Car subscription barometer reveals the business model is here to stay

Our telematics partner, INVERS, recently issued a car subscription barometer report, emphasizing that automakers and drivers are no longer alone in seeing the benefits of car subscription.

Offering "vehicle as a service" is an attractive business model for OEMs, leasing companies, rentals, and non-auto players keen to introduce additional revenue streams. Across Europe, businesses interested in seeing drivers subscribe to a car have increased in numbers and diversity. INVERS shares that usage-based subscription models are estimated to generate ten bn EUR in revenue for France, Spain, the UK, Germany, and Italy, based on 2021 data.

The survey found that Europe's car-subscription market "has been thriving for the past several years." In August 2022, the market is "set for future growth," increasingly connected — but not limited to — the regulated shift from ICE vehicles to EV sales.

Data says it all

The list of European subscription providers has become more diverse as non-automotive players are eager to capitalize on the large automotive economy. These new players come in "different flavors," the Barometer says, but all providers use subscription software and telematics to manage fleets via"mileage alerts," "location tracking," and an instant asset depreciation reading, like the data-driven recommendation engine we offer at Casi. An increased emphasis on data makes it easier for auto- and non-auto enterprises to scale profitably. "Many operators aim for new markets and invest in customer-centric solutions," the Barometer says.

Car subscription is a product that end-consumers already love, and providers need to generate the supply. Most consumers are interested in a service that offers short contracts, digital sales and onboarding, bundled maintenance costs and insurance, and the opportunity to swap a car when needed. The data shows car subscription attracts a new customer segment looking for a better way to have a car.

Car subscription is often considered a "brand magnet." Data out of the UK shows this product is introducing many established drivers to a car brand they have never tried. Consumers are more willing to test a new EV, confirming our hypothesis that flexibility beats uncertainty.

Sharing an interest

The big names of consulting—the Deloittes, McKinseys, and Berylls — all point to a car subscription market of surging value. They see that carmakers and rental and leasing companies are now earning more on subscriptions for themselves and their stakeholders. The EU's main auto markets forecast up to four million new subscribers.

Deloitte says those offering subscription services now include a long list of "pure-play subscription providers". Instacar in Greece is one of these, and its co-founder, Antonis Samothrakis, makes clear the benefits of subscription for both fleet managers and finance: "We need to deploy almost zero capital to increase our fleet," he says, adding that even Instacar's "owned cars" are arranged via leasing facilities. "We decide if we want to acquire the car or not."

With risk management like that, it's no surprise a McKinsey report on car-subscription is called "Subscribed to future auto finance yet?" After talking to 30 auto-finance executives in Europe, McKinsey concludes, "The appeal of subscriptions is driving higher growth rates in the leasing market." That appeal — for consumers — is about "shorter contracts and a pay-as-you-go model."

"Minimal commitment" to a car is not to be underestimated in hard times. One car subscription company says the average subscription duration in Europe is 13 months. Popular with drivers, that term is also popular with fleet services that lease vehicles for their employees. With a subscription, businesses can quickly adjust their fleet size based on how their business is doing.

Apart from these"pure play" car subscription companies, the Barometer confirms car makers, leasing companies, rental agents, and dealerships are keeping subscription offers in their portfolio. This industry evolution has Deloitte believing in a EUR 22 billion shift to car subscription by 2025 in France, Spain, the UK, Germany, and Italy alone.

Assisting the whole range of players is Casi and INVERS with data-driven technology enabling players to unlock new revenue streams and unleash the power of their fleets.