A Farewell to Car Dealerships?
“Farewell car dealerships. Don’t let the door hit you on the way out!” This was FT journalist Patrick McGee’s response when asked to come up with a tabloid headline for his article on how car subscription services are set to disrupt the automotive industry.
But how are car subscriptions set to disrupt the automotive industry?
Well, cars are getting more expensive as consumers are expecting more from them, including electric engines and the latest in infotainment and IOT technology. But, consumers don’t want their monthly lease fee to go up, so lease contracts are getting longer.
In the US, lease contracts are now sometimes as long as 7 years!
But, who today, where convenience and flexibility are key commodities for many people, wants to be tied in to a purchase decision for seven years?! It would be bad enough if your Netflix contract was that long, but with a car, your needs are likely to change a lot in seven years.
That’s where car subscriptions come in...
They allow you to have a car, paid for monthly, but on a contract length that suits you. From rolling monthly, to 3 months, 6 months etc. That means you can change car to suit your requirements (including not having a car) with far greater flexibility and convenience.
But, it gets better. People often shy away from getting a used car because of maintenance concerns. But, on a subscription, that’s the subscription company’s problem, not yours! If the car breaks, they have to replace it and fix it.
This leads McGee to describe consumers as the ‘winners’ when it comes to car subscriptions; and dealerships as the losers.
McGee may be being deliberately dramatic. The advantages to consumers are considerable. However, it may be too early to say for certain that dealerships are the losers. What is clear is that dealerships must be open to exploring new business models to thrive in the car economy of the future.
You can watch the 3-minute video with McGee on the FT website here