Subscription models offer win-win solutions for producers as well as consumers. Businesses and consumers regularly subscribe to everything from software to premade meals. As efficiency, access, and utilization start to obscure the traditional consumer values of ownership and brand loyalty on a global scale–a new solution isn’t an option. And the automotive industry is quickly discovering it’s not the exception.
Some vehicle manufacturers, enthusiastic about the possibilities, are re-branding themselves. What they sell is mobility rather than cars. Editor in Chief of CNET Roadshow, Tim Stevens suggests,
There’s a giant subscription B2B opportunity. Fleet sales represent a large percentage of domestic auto sales. Drive by state government campuses. White car after white car, just sitting there. Utilization rates, for both personal and fleet, are less than 5%. If someone could come in and increase utilization by sharing cars between businesses, that would really be something.
Although auto subscription programs currently target consumers, the substantial, longtail opportunity lies in B2B.
How Car Subscriptions Work
Car subscriptions offer a hybrid leasing and renting alternative to ownership, with some brand-specific bells and whistles. For a flat monthly fee, subscribers have access to vehicles. In many cases, they swap out one model of car for another, without affecting the underlying subscription. You pay for access to transportation that accommodates your specific, ever-changing needs.
The subscription arrangement is more flexible and short-term than a traditional lease, and its upfront cost is usually lower. And it also provides more stability than Zipcar, Turo, or traditional car rental offerings. Furthermore, subscriptions generally cover all insurance, roadside assistance, maintenance, and repair. Delivery and collection of vehicles as needed is another added benefit. The user experience goal is to present a simple, streamlined continuity, with programs that add value, through a homescreen-worthy mobile app.
Monthly subscription fees can range from around $350 for an economy car to over $1500 per month for a luxury vehicle (Note: Gas and parking remain the driver’s responsibility). These fees may work out to be somewhat higher than a traditional lease. (The average standard lease payment is around $450, with a down payment of over $2600.) However, the inclusive nature of subscription models would make an immediate savings impact for businesses that compensate employees for most aspects of vehicle fleet management.
The predictability factor within car subscriptions also serves as a bottom-line enhancing driver. Other B2B auto subscription advantages to recognize include:
- Known transportation costs enable reliable budgeting, with limited surprises along the way.
- Automated billing promotes easy auditing of accounts.
- Perceived and actual barriers around vehicle depreciation are essentially removed.
- Subscription models reduce risk and offer valuable peace-of-mind in the insurance arena.
- Small businesses don’t need as much upfront money to acquire a vehicle.
When it’s Right, it’s Right.
Automobile subscription providers offer a range of options, and your company will need to closely review these options before diving in.
With any subscription product, you have to have a proven, quantifiable need. Enough of a need to warrant the inclusive fee. If you subscribed to Netflix, for example, but only watched one movie every other month, it makes no sense (and clearly you aren’t up to speed on your premium TV). Companies with very minimal or sporadic transportation needs would likely find Zipcar-type alternatives more appropriate.
Fluctuating needs and/or steadily increasing needs for mobility, on the other hand, are often a great fit for auto subscription models. If an employee moves to a new location for a set amount of time, companies often provide them with a vehicle for the duration of the assignment. Terms can range from the Flexdrive one-week option to the Lexus 2-year “complete lease.”
Subscriptions Boost Big Data in Auto
There are cases when it doesn’t make sense to switch from company-owned vehicles. If your business requires specialized vans or trucks to store, carry, or come fully-loaded with particular equipment, then you’ll want to own your own fleet.
Also, if you put a lot of stock in leveraging telematics on your company cars, in order to track their location and driving behavior, subscription models more than deliver on this data. With subscription services a huge part of the actual service is actionable data.
Being able to access vehicles remotely is a huge selling point. Providers can turn vehicles off or disable them, and they collect data that will ultimately create a driver’s profile score. This score will determine the insurance rates for companies and identify reckless drivers.
Subscription platforms are often considered an asset management tool, which is a game-changer, especially for B2B customers. This means that collected data runs through a BI tool that then indicates when you should take the car out of the service an sell it to maximize your return on investment. Toyota’s brand new Kinto subscription service, still in the launch phase, offers connected-car technology that monitors driving.
Riding the Enterprise Resource Planning Wave
As Enterprise Resource Planning (ERP) software becomes widespread, businesses recognize new areas for cost savings. On-demand access — to human capital, equipment, or software — no longer requires long-term commitment.
Businesses apply this concept to: software, office space and transportation along with whole departments such as customer service, billing, and IT. The result is unprecedented agility, along with major cost-savings and a deep change in the entire business infrastructure. Subscriptions offer the flexibility of tiered plans, easy up or downgrading within your account, and hassle free plan suspension or cancelation.
What are Available Auto Subscription Platforms?
While auto subscription services aren’t currently offered on a purely B2B basis yet, they generally welcome businesses as customers. As the number of subscription providers continues to increase, B2B-only plans will accelerate.
Zipcar offers business accounts, which allow business owners to say how many people will need cars, and how often they’ll be driving. Zipcar notes their services are now used by Google, Microsoft, Netflix, and other digital companies in big cities. As of 2018, twelve OEMs, seven Mobility Provider Programs such as Hertz, Zipcar and CarNext, seven auto dealerships, and twelve tech startups offered subscription programs.
Some companies such as Budget Rent-a-Car approach the subscription model through a hybrid “long term lease” offering. This tends to appeal to corporate customers, and there are partnership opportunities emerging between traditional car rental companies, dealers, and nationwide networked platforms like Mobiliti. These allow customers greater choice of vehicle and price range.
Moving More Cars and Realizing Auto Tech Progress
The auto industry benefits from moving cars. Subscription models provide a predictable income flow, every month, for whomever makes or provides these vehicles. Furthermore, subscriptions can create a steady profit channel for innovative auto advancements. But, equally notable, is how B2B subscriptions are positioned to drive auto innovation progress.
EVs stand to grab significant market share through these models. While the current market for these vehicles is small, with prohibitive options and pricing, demand going to explode within the next 3-5 years. In fact, subscription models could very well push EV demand through short-term business and consumer experiences. And then of course, another 3-5 years after EVs take off, the hot topic will be autonomous car options.
Think about how your company will handle its transportation needs to accommodate sustainability and growth, moving forward. What will your fleet look like in two years? Five years?
Agility and efficiency rule. Do you have a solution?