This is how car manufacturers lure young people with a subscription model

Volvo boss Jim Rowan with new electric SUV EX90

The subscription is intended to make it easier for younger customers to get started.

(Photo: via REUTERS)

Dusseldorf While sales of new cars in Germany continued to decline in 2022, contracts in the relatively new segment of car subscriptions are increasing. According to the CAR Institute in Duisburg, around 63,000 subscription contracts were concluded last year. Compared to the previous year, this means an increase of 30 percent. Sales of new cars fell by five percent in the same period.

“The market for car subscriptions is developing dynamically in Germany,” says CAR Director Ferdinand Dudenhöffer. The institute expects a total of 100,000 subscriptions for 2023, which would correspond to an increase of almost 60 percent. However, the market is still comparatively small. In 2022, around 2.5 million passenger cars were newly registered in Germany.

After initial hesitation, almost all vehicle manufacturers have now discovered the business. The CAR Institute currently has 18 internet platforms in Germany through which subscription cars are brokered. In 2020 there were only nine providers.

Short contract commitment with the car subscription

The subscription differs from leasing mainly due to the shorter contractual commitment and thus offers more flexibility. While the customer has to commit to leasing for at least twelve months, some subscription providers offer a one-month term. Contracts for six or nine months are also possible.

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In addition to the major manufacturers, start-ups such as Finn or the car rental company Sixt are also active on the market. Depending on the brand and model, the costs are between a few hundred euros and more than 3000 euros per month. For the vast majority of the vehicles available, the equipment has already been determined and changes are usually no longer possible.

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The range now covers the entire model range – from small cars to expensive sports coupés. According to figures from the CAR Institute, more than 600 different subscription models are currently being sold in Germany. A year ago there were only about half as many.

>> Read also: What makes the car subscription start-up Finn grow so strongly

Almost all costs are included in the flat monthly fee: maintenance, wear and tear, the main inspection at the TÜV, insurance and vehicle taxes. The customer only has to pay for petrol or electricity themselves.

Not only mass manufacturers like Volkswagen or Renault want to open up new customer groups in this way. The comparatively expensive luxury brand Porsche has also become involved in car subscriptions. “The development has been very dynamic since 2018. We do not only expect significant growth rates in Germany. We also see potential in the USA and China,” says Marc Rieß, CFO of Porsche Financial Services.

Subscriptions are intended to attract young customers

Individual manufacturers also see the segment as a test market with which they can test the chances of success for new models. This currently applies in particular to electric cars. Anyone who has never driven a vehicle with an electric motor can familiarize themselves with the new drive comparatively cheaply and for a short, manageable time.

>> Read here: Volvo’s small electric SUV EX30 is scheduled to start in 2023

“Basically, subscription customers are younger than the average new car buyer,” says car expert Dudenhöffer. The subscription market therefore offers considerable growth potential.

Volvo, for example, will launch a smaller new electric SUV in 2023. In addition to classic sales, this is also to be increasingly offered as a subscription. Several 10,000 euros, as they are due for a new car, acted as a deterrent to younger customers, explained company boss Jim Rowan. The average starting age of Volvo buyers can be reduced by around ten years with the subscription model.

In addition, the business should ensure longer-lasting customer loyalty. Volvo calculates that anyone who subscribes to a vehicle at a young age will perhaps later buy a larger model from the brand once they have advanced professionally and socially.

Other manufacturers are also anticipating significantly increasing numbers in the coming years. Toyota, the largest car manufacturer in the world, has founded its own mobility subsidiary that also offers car subscriptions. Kinto currently has around 150,000 customers in Europe. This number is expected to double by 2025.

More: Almost 3000 car dealers in Germany could disappear

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