Younger consumers are drawn to the convenience of subscription services and will want the same model for using cars, Dr Andy Palmer argues.
By Nick David and Dr. Andy Palmer
A quick look at your bank statements will most likely reveal a consistent theme in each month’s transactions: payments to
A generation of consumers, and I’m one of them, have become addicted to subscription services.
Simple and no-strings-attached, subscription services seem to exist for every possible product out there. And now cars are joining the subscription surge.
The auto industry has experienced significant upheaval over the past decade.
Auto executives have dedicated most of their time and attention to adapting the physical and technical make-up of the cars they produce, such as shepherding from internal combustion engines to hybrid or electric in response to a more climate conscious market.
However, changing consumer attitudes are fuelling another major shift for the industry to contend with – and automotive executives are slowly waking up to it.
The industry has long been known for its resistance to change and may find this shift in consumer behaviour difficult to navigate. The good news is that it requires is a marketing shift rather than an operational one, which is easier to manage.
Manufacturers that already cater to a younger audience will naturally find this shift in marketing easier.
In September 2020, Volvo became one of the first brands to launch a direct-to-consumer subscription model. Sixt, the international rental service, also launched a subscription service in the same month.
For a monthly fee, Volvo gives motorists access to a car with everything but fuel included in the package. The simplicity of this appeals to younger generations and urban dwellers who see cars with less emotion and romance than those of an earlier vintage.
For the baby boomers, cars represented post-war prosperity. The VW Beetle became a generational icon in the 1960s and 1970s.
For Generation X who entered their economic zenith during Margaret Thatcher’s era of yuppies and flashy excess, cars symbolized status and wealth Millennials were a trickier sell, but were ultimately attracted to cheaper, smaller and urban-friendly vehicles to suit their lifestyles and budgets.
The lifestyles and budgets of Millennials and Gen Z are no doubt behind the reason why they are by far the heaviest users of subscription services.
To many, the beauty of the car subscription model is that it confers the convenience of car travel provided by ride-hailing apps like Uber or Lyft and ride-sharing ones like ZipCar while still giving customers their own car they don’t have to share that they can get to know and become attached to.
There is also an argument that, as zero emission vehicles become more popular, the subscription model is better suited to electric vehicles.
Over time and after excessive use, electric vehicle batteries become less effective. This means that you’ll progressively get less mileage from a single charge.
Rather than replacing the entire vehicle, which would be highly expensive and inefficient, we may see battery leasing become the modus operandi for motorists in the near future.
While Volvo’s entire car subscription package has created buzz, Renault are leading the way when it comes to battery leasing. When purchasing a Renault Zoe, buyers can choose to lease a battery on a subscription basis rather than owning it outright, reducing the price of a new car by nearly $10,000.
With the Netflix model becoming so popular in other industries, it is only logical that consumers will begin to demand this level of flexibility for more high-ticket items as habits continue to shift.