What’s Missing in Vehicle Subscription Services?

January 1, 2019

As we all know, the auto industry is undergoing many business shifts. The hardware (the vehicles) will always matter but they are becoming less diverse and in time, there will be fewer of them produced for consumers, fewer models to choose from and in general, the total number of vehicles per consumer household will go down. Connectivity, software and services are accelerating the evolution of auto companies into mobility companies. Ride-hailing has proven to be very popular and has had a direct effect on consumer vehicle purchase. However, those businesses are not yet profitable. Some analysts feel that in a few decades, it may be rare to own a vehicle.

Many traditional business practices and models of the past are being challenged. Connectivity and software progressions cause digital revolutions across the entire ecosystems of verticals / industries. As a result, consumer behavior is also changing. I personally became aware of the Subscription Economy when Wayne Huizenga adopted a strategy of renting trash cans, sports’ event seating and VHS tapes. Now due to digital technologies, subscriptions have created fast growing online marketplaces.  The largest services still relate to real, tangible products and cover categories like product replenishment, apparel curation and media access. So of course, you should be able to subscribe to vehicle access. Right?

I subscribe to my cable, my phone provider, a few online newsletters, Amazon Prime and a gym. I used to purchase software applications and now I subscribe to them. I am also presented a new subscription to join at least once a week. Realistically, I could probably go through my day and ask “is it better to buy or subscribe to my soap, to my cologne, to my coffee, to my meals, to my appliances, etc.?” In the case of the big-ticket vehicle subscription service, I can “do the math” of the cumulative cost of ownership, parking, maintenance, insurance and more, but it is more or less a wash. In the near term, it might come down to the value of convenience. One bill instead of many and having someone on-hand to serve my mobility needs. I suspect that this has more value to those with discretionary spending <grin>.

Today, there are more than 50 different vehicle subscription services available to our planet’s drivers. Companies are experimenting with new models of vehicle access, maintenance, insurance and more. Pilot service businesses are being launched, maintained and shut down. Variables are being tweaked, data is being collected and businesses are learning about their subscription customers – like their financial inclinations, conditions of subscription consideration, triggers of “flipping” vehicles, miles traveled, degree of vehicle care and much more.

The good news is that some of the largest industrialized companies in the world are now building internal mechanisms to support and foster experimentation. They are embracing progressive learning, problem solving, iteration and uncertain investments. They have also realized the need for different skills and mindsets across the company. Global automotive companies also realize that they have to generate new sources of service-based revenue or they will suffer. It is likely, just as other corporations have done in the past, that some of these companies will vastly evolve the structure of their business. Perhaps splitting the core from the services.

Vehicle Subscription Service Variables

In this vehicle subscription marketplace, numerous new business models are being “mashed-up” including what it takes to maintain a fleet of vehicles, vehicle access and financing, new types of customer service and more. The significant degree of infrastructure, terms and cultural difference between these services are staggering - and no doubt confusing to many consumers. Some of the variables that I have observed include:

The one-time enrollment fees

The types of vehicles available

Mileage limits

Limit to the # of vehicle swaps or “flips” per month or per 6-months or per year

The length of contract terms

The max mileage limits per vehicle

Price tiering based on duration of commitment

Availability of Maintenance, Insurance, Roadside Assistance

Optional insurance and the need to provide proof of insurance

Some services based on new vehicle models (say < 1-year old) and others that are based on 2-3 years old models and surplus

Some companies own the fleet of vehicles, some use dealership inventory and some rent or subscribe directly from consumers

Added services – like pick-up and delivery

The varied roles of the dealers

So Far, So Difficult

These vehicle subscription companies (and their parents) have not yet figured it out. Some have been born out of an acquisition and some have been home grown. The current models may prove to be too expensive for consumers to commit (even for those with discretionary spending) and to service providers to maintain the vehicles, clean them, deliver them and keep a fleet available and on-call. The most public suspension of service has come from GM when it publicly wound-down its Book subscription service (in NYC, LA and Dallas). It may come back, but in the meantime, Maven and Cruise push on.

I anticipate that if these remain the scope of industry variables, then none of these vehicle subscription services will be the next great mobility business. Two elements seem to be missing from all of these subscription models - 1) any truly unique and surprising curation and 2) any meaningful depth of experience. Consumers need to get more value out of the relationship with the journey, the destination and their overall relationship with the company.

Two elements seem to be missing from all of these subscription models - 1) any truly unique and surprising curation and 2) any meaningful depth of experience. Consumers need to get more value out of the journey, the destination and their overall relationship with the company.

Access and replenishment are satisfied, but any significant curation is noticeably absent. Even with these short-term (say 1-year), high dollar subscriptions, these vehicle subscription companies need to capture consumer value and continuously increase the depth of engagement. Just offering an alternative financial structure (which is not obviously cheaper to consumers) may fall short.

Some Possible Next Evolution

These subscription pilots will yield learnings and hopefully, they will inform the next round of service structure experiments. However, there is a need to broaden the model, stay aggressive and embrace the risk.

Some of these paths may include the evolution of new trusted partners and advisors that help you maximize the value experience of your mobility journeys. Another path may involve the development of new horizontal operating systems or “digital engines / plug-in and APIs” that can be used by various service providers to connect the ecosystem and feel connected and fluid to consumers.

And yet another path of exploration may be about the evolution of the physical hardware. Imagine an owned or shared vehicle that serves as a modular platform. Could you ever imagine buying a “vehicle as platform” that can easily transform or evolve from one type of vehicle to another? With the aid of plug-in experience modules, use it for hauling kids on Monday, delivering packages on Tuesday, as a pop-up breakfast vendor downtown on Wednesday and Thursday and as a mobile office on Friday.

I am hoping the vehicle subscription marketplace will implode, consolidate, react, reshape and re-tool in the coming year. During that time, we will revisit the viability of and go deeper into some of these other possible mobility models. Interesting changes and curious experiments are certain. Stay tuned.

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Emotional Product, Service, System - Design Consulting & Collaboration