23 Apr 2021
Posted in Automotive
Discussion on subscriptions by automotive companies rose by 73% in 2020 as they look to diversify sales channels, finds GlobalData
Consumers’ need for greater convenience and flexibility, and the shift away from the need to own assets, is driving auto companies to try and capitalize by pursuing subscription models. While auto companies have discussed subscriptions in the past, discussions in earnings transcripts surged in 2020, with the entry of more original equipment manufacturers (OEMs) in the space. Mentions of subscriptions in earnings transcripts rose by around 73% in 2020 compared to 2019, according to GlobalData’s Filing Analytics platform.
Rinaldo Pereira, Senior Business Fundamentals Analyst at GlobalData, comments: “A major lesson of 2020 that several companies learnt the hard way is- diversifying sales channels. Several automakers such as Audi and BMW in the past five years have tried subscription sales but were not overly successful. That said, there is still a huge opportunity for auto manufacturers to generate recurring revenue via a subscription model – one such example is to gain customers looking to switch to electric vehicles (EVs).”
Consumer affinity towards EVs has caused subscription companies such as Facedrive to build up their EV offerings. EV production is likely to reach 38% of the global light vehicle production by 2028 and is expected to be slightly over 23.5 million units by 2030, according to GlobalData. Porsche and Volvo also continue to add newer EV models to their subscription portfolio.
OEMs such as Tesla, General Motors, and Volkswagen are also looking to other offer other subscription services such as connectivity (data plans, maps, gaming, music and other internet-based services) coupled with self-driving features in respective EVs. Meanwhile, Tesla’s Chinese competitor Nio is offering battery subscription services for customers.
Pereira adds: “Consumers are looking to avoid the hassles of buying cars while having the flexibility of choosing specific budget cars. Facedrive is one such company driving that change – envisioning itself as the Netflix of the auto industry whilst focusing on sustainability trends.”