Challenges & Opportunities For Automakers Who Are Turning Towards Car Subscription Services

We are indeed living in the age of subscriptions. You can get subscriptions for food, clothing, education, gyming & fitness, video streaming services, and a lot more. It is a web where supply-demand chains interact at the multinational level.

Now that many manufacturers are sertivitising their products, why not the automakers?

Subscriptions or recurring billing for cars is possible because the core of this business model is recurrent need. And it is an undeniable reality that people need to use cars recurrently.

The trend for car subscriptions is in the phase of development. So, there are various challenges that automakers are facing worldwide. Customer satisfaction, an effective subscription management system and the right pricing can make your car subscription plan a success. However, the following challenges are still there that you will need to fight.

Pricey Subscription Plans

It is difficult to price the car subscription plan, and you will need to consider the following factors in this regard:

  • Category of the car
  • The location where you are going to offer the subscription plan
  • Extra features that you want to offer
  • Car maintenance charges
  • Size of the car
  • Financial considerations of the customer

Many car brands are facing this constraint that their subscription plans are pricey for their targeted customers. However, they cannot help it because the commodity that they are offering on subscriptions is not some grocery item. What can be done is to instil this thought in the customer’s mind through marketing that if they are getting subscriptions for Porsche, Audi, or Volvo, then it is definitely different from a Netflix subscription plan. There is a huge price difference between the two subscriptions though both are based on the same recurring billing business model. It is just because of the difference in the purchase price of these products.

Moreover, there are sometimes involved the constraints of location. For instance, recently, Nissan has introduced its Nissan Switch plan but it is only available in Houston. Nissan is one of the most favourite car brands in Europe. However, people in Europe cannot enjoy this affordable subscription plan offered by Nissan. So, location also acts as a challenge when it comes to pricing and offering subscription plans for cars.

The point is bringing the price in the range of affordability for the customers is not an easy task. Many car brands are still holding their horses just because they have to mull over to come up with subscription plans that can offer a win-win situation for automakers and the customers.

Also Read: Why Value-Based Pricing Approach Is Important For Your SaaS Business

Customer Satisfaction

Some automakers offer subscriptions for the fleet of their cars and customers can change the car after a week. Some offer to change the car after a month. However, some do not offer their customers to change cars at all. Offering customers to use a range of cars is for the sake of satisfying customers. The subscriptions for cars also include car maintenance charges and insurance. All these perks are meant to make the subscription plans of the car more lucrative.

Once again, you need to consider the example of the Nissan Switch. This car subscription program of Nissan offers customers to use crossover car during the week and a sports car at the weekend. Thereby, satiating the desires of the customers to have different cars for different occasions.

Car customers need to be satisfied with the car speed, space, size, price, and design. Porsche Drive offers its customers a subscription plan in which they can enjoy at least a range of 6-7 cars from SUVs to sports cars. The factors mentioned here can help you maximise your customer experience & satisfaction and make your subscription plan a success.

Also Read: Building the Customer Success For Different Subscription Businesses & Finding Factors That Help In Retaining Its

Shortage of Vehicles

Currently, the pandemic has left its mark on every business and the automotive manufacturing industry is not an exception. There is a shortage of cars in the market because of the ongoing circumstances. One year back, when the wave of coronavirus forced the businesses to halt their processes, car manufacturing was also affected. Even if cars could be manufactured, the shipping industry was unfunctional that disturbed the global supply-demand chains.

However, the shortage of cars is both a challenge and an opportunity for auto-manufacturing industries. Since there is a shortage of cars, the prices are already skyrocketing. Even if the automakers are willing to offer subscription plans when there are no cars they can execute their plans.

On the car customers side, people are preferring subscription plans because of the sudden rise in the prices of the car. So, if the situation is intelligently tackled, automakers can cater to more subscribers. You can even try to prioritise subscriptions for cars and limit the sales and purchase of cars till the manufacturing process normalizes.

Till this point, it was all about the challenges that the automakers are facing these days. There are opportunities for the automakers as well. Here, we are going to share some of them:

Offer Time-Limited Subscription Options

Automakers have a golden chance to offer time-limited subscriptions to their customer base. Especially, those who have not yet offered subscriptions at all can launch such subscription options as their pilot project. You just need to onboard a subscription management and payment processing software and devise your subscription plans. For instance, now Christmas and New Year are the upcoming events. You can plan to offer car subscriptions for these occasions. If this experiment turns out to be a success, you can proceed to long-term subscription plans.

Plan to Replace Car Lease with Subscriptions

Many car customers prefer to lease. They find it affordable that they do not need to pay the lump sum purchase price of the car rather they pay in instalments. Subscriptions are the recurrent source of earning profits. And you need to tell your customers the plus points of subscriptions in comparison to the lease option.

There are customers in the market who are not willing to enter long-term ownership. You need to target these customers and offer them subscriptions. What can be lucrative for the customers in the subscription plan is the range of cars that they can use.

You can market your subscription plan to the car customers who prefer lease to own based on the fact that in a subscription plan they can drive different cars to match the occasion rather than keeping things trite with one car (in case of lease). Replacing car leases with subscriptions can be a good business option for those car brands that face the issue of car shortages.

Plan Add-Ons

If you find your pilot project to offer car subscriptions revenue-generating, you can now explore options to offer add-ons. You can offer tyre change, extra mileage, car maintenance, or GPS services etc. SaaS businesses upsell and cross-sell their SaaS product. Why not the automakers. There are many features and services for cars that you can offer your customers to get as add-ons.

Also Read: Subscription Software And The Scope Of Recurring Billing Management

You can adopt SubscriptionFlow to plan subscriptions for your cars. The subscription business model can diversify your revenue streams only if you plan to adopt it well. Call SubscriptionFlow experts and plan your luxury car subscriptions in a way that customers cannot resist.