Car subscription: - The market has doubled every year

Schibsted believes car subscriptions are the future and is launching the Honk marketplace. For Volvo in Norway, subscriptions accounted for 20 percent of sales in October.

Journalist: Erlend Kjernli - Published Nov. 11, 2022 at 20:11 Reading time: 9 minutes

Read the original article in Norwegian published by Finansavisen here.​ Finansavisen holds all photo rights.

"Car subscription is one of the trends we believe in. Now we step on the gas," says Christian Printzell Halvorsen, Head of Nordic Marketplaces in Schibsted.

Car subscriptions have already been available for some time on Finn.no as a test to see how the market responded. And the bosses are happy. The providers are starting to become numerous enough, and the customers are interested enough for Schibsted to plug the growth plans into the supercharger and launch Honk as part of Finn.no.

"We are starting in Norway now and will continue into the Nordics during the next year," says Halvorsen.

It is difficult to claim that car subscriptions have taken the market by storm, but it has slowly but surely found their niche and become a real alternative to leasing and buying.

"The trend reports indicate that car subscriptions will make up 20 percent of the new car market in three to five years. There is a significant volume in the Nordic market," says Sjur Idsøe, a business developer at Finn.

Flexibility and security to avoid large unforeseen costs are the arguments the providers of car subscriptions offer. Insurance, depreciation, financing, service, and tire changes are included. Only fuel and tolls are excluded.

"The in-depth interviews we have conducted during the test at Finn.no have shown that both providers and users are satisfied," says Idsøe.

"In 2018, nobody knew what a car subscription was. We were also unsure of that," Hans Kristian Aas, Imove and Casi

Porsche and Jaguar

The mentioned flexibility is about contract lengths that run on a monthly basis, in contrast to leasing with agreements of three or five years. The notice period varies from provider to provider, but mostly lies within a range of one to three months. Idsøe says a key target group is young people who have turned to car sharing and electric bicycles, and who move out of the city to establish themselves. 

"Then they need another form of mobility. This is a generation that has nothing to do with the concept of owning a car," says Idsøe.

The aim is to have 30 providers at Honk by the end of the year. Now the number is 20. Hellestø Car Rental is one of them, where the focus is on luxury cars.

"We have offered subscriptions to our customers before, but not many people have known about it," says Vadim Bytulov, who is head of car rental at Hellestø.

"The car segment accounts for Shibsted's biggest revenue and 90 million visits a month," Christian Printzell Halvorsen, Schibsted.

Among the eleven cars they have at Honk, you can, for example, subscribe to a Porsche Taycan Cross Turismo for NOK 22,000 a month, with a commitment period of three months.

"This is good for those who like to try new cars," says Bytulov.

He also believes that it provides an opportunity for those who want a luxury car for a period of time, but cannot afford to take out the necessary car loan.

"More people will try it out, but it will take some time. We won't see a boom in the market next year, but eventually it could become very popular," he replies.

Younger target group

Volvo started a small pilot with a car subscription in Norway back in 2017. In February 2020, Care by Volvo was launched as a full-fledged service, and Norwegians have let themselves be tempted.

"Car subscriptions account for approximately 15 per cent of the sales volume in Norway. We expect that the proportion of customers who subscribe will still increase somewhat and that it will probably stabilize at somewhere between 20 and 30 per cent of our annual sales volume," says Erik Trosby, PR and communications manager at Volvo Car Norway.

When the Volvo EX90 was presented in Stockholm this week, the monthly price and subscription were a natural part of the sales pitch.

He is particularly pleased that the subscription service reaches a younger target group than Volvo usually does.

"After the first year, we saw that over 80 percent of the subscribers came to Volvo from other brands, and that the customers were on average eleven years younger than the customers who traditionally buy or lease a new Volvo. We see that trend continuing.

If we only look at the figures for October, 20 percent of sales were subscriptions. Purchases and leasing accounted for 40 percent each.

We expect that the majority of the market will still prefer to own the car themselves, in addition to some choosing leasing, but car subscriptions will be an important part of the mix of forms of ownership on the market."

But what are the price differences between purchase, leasing and subscription? NAF has carried out a survey which shows that the differences vary depending on which car model you choose, but the main picture in the survey is that it pays to own the car in the long term. Subscription is the most expensive, but gives a full overview of the costs. The advantage of leasing is that you can get a new car without having to take out a large loan.

Plug and play

Back at Schibsted, there is talk of car sales going down. Figures for the Information Council for the Road Traffic Act (OFV) show that so far this year there are 17.9 per cent fewer first-time registrations of new cars compared to the same period last year. War and the pandemic have created major production and delivery challenges, but the men around the table take the figures as income because the entire car market is changing.

"That is our bet, and we see clear signs that it is correct," says Halvorsen, and refers to the figures and the survey from the test on Finn.no.

Recently, an average of 200 users have signed up for a subscription each month.

"When we press the gas, we will see completely different figures. Several of the providers have run out of cars, which has affected the test phase," says Idsøe.

1,200 CARS: Imove offers, among other things, a subscription to the BMW i4.

But there are not just two men around the meeting table this Tuesday morning. Hans Kristian Aas is also in place. He doesn't work in Schibsted, but hasn't snuck in either. Aas is co-founder and CEO of the car subscription service Imove and the technology company Casi, which has entered into a partnership with Finn. Subscription providers who use Honk are offered to use Casi.

"They don't just subscribe to a car, but the opportunity to use different cars," Petter Utengen, Flex

"The entry barrier to assert oneself in this market is high. You have to build technology, brand and spend a lot of resources on digital marketing. We have created a plug and play solution that opens the door to car subscriptions for everyone in the industry," says Aas.

In other words, Casi stands for the software solution, while Honk becomes the digital store out to the customer.

"We build the market together with the industry. If there are players wondering how to get into the market, we come and say: this is how you can do it," says Halvorsen, and emphasizes that the marketplace is open to everyone regardless of the technological solution.

"Schibsted has marketplaces throughout the Nordic region, and the car area is the most important part, with the largest revenues and 90 million visits a month. It is central to us to help break ground in an area that is hugely exciting," Halvorsen continues.

10,000 cars

Seasonal cars from Europcar, Flexidrive and Autoco Bærum are some of the providers that appear at Honk. Imove is naturally also one of them, and offers various models from a fleet of 1,200 cars. After three years with a total loss of NOK 57 million, the mobility company chose to separate the technology part into a separate company, Casi.

In 2018, no one knew what a car subscription was. We were also unsure about that, and wanted hands-on experience with Imove.

German Autoscout24 is the largest owner with 20.5 percent. Frydenbø NXT and DSD Investering follow with 19 and 11.6 per cent respectively.

"When we look exclusively at the Norwegian service Imove, it is not profitable on the bottom line with administration and everything. We received a clear message from the owners that they no longer had any appetite to help finance what we see as our innovation drone," says Aas.

We have now worked on turning the numbers around, and from the new year Imove will be able to stand on its own two feet.

Aas says that the Norwegian car subscription market is now around 10,000 cars.

"We have seen almost a doubling every single year. Now there has also become a great breadth of actors who help to lift the product."

- What is the cost of a car subscription compared to buying and leasing?

Consumers are smart. In the old days, you bought a car based on the most challenging things you needed the car for, such as towing the boat on the trailer or driving up to the cabin in proper winter conditions. Then you would have ended up with an SUV. But now you can have a small and cheaper everyday car, and rather switch to a bigger car when you need to. Then the total cost can be much lower than if you have a Volvo XC90 all year.

- Are there many people who actually switch in this way?

"They are a growing group. The average duration of a subscription to our platform is ten months."

The oldest is 93 years old

Fleks is another player that invested early in subscriptions, back in 2019. Now you can read on the website that the company is the largest provider in the Nordics.

"A lot has happened and several of our hypotheses have turned out to be correct. But car subscriptions are still a growing sector," says Petter Utengen, founder and general manager of Fleks.

The company has a fleet of 2,700 cars, and aims for 3,000 by the end of the year.

We would prefer to have even more, but we have also noticed the challenges with the delivery of cars.

Utengen says that Fleks has changed along the way. Before, there was a focus on subscriptions that lasted one month at a time, but now a majority of customers stay with the service for twelve months or more.

They don't just subscribe to a car, but the opportunity to use different cars.

At the start, the customer was usually aged 30-45, and was going through a change in life with a child, a dog or perhaps they had inherited a cabin. During the last year, the average age has increased.

"Young people are willing to change, while those over 50 who are used to owning a car are more difficult to convince. When we see that they also use the service, it is an important sign that the market is maturing. Our oldest customer is 93 years old," says Utengen.

You pay a little for the flexibility, but the finances over the course of a year can be much better when you don't have to choose a car based on an extreme need. But it is clear, if you want to have the same car for five years, a subscription is not for you.

Take advantage of the lifespan

Bertel O Steen and Sparebank 1 are the largest owners with 47 per cent of the shares each. They, like the owners of Imove, have had to see dark red figures in the accounts. 2020 and 2021 produced a total deficit of NOK 92 million.

"2022 will also be a red year after quite hard investments. The first three or four months were characterized by corona and a low utilization rate of the car fleet."

- How often do your customers change cars?

"Five percent change cars every month. We see a peak before and after the summer holidays. In August, they would like to have a smaller car again," replies Utengen.

"We want them to change cars even more often. This results in a greater degree of utilization and greater rolling of the fleet."

- There are many stories about large costs when returning a leased car. What about subscriptions?

"We comply with the standards that apply to abnormal wear and tear. There is a big difference between whether you have leased a car for 36 months or had a subscription for five months. I can safely say that we have not had cases with large costs."

Utengen believes there is no doubt that car subscriptions are part of the future. For Fleks, it's about making the most of the car's lifespan and taking care of services such as transport, logistics and preparation. The company has also launched Wundercar, which is a fully digital used car shop.

After a bit of trial and error, we have realized that we have to be part of the entire value chain in order to make money from this.

- What are the goals for 2023

We will double the number of cars in the fleet and focus on international growth. In the first half of 2023, we should be able to break even.