Car Subscription: Where’s the market going?

19 July 2023 | 3 min read

In the United States, where the automobile has dominated transportation since the 1950s, there are literally more cars than households — 1.88 per household to be exact. Yet, in recent years, the focus has been moving to less committed options, and here is where car subscription pops up: commonly defined as the subscription-based Netflix for cars.

Subscription services have gained popularity as an alternative to traditional car ownership or leasing, offering consumers a flexible and convenient way to access vehicles without the long-term commitments and financial burdens associated with purchasing or leasing.

Current Car Subscription Market overview

The global vehicle subscription market size was valued at $2.11 billion in 2021 and is projected to grow from $3.38 billion in 2022 to $172.47 billion by 2029 with more than 16.3 million new and used cars to be part of the vehicle subscription market by 2025.

Europe keeps dominating the vehicle subscription market share with a value of 0.91 billion just in 2021, with the German car subscription market size valued at USD 219 million in 2021. It is projected to reach USD 2,779 million by 2030, growing at a CAGR of 33.5% during the forecast period (2022-2030).

Moreover, every year between 3 and 3.5 million new cars are sold just in Germany and even during the Corona pandemic in 2020, more than 2.9 million new cars were sold. The presence of some of the major car manufacturers in Europe such as Volkswagen, Mercedes, BMW and others is driving the car subscription market on a consistent growth.

Two other major changes that impacted in the rise of popularity of vehicle subscription are:

Shift from ownership to usership, especially among young people living in urban areas where car ownership is increasingly becoming an outlay, for example in maintenance costs and commitment.

Rising cost of vehicle ownership in fuel prices, and shortage of microchips, insurance and so on have deeply contributed to high operating expenses. Encouraging users even more to prefer a subscription-based service, less challenging and more flexible.

OEMs in the Car Subscription Market

As of now, the business opportunity around new concepts of car usage and ownership is evident.

Consumers are no longer actively eager to buy a car, they prefer to opt for a less committal solution that allows them space to change quickly and without particular economic and contractual constraints.

In this scope, OEMs dipped their toes into this new market in two ways:

1. Direct entry into the car subscription market

2. Partnering with car subscription services to offer their own customized subscription program.

OEMs own Car Subscription Program

Car manufacturers are recognizing the pivotal role of subscription models in how vehicles are used and perceived.

The success of Care by Volvo subscription program is a great example, stating that their car subscription service accounted for 15% of total UK retail sales and drove the uptake in new plug-in hybrid electric models.

Overall, OEMs still have large space of expansion in the subscription market and can reach it without overhauling their current internal operations since:

They already have a large user base hence reduced marketing and acquisition costs
They already have in place optimal and efficient maintenance services for vehicles
They have direct vehicle access which can generate economies of scale that will result in huge cost efficiencies.
They have an extensive brand presence online and offline.

Wrapping it up

The car subscription market data speaks loudly, it is experiencing significant growth and transformation as consumers seek flexible and convenient mobility solutions. Both OEMs and subscription companies play crucial roles in shaping this evolving landscape. OEMs leverage their manufacturing expertise, brand recognition, and vehicle offerings to supply the cars for subscription programs, while vehicle subscription companies bring operational capabilities, customer acquisition strategies, and service management to the table.
The subscription market keeps redefining personal mobility and is offering individuals a convenient, customizable, and hassle-free alternative to traditional car ownership or leasing.

What’s next? We’ll dive deeper into the OEMs current scenario around car subscription. Stay tuned!