Manner of transportation has continually adapted, now as societies increasingly adopt new technologies, then the future of mobility as always and it will continue to be; evolving. From horse-drawn carriages to relationship improvements via the personal automobile to public transit in general, mobility has continually been in flux. Today, we are at the cusp of another behavioural shift via car subscriptions and their significant effect on the traditional rental car industry. Car subscriptions are a new mobility change and, unlike traditional ownership or rental models, subscriptions offer consumers flexibility and convenience, as well as provide customers with an all-in-one experience that alters the perception of vehicle access.
Understanding Car Subscriptions:
A car subscription is a flexible means to “rent” a car for a given time, from days to months, without a long-term commitment or the restrictions associated with traditional car rental. For a monthly fee, subscribers can drive a vehicle that often includes insurance, maintenance and on-road assistance, and in some cases allows users to swap between vehicles depending on the trip and their driving needs (e.g. a compact car for a city trip, SUV for a weekend getaway).
The car subscription model has a compelling user experience. Car subscription platforms specialise in apps so customers are able to select a vehicle, schedule delivery and handle payment all without entering a dealership. This user experience has created demand for car subscriptions, especially amongst millennials and young consumers who value experiences and prefer flexibility rather than owning their assets.
The Decline of Traditional Car Rentals:
For decades, traditional car rental services have been a standard in travel mobility, offering short-term vehicle access through airports, hotels, and urban centers. However, with the growing popularity of car subscriptions, many limitations of the traditional rental model are being unveiled:
- Inflexible Pricing: Traditional car rentals are generally grounded in a daily rental price with additional charges for insurance, mileage, or secondary drivers. If someone intends to have a car for weeks or months, this can quickly become cumbersome and expensive. In contrast, car rental subscriptions often offer predictable monthly pricing, which can incorporate many of the disguised costs included with traditional rentals.
- Restricted Vehicle Choices: Traditional car rental operators have limited choices for vehicles that are limited, as can the availability of the vehicle type customers are looking for during peak travel times. Car subscriptions (like ECO Mobility) have a much larger fleet available for customers to select from and, in many instances, will permit customers to swap cars when they change their lifestyle.
- Time-Consuming Process: Renting a car usually involves paperwork and long lines, plus wait time when you arrive at the rental facility. Car rental subscriptions streamline the process via a digital platform and delivery to the subscriber’s location, most often without ever interacting with another person.
These advantages position car subscriptions as a compelling alternative, especially for urban dwellers and business professionals who value efficiency and flexibility.
The Rise of Urban Mobility Trends:
Societal changes are bringing about more of a willingness to adopt car subscriptions. Urbanisation, the gig economy, and changing perspectives on vehicle ownership have all played a role. In urban centres, particularly crowded city centres, car ownership can be more of a frustration and burden than a benefit or convenience. With parking costs, traffic, and the environmental impact of cars, subscribing to a vehicle can offer much more of a practical fix, getting a car for the length of when it is needed while avoiding the headache of ownership.
Moreover, younger generations, specifically Millennials and Gen Z, view car ownership differently than generations prior. For many, access to (and experience using) a car does not necessarily mean ownership. Many young people choose subscription services, ride-sharing, and public transportation over access to traditional vehicle ownership. The mindset of these groups gravitates toward a desire for flexibility, sustainability, and convenience – a unique fit for the subscription model.
How Car Subscriptions Work?
While the specifics of car subscriptions vary from one service to another, they share several important features:
- Flexibility in subscription periods: Subscribers choose for how long they need a vehicle (short term or weeks until a year long subscription) to subscribe for, along with being flexible for various reasons, this benefits travelers and temporary residents or longer term business travelers.
- All-inclusive for a monthly price: With most subscriptions insurance, maintenance and roadside assistance are included in the monthly price. Therefore the subscription process is clear of the numerous incidental fees that plague traditional rentals.
- Vehicle exchanges: Some subscriptions also allow you to exchange in and out of different vehicles. For example, you may subscribe for a small sedan for commuting through the week, and an SUV for a weekend getaway, all with the same subscription terms.
- Digital-first: App-based services allow you to reserve, pay for and assist digitally to eliminate friction and improve accessibility.
This type of model shifts automobile access to services rather than a product, and reflects the shift in consumer behavior patterns across many markets, streaming media, meal kits, etc.
Impact on the Car Rental Industry:
The increasing popularity of car subscriptions is pushing traditional car rental businesses to re-evaluate their business models. While some see subscriptions as a disintermediation and a threat to their traditional rental business, others see subscriptions as an opportunity to offer a better variety. More rental companies are looking for hybrid models that incorporate traditional rentals with subscriptions. Here are some of the changes that are currently happening in rental companies:
- Diversification of Revenue Streams: Some car rental companies are adding subscription options to their rental portfolio to secure long-term passengers that would have been surrendered to competitors. A subscription option also diversifies revenue, as the subscription model typically allows for stabilisation of revenue with monthly payment differences in rental demand, which is more unpredictable.
- Integration with Mobility Platforms: Many rental companies are now integrating into ride-sharing or car-sharing, which allows flexibility similar to subscriptions. This integration provides rental companies with some brand awareness opportunities by modifying their clientele.
- Customer Experience Improvement: Subscription services have increased user experiences around customer convenience, and other rental companies are working to improve their web and mobile platforms, customer delivery, and loyalty programs.
- Best Utilisation of Fleet: Many subscription models might allow companies to allocate the use of their fleet better. The rental fleets can rotate and maintain the vehicles better, so cars essentially are not idled and are revenue-generating.
Benefits for Consumers:
The allure of car subscriptions is more than convenient options. The subscription model includes different types of benefits for the consumer:
- Convenience: A vehicle at your convenience, without all the hassles of ownership, paperwork, and long lines for rentals.
- Predictability of Cost: Monthly fees make budgets easy because they include many things, such as insurance, maintenance, and roadside assistance.
- Choice: Depending on different occasions, you will likely have no problem choosing a different vehicle to match your occasion or preferences.
- Sustainability: Car subscriptions help us share vehicles, and this reduces individual ownership, thereby contributing to less overall carbon emissions and congestion in urban areas.
These benefits better align with the modern customer experience, where convenience and adaptability are seen as more important than ownership.
Challenges and Considerations:
Despite its benefits, this model is not without challenges. For short-term use, subscription pricing is still pricier than traditional rentals, which may deter the budget-conscious consumer. Insurance and liability can also be a complicated consideration, especially when vehicles are being swapped off. Additionally, subscriptions are reliant on fleet availability and digital infrastructure, factors that may differ across regions.
Regulatory frameworks will also be a consideration. Different areas have different rules related to vehicle insurance, taxes, and commercial use, which can affect the rollout of subscription services at scale. Ultimately, getting consumers to accept anything other than car ownership and swap to a new mobility model requires time, advocacy, and education, particularly when it comes to demographics that are more accustomed to vehicle ownership.
The Future of Mobility:
Looking ahead, car subscriptions are likely to become an integral part of the broader mobility ecosystem. They represent a shift from ownership to access, aligning with trends in shared economies and digital services. Here are some potential developments:
- Integration with Public Transit: Future mobility systems may combine subscriptions with public transit, ride-sharing, and micro-mobility solutions to create seamless, multimodal transportation networks.
- Electric Vehicle Adoption: Many subscription services are incorporating electric vehicles (EVs), offering consumers exposure to sustainable transportation without the upfront cost and charging infrastructure concerns.
- Personalised Mobility: Advanced data analytics could enable subscription providers to tailor vehicle offerings based on individual preferences, travel habits, and lifestyle choices.
- Corporate Mobility Solutions: Companies may increasingly use subscriptions to provide flexible transportation options for employees, reducing fleet management costs and enhancing employee satisfaction.
The convergence of technology, urbanisation, and consumer behaviour is creating a new future where mobility is fluid, on demand, and part of daily life instead of dependent upon ownership.
Car subscriptions are fundamentally changing how we perceive vehicles and engage with them, and are not going away. Subscription models are defining the rental car industry (flexibility, convenience and socially distributed experience) while also meeting the switching behaviour of consumers. Rental companies must recognise that the mobility landscape is changing and move with that shift, either evolve or stay stagnant.
As urban spaces expand and the life we thought we knew continues to change, the future of mobility will not be defined by car ownership, but by being able to access a car quickly, easily and in a sustainable way. Car subscriptions will play a key role in creating the next chapter of mobility as flexibility and technology meet consumer agency.
