Automakers are expected to establish a dominant presence in the car subscription space as they hold several fundamental advantages over other emerging market players, however this is not without its limitations.

Key Market Advantages for Automakers

Automakers, as the manufacturers of the vehicles, have a built-in cost advantage when it comes to supplying vehicles for a subscription service. Since they can use their own vehicles built at cost, they can potentially offer a lower subscription fee compared to a third-party provider that has to purchase or lease vehicles at market prices.

In addition, automakers typically have established brand recognition and a strong market presence, which can further enhance the value proposition of a subscription service. By leveraging their brand strength and marketing power, automakers can potentially influence the level of discounting and promotions, making their subscription service more attractive to consumers.

Limitations for Automakers

However, it's worth noting that cost of fleet acquisition is only a single consideration where automakers have the clear advantage.

Launching a subscription service requires significant investments in technology, infrastructure, and customer acquisition. Automakers may face challenges in setting up and scaling their subscription service operations, particularly if they lack the necessary expertise or partnerships with relevant service providers.

Customer-facing operations

Automakers may face challenges in establishing customer-facing operations for their subscription services, especially if they are primarily focused on manufacturing and distributing vehicles. Customer-facing operations such as billing, customer service, and vehicle maintenance require specialized skills and resources that may not be part of an automaker's core competency.

To overcome this challenge, automakers may need to partner with service providers or invest in developing their own customer-facing capabilities. For example, they may work with third-party fleet management companies to handle vehicle maintenance and logistics.

Another option for automakers is to leverage their existing dealer network to provide customer-facing services. Dealerships can offer vehicle delivery and maintenance services, as well as handle customer inquiries and billing. However, automakers will need to carefully manage their relationships with dealers to ensure that they are aligned with their subscription service goals and customer experience expectations.

Single brand offering

The fact that automakers typically have a single brand offering can be both an advantage and a disadvantage when it comes to subscription services.

On the one hand, a strong brand can be a major asset in attracting customers to a subscription service. Automakers with well-established brands and loyal customer bases may be able to leverage that reputation to generate interest in their subscription offering. Customers who are already familiar with the brand and its products may be more likely to trust the automaker to provide a high-quality subscription experience.

On the other hand, having only one brand offering can limit the appeal of a subscription service to customers who may be looking for a wider variety of vehicles or brands to choose from. For example, if an automaker only offers sedans and SUVs, customers who are interested in sports cars or luxury vehicles may be less likely to subscribe to their service. This can be a particular challenge if the automaker's brand is not well-suited to certain customer segments.

Accelerating Electric Vehicle Adoption

The fact that automakers can use their own vehicles built at cost can be particularly advantageous for electric vehicles (EVs) in the context of subscription services.

One of the biggest challenges facing the EV industry is the higher cost of manufacturing compared to traditional gas-powered vehicles. However, automakers that have invested in EV production and have established a supply chain for EV components may be able to produce EVs at a lower cost than third-party providers.

By offering EVs through a subscription service, automakers can potentially reduce the upfront cost of ownership for customers, making EVs more accessible and appealing to a broader market. Additionally, automakers may be able to offer more attractive subscription rates than third-party providers that have to purchase or lease EVs at market prices.

Moreover, offering EVs through a subscription service can help automakers promote the adoption of EVs by reducing customer concerns about range anxiety, charging infrastructure, and maintenance. Subscription services can provide customers with access to a network of charging stations and maintenance services, making it more convenient to own and operate an EV.

Overall, the inherent cost advantage and brand strength of automakers can help accelerate the adoption of EVs through subscription services, making them more accessible and appealing to a broader market.