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[NEWS] Why manufacturers have pulled back on subscriptions

Why manufacturers have pulled back on subscriptions

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OEMs have curbed enthusiasm for rolling flexible contracts, though some specialists are making them work

Manufacturers are backing off from subscription – short-term flexible contracts, offering customers the ability to switch or hand back vehicles with little notice.

Often colloquially referred to as ‘Netflix for cars’, the format was popularised at the beginning of the decade and has been championed by some providers as a revolutionary way of accessing vehicles.  

Autocar contacted seven OEMs advertising subscription products and asked about the format’s progress. Four did not respond, one could not provide an answer, and a source at another told us it had stopped offering cars via subscription. 

Volvo, which did respond, was previously one of the format’s most vocal advocates and, during a press video call in February 2023, CEO Jim Rowan said subscription was “here to stay”, after a 49% year-on-year uptick in 2022.

However, a spokesperson told us via email that its switch to the agency sales model from June this year meant that “subscription doesn’t have the same focus it once did for us, as we now sell direct regardless of finance method. Whereas in the first part of the year, subscription was our only direct channel”. 

We also asked the Association of Fleet Professionals if any of its members were sourcing vehicles via subscription. It said it was not aware of any who were.


Cazoo and the reality of costs 

Subscription was tipped to be the next big thing in motor finance, and many predicted it would be supercharged by online used car retailer Cazoo, which bought a series of European subscription companies, including UK-based Drover in December 2020 for £65.4 million, which it rebranded under its own name.

After listing on the New York Stock Exchange for an astonishing £6.5 billion in August 2021, those predictions were not to be, and the firm closed its subscription arm in June 2022.  

A common argument against subscription is its comparatively high cost compared with conventional leasing, so we examined the difference. In October, we found a Nissan Qashqai Acenta Premium advertised on subscription specialist Wagonex on a 12-month/10,000-mile contract, including maintenance, for £558.33 per month excluding VAT. 

The same car on a 36-month contract at the same mileage and with maintenance was £553.65 from leasing giant Lex Autolease – £4.68 per month less. When we dropped the Lex quote to 24 months, it rose to £675.65 – £117.32 more per month than Wagonex’s 12-month offering. 

Lex’s longer contracts of 48 and 60 months cost £502.98 and £468.12 – respectively £56 and £90.21 per month less than Wagonex’s 12-month contract. 

As with any form of funding, prices can vary dramatically between providers, and it is worth noting that that Lex’s online quote tool is designed for fleets with up to 20 vehicles, so bigger organisations will almost certainly pay less per car, while Wagonex’s does not appear to distinguish its offering between fleets and consumers. 

Leasing firms have also told us that fleets, at least, often want longer contracts. Ben Edwards, a consultant at Arval, said: “Fleet leasing is generally moving up to 48 months. We went through a stage where everything was coming back into a three-year lease to try and get that [electric] technology into the fleet and reduce CO2, but fleets are now seeing that they can extend that back up to four years for cars, because the technology is here. The cars are not going to get much greener than they are now, especially with electric, [and] fleets are reducing their mileages.” 

Subscribe and thrive 

Mycardirect makes subscription look more promising. It was launched in 2020 by Duncan Chumley, formerly chief commercial officer of Daimler Fleet Management and MD of Free2Move Lease. Along with contract hire and rental offerings, it supplies both new and used cars on subscription, has reported consistent yearly growth, and now has a fleet of more than 3000 vehicles. Chumley says subscription counts for more than 30% of those and climbing and he is candid about its nascency. 

“I think it’s still quite an unknown. I’d love to think that everyone knows who Mycardirect is, and I’d love to think that everyone knows what car subscription is [but] in reality, it’s still a very new product.”

Jaguar dealership

He says business customers often use it to dip a toe in the water with EVs: “We are finding companies trying out different electric cars – what works for them, and what doesn’t… They try maybe a BMW iX against the Tesla Model Y, against the Mercedes EQC.”

Top-end business customers also use subscription to determine whether they want to stick with electric or go another route. “With some of the smaller businesses, where the cars are run by the very senior directors, we are seeing people opt back out [of electric],” says Chumley. “Where money is less of an objective… they might try a [Porsche] Taycan, then think: ‘That range of 220 miles – I just can’t live with that. I want a Porsche, so please can you put me in a 911 on lease’.

“Saying that, what we are finding is that a lot of them are actually opting back in to [plug-in] hybrid. When they haven’t found electric’s been working, we’ve had quite a few orders for Range Rover P550es, for Mercedes GLE plug-ins, and BMW X5 45es. They still want that benefit but, because of the nature of what they do every day, they also want that range, so I’ve increased the volume of plug-in hybrids on the fleet.”  

Insurance: the sticking point  

Insurance is often cited as problematic for subscription because providers often do not include it. Its absence reduces subscription’s purported appeal as an easy, all-in-one bundle product, particularly for individuals without company policies, and the manufacturer that told us it had ceased offering subscription said insurance was one of the main challenges. 

Chumley, who is keen to stress that Mycardirect includes insurance with its retail contracts, explains: “The insurance industry is catching up with vehicle subscription fast, with a number of companies specialising in that area. It is worth noting all our contracts to retail customers are regulated hire agreements, which not all subscription companies offer.

"They are not 28-day rolling daily rental agreements, which, from my understanding, insurance companies do not like.”

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