Car Subscription: What Impact for Electric Vehicles?

Despite a severe blow to the automotive industry from the global pandemic and its impact on mobility, electric vehicle sales have grown strongly worldwide in 2020.

Certain countries have recorded strong growth, with a market share of 5% or more in 2019, even more than 10% of sales for 13 European countries, including France.

Indeed, France shows itself as a good student, with a market share of 11.3% (EV-Volumes).

The Revolutionary Emergence of Car Subscription

The automotive industry is reinventing itself through subscription. The first subscriptions appeared in the automotive landscape in 2018.

Indeed, automotive manufacturers are always searching for solutions to:

• Reach new targets
• Diversify their revenue sources
• Create a more sustainable customer relationship

Since then, about twenty manufacturers have already launched their subscription offers, among them:

Premium Manufacturers	Mainstream Manufacturers
Porsche	Volkswagen
Audi	Nissan
BMW	Renault
Volvo	-

Even if this exploration of a new economic model has not been a clear success for all brands, some like Volvo, make subscription a main vector of innovation, in connection with buyers' attraction to electric vehicles.

Strategic Questions That Transform the Industry

Two major questions emerge from this technological and commercial convergence:

Will subscription revolutionize the electric vehicle market?

Can electric vehicles give new momentum to car subscription?

These questions are not trivial. They reveal a profound transformation of traditional automotive economic models, where ownership gradually gives way to usage.

The digitalization of purchase journeys, coupled with the technical specificities of electric vehicles, creates fertile ground for innovation in mobility services.

Is Subscription Really Suitable for All Vehicles?

Pioneers like Tesla with their direct sales model have challenged the established franchise model of dealerships.

They offer consumers a new alternative to buying or leasing a car.

The Difficult First Steps of Pioneers

Innovation is not only technological and the subscription model, which builds a strong link with the customer, has made traditional manufacturers want to launch into it as well.

Yet, the first car subscription offers were not really a clear success.

The Market Ripple Effect

Regardless, these pioneers paved the way for other brands to explore this new model.

Porsche, Audi, Volvo, BMW, Volkswagen, Nissan, Renault… Gradually, about twenty flagship manufacturers have entered subscription.

Some, like Volvo, excel in the field and demonstrate that the model can be viable with the right strategic approach.

Electric Cars, A New Breath for Car Subscription?

The current champion of the segment, Volvo, has just announced the latest upgrade to both its automotive range and its fully digitalized sales journey.

The brand plans to launch a completely new range of electric cars, the C40 Recharge.

Volvo's Digital Revolution

Unlike all its competitors, Volvo has also announced that its electric vehicles will be sold exclusively online.

Volvo's stated objective is to become a fully electric vehicle brand by 2030.

Does this mean that the era of car dealerships is coming to an end?

Care by Volvo: The User at the Heart of the Model

Volvo Cars intends to launch a new offer that places the user at the heart of its model, called Care by Volvo, its new subscription service.

The manufacturer's ambition is to offer its subscribers:

• Peace of mind
• The possibility of having a vehicle without worrying about the usual constraints related to ownership
• Exemption from maintenance, insurance, and registration concerns

Thus, the brand aims above all to simplify the user journey.

The Only Ones?

Volvo is not the only manufacturer to couple its electric vehicle offer with a subscription offer.

Porsche's Electric Offensive

At the end of March 2021, Porsche included the Taycan in its subscription programs, the German manufacturer's first fully electric sports car.

Taycan Subscription Pricing:

• Taycan 4S: $3,250 per month
• Taycan rear-wheel drive: $2,500 per month

On-demand rental:

• 1 to 3 days: $335 per day
• 4 days or more: $295 per day

Porsche Drive's Targeted Geographic Strategy

Porsche Drive had launched its subscription program in October 2017, regionally, in a few US cities, a very specific market.

Cities covered:

• Atlanta
• San Francisco
• San Jose
• Los Angeles
• Monterrey
• Irvine
• Houston
• Phoenix

Subscribers can choose from seven different models for a monthly subscription or for just one day.

The objective for the brand is to think of the car as a service.

New Entrants in the Electric Car Subscription Market

The demand for electric vehicles coupled with a subscription offer is bringing new players to the market.

Car subscription is no longer the preserve of major brands and is bringing forth tech startups that commercialize software and subscription management platforms.

Technological Innovation Serving Subscription

These companies facilitate the implementation of such services via technology that relies on artificial intelligence.

This technology provides:

• Predictive analytics
• Management of the entire subscription program
• User journey optimization
• Offer personalization

Case Study: Onto, the British Startup

These pure players use electric vehicles to boost their subscription offers.

Onto for example is a British startup that offers an all-in-one subscription service for electric vehicles.

Removing Barriers to Electric Vehicle Adoption

Indeed, the model explored by Onto is ideal for potential electric car buyers, but hesitant about the maintenance constraints of this type of vehicle.

Electrification and sophistication can be a serious obstacle to buying an electric car.

A platform like Onto's offer therefore aims to:

• Break down these perceived barriers to acquisition
• Propose a viable alternative
• Allow using an electric car in a simple and accessible way

What Are the Ingredients for Successful Car Subscription?

After four years of experimentation by automotive manufacturers, are there ingredients that condition the success of a car subscription?

Indeed, some trends seem to emerge for this model to be successful:

The 4 Pillars of Success

• Target a very specific customer segment, which prioritizes vehicle usage over purchase and doesn't want to worry about classic constraints related to ownership.

• Target a specific, even regional market: consumer habits vary from a large American metropolis to a medium-sized European city. Porsche for example took the bet of testing a single American city before extending its offer.

• Think of the car as a service where everything is included, like usage, maintenance, insurance, registration to meet specific needs not satisfied by a classic purchase.

• Digitalize and simplify the user journey, by removing barriers to subscription at each step.

The Winning Equation: Electric + Subscription

Will subscription be the secret sauce that makes electric vehicles more accessible to consumers?

Conversely, will electric cars boost the car subscription market even more?

It seems that both can help each other in a virtuous dynamic of automotive sector transformation.