VW launches new car subscriptions... will consumers bite?

Consumers, automakers and vendors remain divided over the usefulness of vehicle subscription services, even as new providers hit the scene.

Driving the news: Volkswagen is launching a new vehicle subscription service in Atlanta called Flex, bundling insurance, maintenance, roadside assistance and ownership into a month-to-month payment.

• The new plan functions similarly to a lease, but rather than agreeing to a set term, subscribers can keep their car as long or as little as they want, provided they give the automaker a 30-day cancellation notice.

• Depending on which model you choose, Flex will charge anything from $599 to $799 a month.

• Pricing is likely to be a sticking point—according to Autoblog’s calculations, leasing a Jetta for 36 months will cost you roughly $12,000 compared to the $22,000 cost of subscribing to the minimum Flex tier for the same length of time (including a $495 activation fee).

• Insurance costs do close the gap, but not enough to make subscribing a better option. However, the program may present price advantages over rentals, which it is likely intended to compete with.

Looking back: Volkswagen’s new platform raises interesting questions about the vehicle subscription market’s future—questions that might be answered by taking a look at previous examples.

• Multiple automakers have tried (and failed) to make the model work. Volvo and BMW are recent examples, the former ending its service this September and the latter back in 2021.

• Both likely struggled to gain market share due to high prices: Volvo charged roughly $600 per month while BMW charged anywhere from $2,000 to $3,700 a month.

What about startups: Startups have had more mixed performance.

• Autonomy, an electric vehicle subscription platform, made a hard pivot to data this August after being acquired by Deloitte, transforming its business into a software-as-a-service model in the process. As Autonomy Data Services, it now targets manufacturers, dealers and other brands interested in providing subscriptions, rather than consumers.

• There are some success stories, however. Finn, which charges around $499 per month for six to twelve-month terms, raised $109 million earlier this year after seeing some initial interest from consumers. It remains to be seen whether those investments pay off.

Zooming in: Still, despite the widening graveyard of former subscription providers, there does appear to be an actual market for companies offering alternatives to traditional vehicle ownership.

• One Deloitte study from this year found that 45% of all consumers are re-evaluating owning a car.

• Another study from YouGov puts the total number of current car owners interested in trying a subscription model at 33%.

Zooming out: At the same time, both studies also indicate that the overwhelming majority of U.S. consumers are content with the way things are.

• That may be due to a lack of knowledge: 60% of survey respondents told YouGov that they hadn’t heard of a vehicle subscription model before.

• However, even if awareness spreads there’s no guarantee consumers will change their minds. That’s especially unlikely without an affordable model, which new entrants, like Volkswagen’s Flex, don’t seem interested in providing.

Bottom line: Convenience has always been the main selling point of subscription models. But while traditional car ownership offers plenty of headaches, convincing consumers that the time they’ll save paying fewer bills will be worth potentially thousands more in added costs will be an uphill battle.

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