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April 26, 2021 | Authored by: Jesus Luzardo

Are auto subscriptions the next consumer luxury?

It’s a beautiful sunny day. You step out into the driveway where your gleaming Porsche Taycan 4S awaits. All you need to do is head out on the open road.

That’s some fantasy.

Actually, no. The concept of the auto subscription, also known as “car-as-a-service,” is slowly creeping into the market. And this leads to a fascinating question: Are car subscriptions the next luxury?

How subscriptions are changing

Let’s take a quick glance at the history of subscriptions. The classic subscription in most households, even as far back as 50 years ago, was of course utilities services and print newspapers and magazines. In the digital era, media continues to be a flag bearer of the subscription model, albeit with a significant difference. Today, legacy media companies often struggle to acquire and retain subscribers, when so much similar content is available online for free. Based on a research performed by Matther Economics, digital publishers experience 50% subscription cancellations after just 4 months. At the same time, personalized and niche media subscription platforms, like Netflix, Spotify, and Disney+, are gaining solid ground.

Despite this metamorphosis, the basic activity of media consumption via a subscription-based relationship model remains the same. At the end of the day, it’s not that difficult to trace the shift from the daily delivery of a print newspaper to an online news subscription.

But cars? That’s another story altogether.

Subscriptions can go further than you think

The idea of subscribing to car usage or ownership is taking the subscription concept to places it has not been before.

Let’s return to the Porsche. The German auto brand recently introduced its electric Taycan sports car to its Porsche Drive subscription service. Instead of forking out over $100,000 to buy the car, customers can subscribe to drive the model whenever they want, for a monthly fee starting at $2,500. Consumers can access the “dream” of driving a Porsche, without the (hefty) fixed cost of luxury car ownership. The subscription offers plans for daily rentals, multi-day rentals, or monthly use. Fees are higher than leasing but come with the option to cancel the subscription at any time, as well as having access to other Porsche models offered as part of the subscription.

In short, auto subscription compels consumers to rethink the idea of how they access and pay for the latest car models. And it comes at a time when car ownership patterns and aspirations are changing. The past decade has seen a rise in urban living, the proliferation of ride-sharing services like Uber, and a generational shift from car ownership as a sign of having “arrived” financially to a preference among millennials for convenient, on-demand auto services.

From “traditional” consumption to subscriptions

Subscription services have proliferated way beyond media to include all kinds of consumer goods, from meal kits to clothing and even jewelry, as shown in a research released by the Subscription Trade Association (SUBTA) that found that the eCommerce subscription market experienced annual growth of 17.33% in the last five years. It predicts three-quarters of DTC brands will offer subscriptions by 2023, while global eCommerce subscriptions will account for 18% of the total market share. But what happens when subscriptions meet big-ticket consumer items? As published by Pymnts.com, the car subscription market is set to grow by 71% by 2022, but what will it take to convince customers to subscribe to cars, or flights, or hotel vacations? Does it make sense to consumers to subscribe to a...Porsche?

This is the emerging issue for the auto industry: Is subscription the next luxury for car enthusiasts? The ability to continually experience the latest, best models and features at a fraction of the ownership cost and with the flexibility and user-friendliness of the subscription model?

When subscriptions meet luxury

Take the time to dig a little deeper and it actually becomes clear that the subscription concept has all the DNA of luxury. In fact, it might even be the ideal fit for the luxury car industry.

Subscriptions provide access to products and services in a frictionless way, and always in ON mode. Like the best concierge or butler, a subscription is there to provide what you want, when you want.

Subscriptions are personalized and adapted to the needs of individual customers, also a hallmark of luxury and prestige. A car subscription tailored to the customer’s individual preferences enriches their life with the utmost simplicity and even affordability. People who would never have considered purchasing a luxury car finally have those experiences within reach.

From the perspective of automakers, subscriptions are the ultimate way to keep people connected to their brand – and this is critical in a world where there is so much overwhelming consumer choice. Subscriptions help companies deliver an amazing, simple, connected experience for customers, holding their attention so they won’t be tempted to look at the other options out there.

Taking the long road

No matter how prestigious or “big-ticket” the offering, the success of every subscription is based on the same foundation: building long-term relationships with customers that connect them to the brands, products, and services they love. At the end of the day, it doesn’t matter whether it’s cars, clothes, or cosmetics. Keeping customers on board for the long road is what subscriptions are all about.

About Author

Jesus Luzardo

Jesus Luzardo

Jesus Luzardo is Vice President, Head of Growth at Vindicia. As an international technology industry veteran, Jesus brings over 30 years of experience in commercial, marketing, strategy, operations and technology roles. Prior to Vindicia, Jesus was Head of Marketing for Amdocs in the Caribbean and Latin America region, driving marketing to significantly expand Amdocs’ sales pipeline. Before Amdocs, he was Head of Sales for Utiba (acquired by Amdocs in 2014), focusing on mobile financial services. His experience includes two years as Head of Corporate/B2B and CCO at Cable & Wireless, and 15 years with Motorola. He lives by Vince Lombardi’s motto: “Perfection is not attainable, but if we chase perfection we can catch excellence.” Jesus holds an MBA from Universidad del Zulia (Venezuela), a B.S. in Electronic Engineering from Universidad Rafael Urdaneta (Venezuela), and Advanced Management certifications from Kellogg Institute of Management and IESE (Universidad de Navarra, Spain).