Selling cars is a tough business – and it might get even tougher, with a generation of consumers more willing to see a vehicle as a service and the technology available to deliver on that promise.
Several manufacturers have sniffed the wind and are trialling subscription systems.
Ride-sharing and autonomous vehicles are two examples of rising technologies changing the way people view personal transportation.
Since the first Holden rolled off the production line, car ownership levels in Australia have risen year on year. The ownership rate in Melbourne has, however, plateaued over the past decade and the number of cars per person of driving age (18-84) has actually declined. Canberra has begun to see a similar trend.
The 2016 Census revealed that in the City of Melbourne, 76 percent of households reported having no car. In the Sydney CBD, including Haymarket and The Rocks, that figure was 57 percent, and for the CBDs of Adelaide and Brisbane it was 40 percent and 35 percent respectively.
Australia’s largest city, Sydney, has the lowest average motor vehicle ownership, followed by its next two largest cities, Melbourne and Brisbane.
Population density drives vehicle ownership rates down. Compare that with the outer suburban sprawl, with up to 17 percent of households having five or more cars.
Ride-sharing apps such as Uber and Lyft have reduced the reliance on personal vehicle ownership in inner-suburban areas, where trips are usually shorter than in outer suburbs.
Several automakers in the US – including Ford, Cadillac, Porsche and Volvo – are trialling vehicle subscriptions for those who don’t want the commitment of car ownership. A choice of vehicles every day, with warranty, maintenance and roadside service included, sets Cadillac customers back US$1,800 a month, while Porsche Passport lets subscribers choose between 22 models for US$3,000 a month. At the other end of the scale, Ford’s Canvas subscription program for pre-owned cars costs users as little as US$400 per month, with mileage plans sold in the same way as data with smart phones, with unused miles rolling over into the next month.
Most Australian Dealers have a fleet of unsold new and demonstrator vehicles, and some already use these in a similar fashion via leasing. A second-hand car sitting on your lot could be earning income sitting in someone’s driveway. The Canvas program lets drivers keep the car as if it were their own.
BMW and Penske Automotive Group are among the big names backing an independent service called Fair, a vehicle subscription service based in Santa Monica that has acquired Uber’s Xchange Leasing portfolio of around 30,000 vehicles. As part of the deal, Fair will be Uber’s exclusive US supplier of vehicles for drivers using them for more than 30 days at a time.
Fair has the head start on Canvas, which has just 600 customers in San Francisco and Los Angeles. Ford acquired the start-up Breeze in 2016, rebranding it last year as Canvas. Where Breeze focused on supplying cars to Uber and Lyft drivers, Ford saw the promise in its technology and recognised the need to pivot to a subscription model.
“Building on our success in 2017, we plan to further expand our platform and offerings in 2018 to meet even more customer needs,” said Canvas founder and CEO, Ned Ryan.
“Month-to-month subscriptions are just the first step. As our product evolves over the coming year and beyond, we’ll be focused on adding more customisation to the platform, implementing solutions to improve the scalability of the business and offering bigger savings for customers who want longer terms.”
Ford is using Canvas to test the market and the product, with the goal of using the technology to build expertise in billing and fleet management. Part of that is involving Ford Dealers with subscriptions to keep Canvas’ used car fleet small.
Dealers are getting service business and Ford Credit handles the finances.
The key component is flexibility, according to Credit Executive Vice President of Marketing and Sales, David McClelland.
“Multiple cars, multiple customers, variable term, variable payment. This is how we stay relevant in the world,” he said.