Are you in the market for a car, but don’t want the commitment of owning one? Ride sharing and car sharing can be a convenient alternative, but a new type of service, known as car subscriptions, aims to fill in the gaps between these models. And several major car manufacturers are placing big bets on the space.
Car Ownership Models
There are many different reasons why people use cars. Given the relatively low population density in Canada, it’s no wonder that we’re 12th in the world on the list of vehicles per capita.
It sounds obvious, but the car ownership conversation gets more interesting and complex when you think beyond the ‘why’ of driving, but also the ‘who’ is driving.
Getting groceries for a bachelor is different than getting groceries for a family of four. A parent taking their child to play hockey with all of their equipment is different from another parent taking their child to piano lessons.
Not everyone needs the long-term commitment of owning a car. Many have turned to ride sharing (services like Uber and Lyft) and car sharing (ZipCar and Car2Go) because they provide flexible short-term commitments without the hassles of ownership.
Ride sharing services have raised at least $47 billion, as of the end of 2016, but combined with car sharing they still only account for 1% of vehicle miles travelled (VMT) according to this McKinsey study.
There does appear to be room for new types of ownership to innovate on use cases that these models don’t quite solve for. The table below lists some of the features of the various car ownership models that are out there:
Filling In the Gaps
There are obvious inconveniences to the sharing model. They are short term and can be particularly inconvenient depending on your situation. Try lugging a baby car seat and stroller 5–10 minutes to the closest parking lot, then strapping it in every time you need to take the car.
With consumers showing their desire for access over outright ownership in other areas such as music and movies, traditional car ownership also faces uncertainty and change.
Is there something else out there that combines the stability of long-term ownership and the flexibility of short-term rentals?
Car Subscriptions: A New Type of Ownership Model
Car subscription services are still a relatively new model, but we’re starting to see several major car manufacturers enter the space.
It’s a model that acts kind of like a long-term car rental, or a short-term lease with added flexibility. The hassles of car ownership, such as finding and negotiating the right car insurance and taking time out of your day to handle maintenance and tire changes, are offloaded from the driver and onto the platform operator. It’s less commitment than a more traditional purchase but more convenient than car sharing.
Ford, Porsche, Cadillac and Volvo have all launched their own subscription services with unique options and perks. For example, the Porsche Passport program gives people the ability to switch between a few of their different models for a cool $2000-$3000 USD per month. Hyundai has also launched a subscription service for its Ioniq model. Lexus, BMW and Mercedes all just announced plans to launch their own subscription programs in the last week.
Large manufacturers are clearly seeing a gap in the market for a new type of service that makes it easier and more convenient for people to be mobile.
A number of startups are also trying to innovate in this space by working with dealers to utilize the inventory on their lots in different ways and open up new customer channels.
Is this a car ownership model that you would consider? Do you think it will simplify your car-using habits?