Vehicle Subscription Market Trends

Growth Drivers  

• Affordable alternative amid rising interest rates and car prices: Vehicle subscription services have emerged as a cost-effective alternative solution to soaring interest rates and car prices. Reuters reported in April 2024, that insurance costs are soaring in the US which is restraining new car purchases. Since traditional car ownerships require large-scale upfront payment or long-term financing, vehicle subscription services have emerged as an affordable alternative solution driving the vehicle subscription market growth. Additionally, users can drive a vehicle in its peak years as key market players are regularly updating their inventory to match customer demands. Leading market players are releasing new affordable subscription plans such as, in February 2023, Hyundai announced its Evolve electric vehicle subscription plan.
• Shorter wait times and lucrative subscription packages: Traditional car buying and leasing practices can be time-consuming with a considerable amount of paperwork. Waiting time for new vehicle purchases can go up to 3 to 6 months, and 1 to 2 years for certain brands. The subscription package successfully solves this pain point by eliminating the wait time and lengthy paperwork process. Streamlined services ensure that customers can book a vehicle in 5 minutes and set up a single-day delivery. Additionally, vehicle subscription packages provide all-inclusive services such as insurance, maintenance, registration, delivery, and on-road support, and does not ask for long-term commitments. The convenience of use is a significant cause for the vehicle subscription market growth.

Challenges  

• Limited consumer awareness: Despite the increase in subscriptions, the consumer awareness on subscription models for vehicles can be low which can prove to be an impediment to vehicle subscription market growth. The lack of awareness can especially be challenging in emerging markets where consumer preference for traditional car ownership is ingrained. Market players must navigate the challenge of education potential consumers on the benefits of subscription models.
• High costs in managing large fleets: Operational challenges such as high costs can be a detriment to vehicle subscription market growth. Building and maintaining a large deployable fleet can increase operational costs. Additional costs such as registration with local authorities, installation of latest technologies such as GPS tracking, proprietary software, etc., add to the high operational costs.