Sure, we are still largely live in the “POWER OF FREE” economy world especially online. We trade our data exchanging for the use of services from Google, Youtube, Facebook, Twitter, Instagram, … etc. However, there is another (or has been another) business model slowing but steadily canopying the world – “(Freemium) Subscription”. It’s not only popular on the intangible services like using Google or Facebook but it’s the foundation of modern physical goods or delivery services businesses (e.g., snacks subscription boxes, monthly outfits subscription… etc). If you think that the train has been slowing down a bit since whatever we can imagine has been putting into place already, you are WRONG.
It’s not leasing a car, it’s not owning a car, it’s not even renting a car… it’s just like Netflix type of subscription services that you can subscription through a few car manufacturers and you will be able to pick and choose which car you would like to drive that month (models varies). Still scratching your head since it’s so foreign that it’s kind of hard to stick to the brain? We will walk you through what’s happening in this new car subscription category.
Just Like Netflix But Different in What You Get (Physically vs. Virtually)
As we all know that when we sign up for the Netflix which is a subscription based films/shows streaming service, we can get whatever films/shows they offer anytime that month until we cancel it. That’s right… we can cancel it anytime. The vehicle subscription is similar just what is being delivered is different. You pay a monthly subscription fee to access several vehicle models from a car company.
The monthly subscription fee covers insurance, maintenance, and roadside assistance.
How Does That Actually Work?
Let’s use Cadillac as an example since its sort of the pioneer in this category.
It’s only available in New York City as of today. The service will soon be expanded to Dallas and Los Angeles areas.
1) STEP ONE: JOIN
Apply to become a member – there is a $500 enrollment fee. Plus $1,800 per month for the service.
2) STEP TWO: EXPLORE
Select the Cadillac that is right for you.
3) STEP THREE: ENJOY
Receive your on-demand vehicle at your home.
4) STEP FOUR: REPEAT
Exchange your vehicle up to 18 times a year.
As you can see from the steps laid up above that you will be paying $1,800 USD per month for the service alone. However, you will be able to swap your car for variety of models Cadillac “Book” program provides for 18 times an year which is really more than enough for you to be willing to do that.
You might think that if you already are paying $1,800 USD per month, you shouldn’t be worrying about other charges for any reasons, right? However, you still will need to pay for the insurance deductible ($1,000) if that occurs. Also, there is a fine ($150) for not returning the car in a clean and neat condition.
If you are interested in this vehicle subscription economy, you can get into details through one of cnet’s article here.
Who are the Target Customers of the Car Subscription Economy?
To be honest with you, even though those car manufacturers claim that there is a potential demand for this, we don’t give in for now. They mentioned their target customers are wealthy young professionals who prefer not to add a line on their asset book for a car. Sounds reasonable, doesn’t it? However, if that’s the case, there are several ways of doing that. Also, if that segment really exists (big enough pie is what we are talking about here), there are so many alternatives which are really much better candidates to serve that segment. For instance, if you are in that (wealthy) category and don’t want to have any vehicles on your name also happen not like to drive, there are limousine companies can offer you a better service. If you just wanna go to a place fast whenever you want, there are Uber and Lyft everywhere. Or if you just want to have a car to drive (because you like to drive) whenever you feel like it but do not want to own/lease it, you can do better to find a car rental company (national chain rental or just a fancy local car rental that only provide expensive models) to meet your need.
Really that if you are wealthy enough, it’s unlikely that you would like to go through the process to swap cars every once in a while. First, your time is more valuable on doing what you do to make you be in such a wealthy status/level. Second, you are able to own almost any car those companies provide. Want to try a new car? There are just too many alternatives to do that. However, if you really value convenience and really like to try all of those new cars from so many different brands, the vehicle subscription plan is what you should get if you can afford it. Why? Because… first, you can try all the models from different car manufacturers. Second, you can just browse through the app and the vehicle will be brought to you. Third, the insurance, maintenance, and other car related stuff are all being taken care of. Think of that if you buy or lease 5 different vehicles a year, how much hassle you need to go through in order to get all cars insured?
It’s just like all the innovations which are not that widespread first but when the pricing gets more competitive the demand will be seen.
Even it’s still in the early stage of the car subscription economy, the potential already can be seen here. We argued that there are better alternatives above; however, it’s just like all the innovations which are not that widespread first but when the pricing gets more competitive the demand will be seen. So, if we talk about around $2,000 USD subscription fee a month, there aren’t many people will even give it a peek. However, if we are talking about less than $400 per month then … it gets interesting. You think that it’s impossible? Take a look at “Canvas” and “Flexdrive”. The difference here from the above discussions is that “Canvas” and “Flexdrive” don’t offer brand new cars for you to subscript and swap.