Market Snapshot
In 2022, the global car subscription market, valued at USD 5 billion, started showing signs of a significant leap forward. As the forecasts predict, it is poised to grow over 35% during the period 2023-2030.
Revolutionizing the traditional concept of car ownership, car subscription has emerged as the next generation of car-as-a-service offerings. As explored in our comprehensive guide, “What is a Car Subscription? The Ultimate Beginner’s Guide“, a car subscription operates on a recurring fee model, primarily covering costs like insurance and maintenance. These subscriptions can range anywhere from a month to two years, offering flexibility and convenience to its users.
Bridging the gap between car rental and car leasing, car subscription holds several advantages over both. It allows for regular vehicle swaps and covers additional vehicle expenses such as insurance and maintenance, making it a hassle-free solution for customers. Both Original Equipment Manufacturers (OEM) and captives play crucial roles in this rapidly expanding market. Simultaneously, independent service providers are enhancing their competitive edge through strategic collaborations and innovative product development.
Urban commuters are progressively favoring car subscription over traditional leasing services. Its inherent benefits, including flexibility, affordability, and simplicity, coupled with its provision for frequent vehicle changes, make it an attractive proposition. These advantages, as we’ve detailed in “Car Subscription Vs. Car Leasing: See How They Compare“, are anticipated to drive the global market expansion.
Despite the promising trajectory, certain challenges do exist. The well-established car leasing, rental, and sharing sectors are dominant, and their cost-effective leasing models sometimes overshadow subscription schemes. However, the car subscription market is ripe for growth, with several factors contributing to this potential upswing. These include the formation of strategic alliances with automakers, the development of robust digital platforms for efficient service operations, and dealer network expansion to reach more customers and provide services more effectively.
Market Dynamics
Driving Forces of the Market
Embracing the Flexibility, Affordability, and Versatility of Car Subscriptions
A car subscription functions as a limited-period agreement that provides ownership benefits without the burdens of maintenance or insurance. In essence, it offers consumers the liberty to swap cars according to their changing needs and preferences. This concept has emerged as a compelling alternative to traditional car rentals and leasing solutions, offering numerous advantages that resonate with modern consumer needs. More importantly, car subscriptions enable subscribers to choose their desired models and define their contract duration, which can be as short as one month or as long as two years. This flexibility has particularly appealed to millennials, presenting a cost-effective solution for short-term car usage. With this shift in consumer preference, the car subscription model’s advantages over car leasing and rental services are anticipated to fuel its demand.
Bolstering Market Growth: The Advantages of Subscription Over Leasing
While long-term car leasing might seem less costly compared to subscription services, there are distinct benefits that tilt the scale towards car subscriptions. Unlike car leasing, subscriptions allow multiple vehicle swaps within the contract terms, offering a level of flexibility unheard of in traditional leasing contracts. Furthermore, leasing usually entails various additional costs such as maintenance, repairs, insurance, and taxes. In contrast, these costs are integrated into the subscription service, handled entirely by the provider. This unique combination of flexibility and cost-effectiveness has the potential to propel the demand for car subscription services.
Market Constraints
The Leasing Model: A More Cost-efficient Scheme?
While car subscriptions provide flexibility and shorter-term agreements, they are often perceived as more expensive compared to leasing or long-term vehicle ownership. Monthly payments and mileage restrictions can lead to additional charges if exceeded. However, Steer EV, a car subscription company, stands out with its unlimited mileage feature, offering a unique advantage over other car subscription providers. With Steer EV, customers can enjoy the freedom of driving without worrying about mileage limits, making it a more cost-saving option. Although car subscriptions in general may face cost-related constraints on their market growth, Steer EV’s unlimited mileage feature and cost-effectiveness set them apart from other car subscription companies.
Unlocking Market Opportunities
Strategic Partnerships with Automakers to Spur Growth
Consumers opting for car subscriptions prefer reliable service providers and approved vehicles. To cater to this demand, automobile manufacturers have started launching their own car subscription services. Simultaneously, they’re establishing partnerships to reach untapped markets, underlining a shift in consumer attitudes towards car subscriptions. These strategic alliances are key for market participants aiming to secure long-term opportunities and a competitive edge in the global market. For instance, Hyundai Motor India entered into a partnership with Revv to offer a car subscription model in six Indian cities back in 2019. As such, these collaborations offer a new path for the growth of the car subscription market.
Segment Analysis
A comprehensive understanding of the global car subscription market involves an examination based on service providers, vehicle types, end-use, subscription periods, and regional influence.
Service Providers: OEMs & Captives versus Independent/Third-Party Providers
The market segmentation based on service providers includes OEMs & captives and independent/third-party service providers. Independent providers are projected to command a market CAGR of 24.7% during the forecast period, primarily due to their more localized services and partnerships with OEMs. Most independent providers offer a variety of options to their end-users, often collaborating with multiple companies to broaden the possibilities. With changing consumer sentiment and domestic market trends, independent providers are expected to see lucrative business opportunities, further bolstered by strategic alliances with vehicle manufacturers.
Vehicle Type: IC-Powered Vehicles and Electric Vehicles
The global market is divided into IC-powered vehicles and electric vehicles. Despite a recent decline in automotive sales and production, IC-powered vehicles continue to dominate the global market. However, the landscape is shifting, with shared mobility and increasing penetration of electric vehicles prompting an optimistic outlook for the car subscription market. The adoption of car subscriptions for electric vehicles is growing rapidly, spurred by a surge in electric vehicle sales and their operational efficiency over IC-powered vehicles.
End-Use: Private and Corporate
The global market is further segmented into private and corporate end-use. The corporate segment caters to business activities, offering efficient mobility solutions for shorter terms, typically less than two years. Many corporations are opting for subscription services to minimize risk and capital expenditures. Meanwhile, the private segment is expected to see a faster growth rate of 30.4% by 2030, driven by changing consumer attitudes and the preference for periodic vehicle upgrades.
Subscription Period: 1 to 6 Months, 6 to 12 Months, and Over 12 Months
Lastly, the market is segmented by the subscription period, including 1 to 6 months, 6 to 12 months, and more than 12 months. The 6 to 12-month subscription period is expected to witness significant growth, with attractive deals from market players and consumers’ preference for this time range. The flexibility to swap vehicle models throughout the subscription period, along with a consumer trend towards cost-effective alternatives to outright vehicle ownership, will likely drive growth in the 6 to 12 months category.
Market Breakdown
The worldwide car subscription market is divided according to service provider, vehicle type, end-use, subscription duration, and geographic region.
Regarding Service Providers
Service providers in the market are categorized into OEMs & captives and independent/third-party service providers. The independent/third-party service providers are poised to lead the market with an impressive CAGR of 24.7% during the projected period. These providers chiefly offer their services within domestic markets, often on a smaller scale compared to OEMs and captives. They operate autonomously or form alliances with OEMs to manage fleets and offer customer service. They tend to provide a range of options to end-users, collaborating with numerous companies to widen customer choice. As consumer attitudes and business perspectives shift toward car subscriptions, these providers are anticipated to benefit, thereby fueling their growth. Many independent/third-party service providers are building strategic collaborations with vehicle manufacturers to secure their long-term business prospects.
Vehicle Type Classification
The vehicle type segmentation of the market includes IC-powered vehicles and electric vehicles. Vehicles powered by internal combustion (IC) engines have traditionally dominated the global production and sales. Despite a recent decline in automotive sales and production, a resurgence is expected due to increasing electric vehicle penetration, rising disposable income, and evolving perceptions in the transportation & logistics industry. The changing industrial environment and the growing trend towards shared mobility are set to boost the car subscription market.
The rise of car subscription for electric vehicles is noted due to the growing integration of electric vehicles into total automotive sales and their operational superiority over IC engine-powered vehicles. As government regulations tighten around vehicle emissions and the demand for fuel-efficient, high-performance, low-emission vehicles grows, the market for electric vehicles is expected to flourish. Due to the high cost of electric vehicles compared to IC engine-powered vehicles, car subscriptions are becoming a cost-effective alternative for potential buyers. As a result, the demand for electric vehicles is projected to rise, thereby enhancing the car subscription market.
End-Use Segmentation
The market, based on end-use, is segmented into private and corporate uses. The corporate segment provides car subscription services exclusively for business activities such as daily commuting, business trips, and marketing-related company events. These services are designed to provide efficient mobility solutions for a shorter duration, typically less than two years. Many businesses are turning to subscription services to reduce risks and capital expenditures, and specific car subscription services are being offered to cater to this corporate demand.
The private end-use segment is projected to grow at a fast pace, with a CAGR of 30.4% by 2030. This segment includes car subscription services tailored for personal use, such as leisure, commuting, and travel. In line with the trend moving away from direct car purchases to leasing or subscription, consumers are showing a preference for replacing their vehicle every two years. With the rise of leisure activities and waning consumer confidence in car buying, consumers are predicted to lean towards car subscriptions. The changing consumer perspective will likely drive demand for this private segment during the forecast period.
Subscription Period Classification
The market, based on the subscription period, includes 1 to 6 months, 6 to 12 months, and more than 12 months. The 6 to 12-month subscription period is expected to see healthy growth during the forecast period, with the global market maintaining its substantial share. In recent years, the average car subscription duration has been approximately 12 months, with most market players offering enticing deals within this timeframe. The ability to switch car models during the subscription period is another attractive factor contributing to market growth. As consumers gravitate towards more flexible mobility options and cost-effective alternatives to outright vehicle ownership, the 6 to 12 months category is predicted to see significant market growth.
Geographic Breakdown
The geographic categorization of the global car subscription market encompasses North America, Europe, Asia-Pacific, and LAMEA regions.
Will North America and Europe Lead the Global Car Subscription Market?
The North American market is largely influenced by the increasing demand for smart mobility and environmental consciousness among consumers. It is predicted that investments in rapidly developing urban regions, transportation fleet management innovations, and a shift towards shared mobility will create enticing opportunities for the car subscription market. The regional growth can be ascribed to the rising demand for efficient urban mobility solutions, technological advancements, and vehicle and driver safety considerations. Top market players are employing diverse strategies to strengthen their market presence, with ongoing product development to meet the evolving needs of the end-user and secure a competitive advantage.
Europe is expected to dominate the global market, primarily due to the increasing adoption of car subscription services and the positive outlook for shared mobility. Europe’s car subscription market is predicted to hold the largest share and witness significant growth over the forecast period. The car subscription market in this region bridges the gap between emerging on-demand ride services and conventional contracts or long-term leases. Furthermore, market players in the European car subscription sector are developing advanced digital service platforms to maximize long-term business potential. Europe, already being a well-established market for car subscriptions, holds the largest market share globally. To seize business opportunities in Europe, several companies are entering the market either directly or in partnership with local firms.
The Asia-Pacific region is expected to register the highest CAGR during the projected period. The growth of the Asia-Pacific car subscription market is primarily fuelled by the increasing acceptance of smart mobility solutions, the expanding subscription economy, and the rise in cars-as-a-service adoption. Countries like India, China, and other nations in the Asia-Pacific are the primary growth contributors in the region, owing to a growing preference for shared mobility, changing transportation mindset, and increasing urbanization. However, the car subscription concept is relatively new in the Asia-Pacific region, and the lack of customer awareness poses a hindrance to market growth. The region is anticipated to witness substantial growth, driven by a changing mobility landscape and evolving consumer attitudes towards car ownership and associated costs. Market players in the Asia-Pacific have been introducing the car subscription concept for the last three to four years, which is now primarily accepted by end-users.
Key Market Players in the Car Subscription Industry:
- Steer EV
- Daimler AG
- Drover Limited
- Fair Financial Corp.
- OpenRoad Auto Group
- Porsche AG
- Prime mover Mobility Technologies Pvt Ltd.
- The Hertz Corporation
- Toyota Motor Corporation
- Volvo Car Corporation
Frequently Asked Questions (FAQs)
What is the projected growth rate (CAGR) of the Car Subscription Market?
The Car Subscription Market is expected to experience a significant growth rate, with a CAGR of approximately 33.5% during the forecast period.
Who are the major players in the Car Subscription Market?
Key players in the Car Subscription Market include Steer EV, Daimler AG, Drover Limited, Fair Financial Corp., OpenRoad Auto Group, Porsche AG, Prime mover Mobility Technologies Pvt Ltd., The Hertz Corporation, Toyota Motor Corporation, Volvo Car Corporation, and more.
Which region holds the largest market share in the Car Subscription Market?
North America has emerged as the dominant region in the Car Subscription Market, accounting for the largest market share.
In which region is the Car Subscription Market witnessing the highest growth rate?
The Car Subscription Market in the Europe region is projected to exhibit the most substantial growth rate among all regions.
Which segments are encompassed in the global Car Subscription Market report?
The comprehensive global Car Subscription Market report covers various segments, including Service Provider, Vehicle Type, End-Use, and Subscription Period.
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