The Volkswagen Group’s latest move into subscriptions is the launch in Germany of the ID 3 and ID 4 electric cars, costing from €499 per month with either a three-month or six-month minimum term. It joins subscription schemes such as Care by Volvo, Hyundai’s Mocean and Jaguar Land Rover’s Pivotal. Subscription is a fancy word for bundled leasing. Businesses have long used leasing (where the car isn’t owned but is handed back after a fixed period), as are private buyers increasingly. Subscriptions go further by bundling elements such as tyres, servicing and sometimes insurance to leave a flat monthly fee.
Car makers have also touted flexible time periods that mean you can sign up for blocks of mere months rather than years in traditional leasing. However, that’s not a big attraction, concluded a Boston Consulting Group report this summer. “At this point, providers are offering them primarily for marketing purposes,” it said. In fact, BCG added, it was a “myth” that customers wanted month-to-month flexibility.
Also flagged as a myth was that customers wanted to swap cars – a feature of the subscription service that Porsche rolled out in the US. “Both features drive up costs and in turn the price tag,” it said. “Swapping, for instance, requires additional deliveries and results in underutilised reserve vehicles.”
Subscription schemes have been hit-and-miss so far; those that have since been abandoned include Access by BMW, Book by Cadillac and Mercedes-Benz Collection. Yet BCG predicts that subscriptions could still account for 10% of the market in Europe and the US by 2030, amounting to some five million to six million vehicles.
One problem with the subscription model is that, expressed as a single monthly figure, it looks expensive next to a PCP finance deal. However, it turns out that we consumers aren’t very good at totting up how much we spend on motoring: a survey of 6000 car owners in Germany published in Nature magazine last year found that they underestimated the cost of ownership by 50%.
A smart campaign along with a nifty cost calculator app could swing opinion. Revolutions in motoring never come as quickly or as noisily as promised by the early promoters, but the desire for a hassle-free life and a willingness to pay per month could yet make people turn to the likes of Kinto, Mobilize and Free2Move for their travel choices with the same frequency as they engage with a banking app.
