “economy” plan. The manufacturers win because they can control the inventory by adding/removing stock as necessary.

    So yes, a subscription model will be the way of the future.

    • 0 avatar

      I disagree, such a thing would only happen mainstream if it was mandated. You’d have to clear out all of the level headed folks before this would be accepted en masse.

  • avatar

    “Will it work in the long term? It certainly has for cellular providers”

    Actually they are moving away from this model. AT&T at least no longer has two year contracts. They still have payment and upgrade plans, so from the consumer’s point of view it might seem the same since they get a monthly bill. I know I was happy to move away from that old bundled phone service monthly system. Now I just buy an iPhone outright, own it free and clear and pay for whatever monthly service / data usage I need. This avoids the forced upgrade where you had to renew every two years and trade in your old phone to get a shiny new one.

    I guess car subscriptions will work for people who just need transportation and don’t care about vehicles. IE: non-car folks. To me a car is too personal to “share” so this concept doesn’t work for me. I see these subscription services to be more like a very flexible leases. And leases have proven to be very popular so long term I believe subscriptions will catch on.

    Just seems crazy to engineer an entire car for people who will only use it on a monthly basis. I wonder at what point do these vehicles reach EOL (end of life) and get pulled out of the system? In 1 year, 2 years? Will there be a huge new market of previously shared cars for sale? Or will a whole new buy-here-pay-here market evolve for people to subscribe to old beaters? Guess I just can’t get my head around a subscription to a THING. For services it makes sense, for example I pay for lawn service, I pay for television service. I can see where city dwellers pay for transportation services (metro/oyster cards) but subscribing to an actual car? Does not compute in my world.

    • 0 avatar

      The cellphone providers are being forced to move away by the phone manufacturers. Auto manufacturers do not have this problem. They control the hardware and the hardware suppliers.

  • avatar

    Lot of melodrama in here. I don’t mind this. If I could, I would change cars every year. The prospect of being in a car for 15 years sounds like torture.

    I think they can make this work, though as a former NYC resident there would definitely be some challenges for shorter term programs. I think one big help would be to keep cars in the fleet long after their model year. If someone doesn’t have to buy/own/maintain/sell a car, I doubt they will care if they have something brand new, just like with rental cars.

    If autonomous cars ever truly come to be, I think the concept of car ownership will disappear for many. It’s a huge hassle and waste of time and money. People want to get around; car ownership is a necessary burden to that end, not a source of enjoyment for the general public.

    • 0 avatar

      It certainly would be torture if it was an Accord. I’m almost halfway to 15 years with my 328!, and I have no intention of parting with it anytime soon. :-)

      Though it did get a love tap from a texting moron recently. Only a $600 scratch on the rear bumper thankfully.

      I’m not willing to subscribe to much of anything tangible. Buy, maintain, keep for a really long time. I have one car that was “built” by British communists that is still going strong at age 43, I am sure the German one will manage to do at least that well.

  • avatar

    Subscription based car service is the future because transportation is a relatively specialized function best performed with numerous automobiles. Unfortunately, the average person does not have the capital or real estate to operate a fleet so this is best left to the manufacturers.

    Unfortunately, the manufacturers are not taking it seriously, and Cadillac’s pathetic attempts are reminiscent of bygone eras when GM would approve a project and then intentionally sabotage it to make it appear as though the company supported change, while they were actually clinging to the past.

    Subscription based services will allow people to commute in specialized vehicles, take family trips in specialized vehicles, transport/tow cargo in specialized vehicles, etc. Subscription could even put rental companies out of business, depending upon execution because the subscriber could fly to another town and pick up a vehicle on their subscription.

    Fleet subscriptions change everything including the way cars are manufactured and insured. Rather than having hundreds our thousands of variants, the manufacturers will make several for use in their fleets. Used cars will be managed differently. Insurance could be done on a fleet basis directly through the manufacturer, though liability will probably still require an outside policy.

    The challenges are numerous as well. The manufacturers cannot easily estimate the liability of running consumer-based fleet subscriptions. There will be a huge impending battle between fleet operators and manufacturers. Obviously multi-brand fleets would be more attractive for many buyers, but the manufacturers could lock them out of the market if they were so inclined.

    The consumer also faces the prospect of losing their job and losing their vehicles. For most “car owners” who are merely rolling forward balances, this is probably irrelevant, but fiscally-responsible car owners will be adversely affected if they don’t have a buy option or they don’t actually have equity in something.

  • avatar

    There will always be a large proportion of the public who demand their own, personal, vehicle, whether it be car, truck or bicycle. The subscription idea might be good for city dwellers but having any form of ‘subscription’ service where they can swap vehicles on a whim will end up very expensive for the OEM/lender who supports the concept.

  • avatar

    Manufacturers and their dealers hate customers who buy a product and keep it until it no longer meets their needs or because maintaining it is no longer cost effective or even possible. They want customers who faithfully trade in the model they own as soon as the manufacturer offers something new. (iPhone owners are a good example of this.) Leasing and subscriptions are a way for manufacturers to force customers onto their replacement schedule rather than the customer’s schedule.

  • avatar

    I would *love* to pay a full-line manufacturer a base fee and then have access to a large fleet with every model the manufacturer makes, with weekly or monthly surcharges for more expensive or in-demand cars. I think that could be a great business model.

    Imagine the possibilities with Ford as an example. Have a Mustang most of the time, swap it for a Flex or Explorer during the months of July and August when family road trips are happening, swap it for an F-150 for a couple of months when a house project is going, swap the manual for an automatic just to change things up, and on and on. It would be expensive to run a program like that, and the fees would obviously cost more than a normal lease, but there’s a lot of potential value for the consumer.

  • avatar

    Wealth doesn’t exist for most people, therefore purchasing makes less and less sense.

    If you don’t put any money down when you buy a car, you are subscribing, but certain expenses such as maintenance are lumpy.

    For people with a decent income stream, and no wealth, this sort of approach to life works. Until the income stream starts to run dry.

  • avatar

    I’d maybe do this if a classic car subscription service existed, otherwise probably not.

    • 0 avatar

      Such a thing does in fact exist.

      I need to focus on becoming a Bitcoin millionaire. I inquired a few years ago and *then* I believe it was £8,000 annually.

  • avatar

    “Cost is not going to be the primary motivation for getting people to switch from personal ownership. It will be because subscribing is easier than owning.”

    I totally disagree with this statement. Like Posky said price does and always will matter. Even for the hipster fucks.

  • avatar

    Because I’m now a retired boomer, most of these new fangled deals I can ignore without worry. All I subscribe to is Netflix and a magazine. And ocaisionally I think of canceling them.

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