What is Car Subscription?
Car subscription means flexible usership of a vehicle, it combines the benifits of both car rental and vehicle leasing. Car subscriptions promise to offer higher flexibility, lesser risk and commitment, as compared to the traditional vehicle ownership model.
This concept was recently introduced by automotive some OEMs, car rental companies, and startups. Car Subscription is gathering momentum as many customers are gradually shifting from vehicle ownership to car usership, especially with younger generations segment.
As part of Mobility as a Service (MaaS) with a market share of about 3% of the MaaS market, this business model offers a fully digital experience to hire a vehicle without or with less long-term commitments. Car subscription is also known as Car as a Service (CaaS) or Vehicle as a Service (VaaS), however both CaaS or VaaS can have a broader implementations in the near future.
Car Subscription as a Business Model
Looking at the broader spectrum of vehicle-based mobility product portfolio, vehicle subscription is positioned in the middle. It combines the flexibility of on-demand mobility services (Car-sharing/Ride-hailing) and the conveniences of hiring, leasing, or buying a car.
Key factors are shaping this new business model:
- Digitalisation, by providing a complete digital experience.
- Convenience and flexibility, both in terms of contract terms and vehicle choice.
- Environmental awareness, by promoting an easier adoption of electric vehicles, especially for first-time EV owners.
- Increasing consumer attitude towards usership, providing new opportunities even to OEMs to tap into a new market segment.
What is the Market Size of Car Subscription?
The car subscription market has surpassed USD 5 billion in 2022 and is expected to grow at a CAGR of over 35% during 2023 – 2032. The U.S market is expected to experience a noticeable rise in market share during the foreseeable future, largely due to an increasing presence of CaaS/VaaS providers and the impact of technology on the automotive industry. India and China are showing impressive growth due to the increased popularity of affordable transportation options.
In the Middle East, car subscription services are gaining momentum as more startups are introducing this new service into the market, especially in the UAE and Saudi Arabia.
The future growth forecast of over 35% is because of the advantages of subscription service, such as its ease of use, cost-effectiveness, and convenience, compared to leasing or owning a vehicle. According to verified market research, another reason for the automotive subscription expanding at an accelerated rate is due to the increasing digitalization of the industry globally.
Major Companies offering Car Subscription Services
As previously mentioned, Car Subscription services have been introduced by OEMs, car hire companies, and new startups.
Major OEMs currently offering the subscription model:
- Volkswagen via AutoAbo
- Volvo via Care By Volvo
- Mercedes-Benz Mobility via Mercedes-Benz Subscription
- Porsche via Porsche Drive
Major car rental companies offering this service:
- Sixt Rent a Car via Sixt Plus
- Enterprise Rent a Car via Subscribe with Enterprise
- LeasePlan via AboCar
Notable car subscription startups
- FINN – German-based company recently entered the US market
- GO Subscription – US-based company currently operating across 8 cities
- Autonomy – US-based startup offering EV subscriptions
