According to the Market Statsville Group (MSG), the global vehicle subscription market size is expected to grow from USD 5.90 billion in 2022 to USD 45.92 billion by 2033, growing at a CAGR of 20.5% from 2023 to 2033. Vehicle subscription is gaining popularity in recent years due to its cost-effectiveness and easy access to vehicles. Additionally, car subscription offers flexibility, convenience, and minimal commitment; hence, it attracts a diverse consumer base, which is expected to drive the market during the forecast period. Moreover, an increasing number of premium OEMs offering vehicle subscriptions will accelerate the market growth in upcoming years. However, the availability and cost-effectiveness of vehicle leasing, rental, and sharing services as compared to the vehicle subscription services may hamper the market growth during the forecast period.
Vehicle subscription is gaining popularity in recent years due to its cost-effectiveness and easy access to vehicles. Additionally, car subscription offers flexibility, convenience, and minimal commitment; hence, it attracts a diverse consumer base, which is expected to drive the market during the forecast period. Moreover, an increasing number of premium OEMs offering vehicle subscriptions will accelerate the market growth in upcoming years. Currently, big carmakers such as Mahindra, Maruti Suzuki, and Toyota offer car subscription plans, and cashing in the possibilities are other brands such as Mylescars and Avis India.
Vehicle subscription is the new model of ownership service in which the customer pays a recurring fee for the right to use one or more vehicles. Some vehicle subscriptions offer maintenance and insurance as a part of subscription fees, and some offer vehicle switching during the subscription period. A vehicle subscription is considered the best alternative to leasing and owning a car. Many service providers offer vehicle subscription services, including technological companies, OEMs, and mobility providers. In addition, subscription services involve various subscription plans based on brands and duration. Moreover, these services can be used for private as well as business purposes. Hence, along with ridesharing, leasing, and other services, the vehicle subscription market is also expected to grow rapidly in upcoming years.
The vehicle industry has seen a change. With the arrival of subscriptions for many day-to-day applications, has attracted a huge customer base to opt car and other vehicles on subscription basis. From finding the right car to zeroing in on the appropriate insurance and dealing with maintenance, the hassles involved with car ownership are manifold. Therefore, consumers are shifting towards the subscription model owing to its ease and flexibility.
The COVID-19 has a negative impact on the market’s growth, as governments imposed lockdowns and travel restrictions to restrain the spread of the COVID-19. The business was forced to adopt work-from-home policies and an online platform which restricts the outgoing activities. Such factors hampered the demand for vehicle subscription during the pandemic.
In addition, covid-19 pandemic is causing metropolitan areas to rethink consumer mobility and goods delivery, and urban consumers to reconsider vehicle ownership concerned about the contagion risk posed by public transportation and on-demand mobility services. Automotive OEMs should use this opportunity to analyze their models and decide when and how to transform. The transportation transformation, while personally driven vehicles will continue to be used during this phase, the changes have seen over the past 10 years in urban consumer transportation preferences with the ascend of on-demand mobility services should have convinced OEM executive teams that significant transformations of their business are necessary. For some OEMs transformations will imply producing vehicles that are based on sophisticated technologies, such as self-driving cars. For others it will imply the adoption of new business models. OEMs will start offering vehicle subscriptions and mobility services directly to consumers as a result of their transformation. In order to do this effectively they will need to create and operate fleets.
Automakers have been exploring for business models other than automobile sales to broaden their profit pools for years. While pay-per-use models such as vehicle sharing, ride hailing, and other means of mobility have become increasingly widespread, the alternatives to outright ownership have been confined to short-term rental (which is not necessarily inexpensive) or leasing, which often requires longer-term commitments and has more restrictive conditions. OEM subscription services have been available for numerous years. However, the sector has just lately begun to acquire traction with consumers and investors, as business models continue to change and a growing pool of suppliers fine-tune their competitive formulations.
In addition to becoming proficient with direct-to-consumer models, the adoption of subscription models will turn OEMs to fleet managers and operators. It will require them to keep vehicles on the books for long periods, something they have resisted to date. It will also necessitate that they acquire new skills for fleet management and fleet operation. carmakers, including Hyundai, Toyota, Kia, Maruti Suzuki, Tata Motors, Volkswagen, and MG Motor, have already started to offer vehicle leasing and long-term vehicle subscriptions through partnerships with mobility providers such as Zoomcar, Revv and Myles and with traditional leasing companies like ALD Automotive. This can also be viewed as a potential strategy to drive greater traction for the peer-to-peer market segments and to accelerate the shift towards subscription economy in the near future.
Automobile rental companies use contracts with automobile manufacturers to control their fleets. In several cases, these contracts have repurchased agreements claiming the manufacturer to repurchase the vehicle at a guaranteed depreciation rate during a particularized time. Leasing a car is light on the pocket initially, as there is no down-payment. Leasing is comparatively cost-efficient than subscription schemes. Most car subscription companies’ monthly fees include basic rental, miles, maintenance, breakdown assistance, and even insurance. Even in case of damages, regardless of the degree, leasing requires one to pay for the repairs while subscription does not.
Various consumers may prefer leasing because it allows them to easily exchange a vehicle and select a new model when the lease expires, allowing a consumer to drive a new vehicle every several years without having to sell the old vehicle or incurring repair costs after the manufacturer's warranty expires. Thus, the aforementioned factors may restrain the market’s growth over the forecast period. Further, country like India with 28% of total population is middle class and around 41.6% is of lower class can barely think of purchasing a vehicle. The targeted middle- and lower-class population prefer leasing, rental and sharing vehicles, thereby hampering the market’s growth.
As business activities gain pace and the economy rebounds its way in 2022, the auto industry is set to enter a new phase of growth, innovation and investment. Recent policies that were introduced, including battery swapping policy, aimed at an encouraging move towards green energy generation and decentralization of energy distribution is likely to create a well-established EV infrastructure across the country, while instilling customer confidence in riding EVs on the roads.
Various EV manufacturers are recently introduced the EV subscription plans for introducing their new EV models to all class of consumers, thereby creating a lucrative growth opportunity for the market. For instance: in January 2022, Quiklyz, the vehicle leasing and subscription arm of Mahindra Finance, announced that it will offer the widest range of electric vehicles (EVs) for leasing and subscription to potential customers. Launched in November last year, Quiklyz digital platform provides a subscription program for both retail and corporate customers. It also allows customers to access new cars without the hassle of car ownership, as the company takes care of registration, insurance, scheduled and unscheduled maintenance as well as roadside assistance, among others. The platform, which offers multi-brand vehicles, said it currently has the largest portfolio of EVs on the subscription platform, comprising both e-three and four-wheelers from original equipment manufacturers (OEMs) such as Mahindra, Tata Motors, Mercedes-Benz, MG Motors, Audi, Jaguar and Piaggio. Quiklyz plans to add more EVs to its portfolio as it aims to create exciting EV subscription products for its customers. Thus, the aforementioned factors may fuel the growth of vehicle subscription market around the globe.
The study categorizes the vehicle subscription market based on type, and application area at the regional and global levels.
Based on the type, the market is divided into IC powered and electric vehicle. The IC powered segment is expected to dominate the market share in 2022 in the global vehicle subscription market. The IC powered segment currently dominates the market share in the vehicle subscription market owing to its low subscription prices compared to electric vehicles. The increased availability of refueling stations for conventional fuels such as petrol or diesel might be ascribed to the improved market outlook. Furthermore, the availability of IC engine cars in low, middle, and premium price ranges is propelling market expansion. The rising popularity of EVs will create a need for EV subscription services. For example, EV sales in the first half of 2022 increased to 196,788, accounting for 5.6% of the total market. Toyota, GM, Stellantis, Honda, Nissan, and others are reporting more EV sales as increasing petrol costs continue to enhance EV popularity.
Based on the regions, the global vehicle subscription market has been segmented across Europe, North America, the Middle East & Africa, Asia-Pacific, and South America. Europe is projected to account for the highest market share in 2022. The existence of various mobility service startups as well as established manufacturers such as Mercedes, BMW, and others is propelling industry expansion. Furthermore, Europe has a strong presence in the automotive sector; thus, shifting the focus of European automakers to mobility service-based models in order to diversify their business in accordance with the interests of the new generation is expected to generate lucrative opportunities for the region's market. Furthermore, the increased penetration of automotive subscription service providers as a result of consumer demand for car leasing services, as well as government regulations to control emissions from vehicles in this region, are heavily influencing the growth of the vehicle subscription market.
The vehicle subscription market is a significant competitor, and extremely cutthroat in the sector are using strategies including product launches, partnerships, acquisitions, agreements, and growth to enhance their market positions. Most sector businesses focus on increasing their operations worldwide and cultivating long-lasting partnerships.
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