Revitalizing subscriptions: How EVs are changing car ownership

Exorbitant costs and limited demand have threatened to kill car subscriptions, but electric vehicles are set to revitalize this market segment that was thought to be grasping for life in recent years. Consumers pay on a month-to-month basis for a variety of everyday services, including grocery shopping, phone plans, television streaming and delivery of household items. Now EVs are giving new life to the same method for car payments, boosting the launch of monthly subscriptions that allow consumers to cushion the startup costs and get into an EV without the permanence of ownership. “EVs are the catalyst for the familiarity with [car] subscriptions,” John Possumato , founder and chief executive of vehicle subscription platform DriveItAway , told Auto Finance News . “I see subscriptions where consumer leasing was 25 years ago. [Leasing] fit a large section of consumers’ buying needs, but nobody knew about it.” Several startups focused on EV-specific subscriptions have recently come online, signifying the return of a financing arrangement that seemed to be short-lived just a few years ago. Pay per month Several OEMs, including Audi , BMW and Cadillac , have attempted to offer vehicle subscriptions but discontinued the programs a few years in, according to Consumer Reports . Audi’s monthly subscription service, called Audi select, launched as a Dallas-Fort Worth-area pilot in September 2018 with a price of $1,395 per month, according to a company release. The program ended in 2021, largely due to limited availability and the high price tag. The first generation of car subscriptions targeted affluent consumers but struggled to appeal to a group of buyers who didn’t need to subscribe in order to get the cars they wanted, Possumato said. EVs, while still for the most part considered luxury vehicles, are attracting a variety of buyers across the nation, providing an opportunity to bring back subscriptions as a way for consumers to better afford the upfront cost of an EV and to try out going electric before purchasing. A new EV as of Dec. 12 averaged $65,041, according to Kelley Blue Book . “EVs stimulate subscriptions … we spread the upfront cost over a period of time,” Possumato said, noting subscriptions also assist with EV hesitancy. "This is the first step toward [EV] ownership for a lot of folks who really cannot afford to take the plunge.” DriveItAway includes maintenance and insurance in the monthly payment and allots a portion of the cost toward a down payment if the customer opts to purchase the vehicle when the subscription ends. The program has launched with multiple models in the past year, including the Chevrolet Bolt EUV , the Ford Escape plug-in hybrid and the Polestar 2 EV . The company in December expanded services to Canada . Gaining traction Several startups with core subscription models based on EVs have gained traction in the past two years. EV subscription service Autonomy , founded in 2020, has seen subscriber activity steadily increase since it began rolling subscribers in February, founder and Chief Executive Scott Painter told AFN . The Santa Monica, Calif.-based company first launched services in Los Angeles before opening to all of California and has now extended services to Florida, Texas and Washington. Autonomy’s subscription, which includes a startup fee of about $3,000 and starts at $450 a month, is available for the Tesla Model 3 and Model Y with plans to soon launch for the Mercedes-Benz EQS EV. Payments cover maintenance, roadside assistance and insurance for qualified subscribers. The company aims to have 20,000 subscribers by the end of 2023 and has grown to about 15 to 20 subscriptions per day, Painter said, adding that about 10% of consumers who download Autonomy’s app make a subscription reservation and about half of reservation holders are in a market served by Autonomy or meet the qualifications. “We are starting to see a resurgence in consumer interest in subscriptions because it is cheaper, easier and faster,” Painter said. “It is a month-to-month product that allows you to get all the things that are the natural adjacencies to car ownership handled in one payment.” Turning to electrification EVs also attract green-minded companies and consumers, opening the potential for car subscriptions to earn support as a way to tap into the electrification movement. “We realized that electric vehicles could have an impact on climate, but they're too expensive to scale up to a climate-level solution,” Sunil Paul , chief executive and co-founder at EV subscription fintech Spring Free EV , told AFN . “At same time, even at today's price, the total cost of ownership is lower than a gas- or diesel-powered vehicle." Spring Free EV rents electric vehicles to fleet managers in multiple cities across the nation, including Atlanta, Houston, Los Angeles and San Francisco, for uses such as delivery or ride sharing. Companies pay Spring Free EV a monthly fee plus a cents-per-mile fee to list the EVs on their platforms. Individual investors purchase vehicles for Spring Free EV from manufacturers such as Chevy , Nissan and Tesla, Paul said, noting current available models include the Chevy Bolt, Nissan Leaf and Tesla’s Model 3 and Model Y. Spring Free EV works with about 100 fleet managers and expects volume to “grow dramatically” in 2023 as supply constraints lift, he said. “[Supply is] not reflowing quite yet, but it's way better than it was even three months ago, and that means we should be able to get a lot more vehicles out to our customers.” EVs are appealing to car subscription providers largely due to their lower maintenance costs and their ability to hold their value, Autonomy’s Painter said. “Residual risk, historically, has been a big problem for most of these subscription car companies,” he said. “There will be shortages of electric cars for the next decade; even if nothing but electric cars got made as brand-new cars, it would take 10 years before we had equilibrium between used electric cars and used non-electric cars. “Electric cars as an asset are a good thing,” Painter noted. “They are depreciating more slowly than their internal combustion engine counterpart.” Car subscriptions are likely here to stay as EV adoption becomes more mainstream and both businesses and consumers see the value in the unique usership model. In fact, fleet companies are beginning to build EV subscriptions into their operations, Spring Free’s Paul said. “Some of our rental fleet customers are adding this kind of subscription model to what they do,” he said. “We think that will continue to be a trend; if you're already in the business of renting a car, whether you're doing direct-to-consumer or through a platform ... you're already doing the things that it takes to do a subscription, it’s just your time frame is much shorter.” Auto Finance Summit East, Auto Finance News’ new spring event, kicks off May 10-12 at the JW Marrio t t Nashville. To learn more about the 2023 spring event and register, visit autofinance.live / afs -east .

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