Are Car Subscription Services Going to Become the New Normal?

Matt Posky
by Matt Posky
are car subscription services going to become the new normal

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.

“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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  • DudeMcLovin DudeMcLovin on Dec 05, 2017

    “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.

  • Fred Fred on Dec 05, 2017

    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.

  • Nrd515 I bought an '88 S10 Blazer with the 4.3. We had it 4 years and put just about 48K on it with a bunch of trips to Nebraska and S. Dakota to see relatives. It had a couple of minor issues when new, a piece of trim fell off the first day, and it had a seriously big oil leak soon after we got it. The amazinly tiny starter failed at about 40K, it was fixed under some sort of secret warranty and we got a new Silverado as a loaner. Other than that, and a couple of tires that blew when I ran over some junk on the road, it was a rock. I hated the dash instrumentation, and being built like a gorilla, it was about an inch and a half too narrow for my giant shoulders, but it drove fine, and was my second most trouble free vehicle ever, only beaten by my '82 K5 Blazer, which had zero issues for nearly 50K miles. We sold the S10 to a friend, who had it over 20 years and over 400,000 miles on the original short block! It had a couple of transmissions, a couple of valve jobs, a rear end rebuild at 300K, was stolen and vandalized twice, cut open like a tin can when a diabetic truck driver passed out(We were all impressed at the lack of rust inside the rear quarters at almost 10 years old, and it just went on and on. Ziebart did a good job on that Blazer. All three of his sons learned to drive in it, and it was only sent to the boneyard when the area above the windshield had rusted to the point it was like taking a shower when it rained. He now has a Jeep that he's put a ton of money into. He says he misses the S10's reliablity a lot these days, the Jeep is in the shop a lot.
  • Jeff S Most densely populated areas have emission testing and removing catalytic converters and altering pollution devices will cause your vehicle to fail emission testing which could effect renewing license plates. In less populated areas where emission testing is not done there would probably not be any legal consequences and the converter could either be removed or gutted both without having to buy specific parts for bypassing emissions. Tampering with emission systems would make it harder to resell a vehicle but if you plan on keeping the vehicle and literally running it till the wheels fall off there is not much that can be done if there is no emission testing. I did have a cat removed on a car long before mandatory emission testing and it did get better mpgs and it ran better. Also had a cat gutted on my S-10 which was close to 20 years old which increased performance and efficiency but that was in a state that did not require emission testing just that reformulated gas be sold during the Summer months. I would probably not do it again because after market converters are not that expensive on older S-10s compared to many of the newer vehicles. On newer vehicles it can effect other systems that are related to the operating and the running of the vehicle. A little harder to defeat pollution devices on newer vehicles with all the systems run by microprocessors but if someone wants to do it they can. This law could be addressing the modified diesels that are made into coal rollers just as much as the gasoline powered vehicles with cats. You probably will still be able to buy equipment that would modify the performance of a vehicles as long as the emission equipment is not altered.
  • ToolGuy I wonder if Vin Diesel requires DEF.(Does he have issues with Sulfur in concentrations above 15ppm?)
  • ToolGuy Presented for discussion:
  • Kevin Ford can do what it's always done. Offer buyouts to retirement age employees, and transfers to operating facilities to those who aren't retirement age. Plus, the transition to electric isn't going to be a finger snap one time event. It's going to occur over a few model years. What's a more interesting question is: Where will today's youth find jobs in the auto industry given the lower employment levels?