NEW ROADS: Weighing pros and cons of vehicle subscriptions - Part I

RALEIGH, N.C.  - 

Ask people in the auto industry what they think of car subscriptions, and you’re likely to get a range of answers as diverse as … well … the subscription platforms themselves.

Industry consultant Maryann Keller, for example, did not pull any punches when sharing her thoughts during a keynote address at the Automotive Intelligence Summit.

“To me, they make no sense,” Keller said at the event, which was held this summer in Raleigh, N.C. 

Keller, who is the principal at Auto Intel Council-member Maryann Keller & Advisors, was referring to automakers’ subscription programs during this part of her presentation, though she would later share some reservations about dealer-based used-car programs, too.

She isn’t buying the notion that drivers would actually want to switch out of vehicles at a rate as quickly as a month or two.

“It would take me a month to figure out how to put the phone in the next car,” Keller said. “And by the time I haul all the junk that I carry in my car into the next car, you’d have probably (enough) time to get another turn on my subscription. But that’s me.

“I don’t think the auto companies have answered some fundamental questions,” she said.

More on that later.

Car subscriptions a ‘smart play’

Meanwhile, Janine Pollack — director of integrated marketing at MNI Targeted Media — called subscriptions a “smart play” for the industry, while acknowledging the sector is still in an early stage. 

“It is too soon to say how the vehicle subscription model will fair in the marketplace. Any new service or model needs time to gain traction, buzz and data. However, I will say — it’s a smart play,” Pollack said in an emailed Q&A.

“This model has many things going for it. It plays off consumers’ love for their ride, it gives the participants bragging rights and it’s turnkey,” she added. “It will appeal to both the car enthusiast and the early adapter, both prime targets for the automotive industry.”

Pollack contends it’s a good add to the lineup of options from automotive companies.

“The vehicle-subscription model appeals to the ‘discovery commerce’ model of subcom [subscription commerce], meaning it appeals to the consumer’s interest by providing a curated experience using advanced customer data to discover items — in this case a car — they may not otherwise have found,” Pollack said.

As the comments from Pollack, Keller and others around the industry would suggest, the challenges and opportunities associated with car subscriptions are just as varied, too.

And it may take some time to navigate through what is believed to be a “startup” phase for this model.

‘Think of these as startups’

In the overall time continuum of the auto industry, subscriptions are at a very early point — even when compared to relatively young innovations like ride-hailing and car-sharing.

In its study titled “Evolution of Mobility: A Shift Towards Alternative Ownership,” Cox Automotive shared a timeline detailing the respective advents of various types of automobile usage. And subscription is the youngest of the bunch.

Following traditional ownership, public transportation and taxis, car-sharing (Zipcar, Enterprise CarShare, etc.) was launched in 2000, with ride-hailing (Uber, Lyft, etc.) coming about in 2009.

Subscriptions weren’t launched until 2014.

“Think of these as startups. There will be a lot of learnings along the way, how to better do things, maybe better places to do the business,” Autotrader executive analyst Michelle Krebs said during an August conference call with reporters about the study.

“I think we have to see this much as the early stages of Uber and Lyft and Zipcar. We will be learning a lot along the way. And I think the efficiencies, too, will become very important. How efficient are you in terms of your technology, making all this work, managing the fleets of vehicles and addressing customer satisfaction?”

Given that subscription models are “still relatively new to market,” they have mostly operated “in pilot mode,” says Isabelle Helms, Cox Automotive’s vice president of research & market intelligence.

Though certainly some have moved forward and begun to “ramp up as real viable businesses,” she said.

“So, when you’re running a pilot, you’re obviously not running it as efficiently as you can be. Now we believe that as the scale of these businesses grow, new options will become available – predominantly lower-cost options will come to market, made possible by greater operational efficiencies, even improved insurance costs for the providers,” Helms said during the same conference call on the study.

“They’ll be able to make smarter decisions about what cars to buy, therefore reducing costs on their end, as well as when to de-fleet these vehicles,” Helms said. “But one thing we also believe is that automation should help reduce the costs associated with the white-glove delivery of some of these services today.

“So, a lot of things are going to happen, but we believe that the biggest contributor to the growth of subscription services is just reaching large scale,” she said.

As one might expect during “pilot mode,” there are a lot of questions to be ironed out.

That and more will be shared in Part II of this story

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