EV Acceptance Could Signal ‘Vehicle Subscriptions 2.0’

When “subscription” became a buzzword and a practice in the car business a few years ago, it was focused on new vehicles by manufacturers who thought well-heeled consumers would warm up, in volume, to paying a bit extra for what amounted to a “turnkey” monthly lease for the ability to switch vehicles at will.

The model promulgated by many was, “Have an SUV in the winter and a convertible in the summer.”

While there might have been a sliver of business here and there, consumers, even affluent ones, did not take to these programs. The cost seemed to far outweigh the benefits, as the convenience of being able to swap vehicles was less important than the inconvenience of switching when the costs were added in.

Programs more similar to conventional single-vehicle leases, with an “out clause,” such as that introduced by Volvo, did better, as did single-vehicle used-car subscriptions. But again, from what I can see volumes were not overwhelming.

EVs Change Everything

A new area for vehicle subscriptions may show great promise, however – those focused on exclusively electric-vehicle subscriptions.

By all accounts, the future of motor vehicles is electric, although the public, at least in the U.S., seems hesitant about mass adoption. And it isn’t simply because some dealers lack focus on the sale, despite what Tesla and the go-direct-without-dealers folks would have you believe.

First, although the new generation of EVs comes with substantially more range than most drivers need for a daily commute, range anxiety exists and in many areas the charging infrastructure is not as large or convenient as it assuredly will be.

Add to that people’s natural hesitancy toward adopting a new propulsion system after 100 years of internal-combustion engines, and what amounts to a lifestyle change. Finally, there is the anticipated rapid cycle improvement of EVs, almost akin to that of cell phones, so who would really want to own (or even long-term lease) one?

For smooth volume adoption a turnkey, noncommittal subscription may be just the financial/process mechanism to make an EV transition work.

It’s Over There and Coming Here

I’m not the only one who seems to think so. On.to, a relatively new EV subscription service in the U.K., just raised a $175 million series B venture round, and Finn.Auto, another relative newcomer to the business, raised a $24.2 million Series A round for outward expansion from their German home market.

Of note, Spanish subscription service Bipi was recently acquired by Groupe Renault for its operations in Spain and France (with Italy on the way) and its 10,000-plus subscriber base.

The U.S. market has had only a few players so far, including enterprising start-up Flux San Francisco. This is probably just because the price of fuel is higher, the geography more inviting and, most importantly, the charging infrastructure is more advanced in Europe than in the U.S.

I also note the recent introduction of Ferry Automotive, which looks to take this new EV subscription market by storm in the U.S. Its website carries a mission statement no less ambitious than “…to get 50% of U.S. Drivers in Emissions-Free Vehicles by 2035 Through a Revolutionary New Model of Car Ownership.” 

Possumato (2).jpgFounded by some highly regarded folks in the car business in Europe, and with successful European models already in motion, there may be something there.

When the introduction of vehicle subscriptions was becoming an industry buzzword/fad, the analogy usually was to things such as cell phone subscriptions, but this comparison never really seemed to apply. Cars were different, we already had rental and leasing for them and, given that the average car on the road is about 12 years old, significant product cycle upgrade was at a much slower pace.

Now that EVs in mass quantities will soon be available and incentives to drive one are in the cards, and with the product cycle upgrade for batteries now as fast as it is, the comparison seems to fit a whole lot better.

It has been a long time since I owned (or even conventionally leased) a cell phone.

John F. Possumato (pictured above, left) is an attorney and founder and CEO of DriveItAway, which creates platforms and applications enabling automotive retailers to offer new app-enabled mobility options, including remote rental and rent-to-purchase.

 

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