Subscription Car Services: Full of Potential and Challenges

Subscription Car Services: Full of Potential and Challenges

Subscription Car Services: Full of Potential and Challenges

The automotive industry is undergoing a swift transformation in response to growing consumer expectations for the right ride at the right time—an owned or leased vehicle for day-to-day needs, a Lyft or Uber ride to and from events, and an on-the-spot rental while traveling in a new city. Adding to this “mobility movement,” subscription car services enable customers to pay a monthly fee for the use of a car, covering everything from insurance and maintenance to roadside assistance. Subscribers get the added benefit of being able to switch out cars with little notice.

Despite the varied outcomes of current programs and the challenges facing this new industry segment, subscriptions are already joining traditional financial products across the automotive industry, and lenders are wise to start thinking about how they will integrate subscription services into their current offerings and processes.

Vehicle Subscription Success Spectrum

As with any new business model, early subscription car services have faced challenges, contributing to uncertainty about their viability as well as the implementation of best practices. Cadillac has “paused” its subscription service to re-tool their offering and release a newer version in the near future. Volvo has experienced higher-than-anticipated demand for its subscription service—so much so that it is dealing with growing pains, like wait-listed models that are a part of the service. In contrast, Santa Monica-based Fair is shopping for new creative agencies with plans to “go big”—national and then international—with its subscription service. These early implementations highlight the challenges, as well as the potential, of subscription models.

Mobility Movement Is More than a Fad

As the auto industry evolves to meet the demand for blended experience offerings, many are touting the benefits of subscription services as an additional revenue stream and a touchpoint with customers. However, these car subscription services are in their infancy, and the mixed results of early-to-market offerings have left many OEMs, dealers, and lenders wondering whether car subscription services are simply a fad or the auto industry’s future. Which begs the question, what is the best approach for lenders to invest their time and money in implementing and ensuring subscription service viability now and into the future?

A study of the initial subscription pilots yields two key takeaways:
• Clearly define program goals from the outset.
• Make sure the internal and consumer-facing infrastructures are in place to facilitate accomplishing those goals.

Currently, subscriptions are often managed either manually or as a fleet contract within lenders’ legacy LOS and servicing systems. Providers need to determine how to best integrate and automate subscription services into existing and developing processes and workflows to allow the many facets of a subscription service (e.g., payments to insurance carriers, maintenance, and other third-party service providers) to be covered under a single payment from the consumer.

The consumer journey is a crucial part of implementing a successful subscription service. One hurdle facing this new mobility model is the disparate and fragmented customer journey. Customers shop and consult multiple online sources, often having to repeatedly enter their preferences, personal information, and vehicle criteria. OEMs, lenders, and dealers would like to capture that research and shopping data, and consumers would like a single, streamlined, and more personalized digital interface that allows them to interact easily with all relevant parties from subscription start through to vehicle exchange.

The key to implementing a successful subscription service will be understanding that the single customer journey is transforming into multiple, often overlapping, journeys. Customers may lease one vehicle while subscribing to two others, all of which require flexible journey steps and digital interaction points.

Moving Forward

Automotive industry giants as well as forward-thinking dealerships, lenders, and third-party providers recognize consumers’ growing expectations for new levels of convenience and flexibility. Currently, the industry is working to determine how to leverage this mobility movement and implement scalable, flexible solutions.

As subscription operators capture more data about customer preferences and as vehicle technology expands, automotive subscription services will move more into the mainstream. The future will have traditional vehicle loans or leases paired with subscription vehicles and automotive features as well as services.

Industry players will need to shift their thinking from an either/or perspective to embrace the ongoing, fundamental change in consumer expectations that is expanding to include traditional ownership and leasing as well as subscription services. This industry shift will require subscription operators to thoughtfully invest in technology and process developments that will evolve with this business model. The good news is that current challenges and growing pains are helping develop best practices and shape an invaluable foundation for successful, future implementations that will mature and remain viable now and in coming years.