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Car Subscriptions Misfire, But Stay On Track For Future

Subscriptions in the world of cars has had some trouble getting into gear. In 2018, both Audi and BMW announced subscription programs that would allow consumers to pay a monthly fee to upgrade their automobiles to the latest model (whenever they wanted, in BMW’s case). Neither program quite took off with consumers, and two weeks ago, both BMW and Audi announced they were calling it quits on their subscription offerings for now.

It’s a swing and a miss, sticky.io CEO Brian Bogosian told Karen Webster in a recent conversation – but not one that bodes poorly for the future of subscriptions for automobiles. BMW and Audi’s programs, he said, simply didn’t work. At the end of the day, the success of any subscription bundle hinges on hitting the sweet spot between a highly compelling package and pricing that customers can afford. Audi and BMW are both luxury brands that both operate in an upper-market tier, noted Bogosian. At a few thousand dollars a month, the subscription offering didn’t speak to that customer segment, and was evidence that the more rarefied luxury tier might not have been the ideal jumping-off point for this kind of product.

But subscriptions can work in automotive. It’s a fact that becomes apparent when looking at a brand like Volvo, which is currently making one work by “providing compelling value to the customer” – value that Bogosian believes can and will be replicated across the automotive segment, likely more successfully by mass-market players like Ford and Volkswagen than by luxury players like BMW and Audi.

“I think people will see significant uptake for car subscriptions, and I think some brands will be very successful with this kind of model,” Bogosian predicted. “For a mass-market car that addresses a big part of the total market opportunity, I think there will be a tremendous opportunity for a subscription term of three to five years, offering subscriptions at different price points. I think it comes down to what you’re providing to consumers, and whether it’s compelling or not.”

As of yet, he said, the right player hasn’t entered the market to change the long-held assumptions in the field. As Bogosian pointed out, it’s not always the first movers that end up moving the market.

Waiting For Innovation

But the market will move when the right innovative player creates the right bundle that actually motivates a shift in how consumers own cars – and, more importantly, how they want to own cars, said Bogosian. That might be an established player like GM or Ford, or it might be a newer innovator like Tesla that is already testing out subscriptions – not with the cars, but with the amount of autonomous driving the car can do. And then there are all the rumors about the potential of a disruptive Apple entrant, something that one can never count out as a possibility from team Cupertino.

“Once you see a big player move into this segment and offer something that’s compelling, I think it will change,” Bogosian said.

Because as we’ve seen over the last several years, the market is already changing. The car, for everything it has historically been, has become in many regards another device to connect – like a phone or tablet. Those connections are proliferating, said Bogosian – but they need to do a better job of connecting in a way that is useful for their operators.

“These cars need to become more connected than what we already have,” he said. “We’ve got this subset of features and capabilities within the vehicle, but their connectivity to the exterior world varies considerably by brand, by vehicle and by the methods in which access is granted. I don’t think they’re well-positioned to take advantage of the content they can provide to these vehicles.”

And that has to change in order for the automotive subscription business to really get on the road to taking advantage of the massive captive audience buckled into their seats. Bogosian believes there will likely have to be a lot of negotiation between the OEMs and the Amazons, Apples and Googles of the world to build operating systems for cars that connect to the points consumers already leverage.

People want connected cars, noted Bogosian, and they don’t want complicated navigation across several siloed devices to access it – they want the car to easily connect to all the other devices they already use, such as their phones and computers. “Larger OEMs may build co-branded solutions so that they don’t disaggregate themselves from their consumers” in the connected car future, he said.

That future is coming – and it will certainly employ cars that connect to subscription services and the rest of the commerce ecosystem. Sooner rather than later, they may themselves even end up owned on a subscription basis.

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NEW PYMNTS DATA: BUY NOW, PAY LATER CONSUMER STUDY 

About: Buy Now, Pay Later: Millennials And The Shifting Dynamics Of Online Credit, a PYMNTS and PayPal collaboration, examines the demand for new flexible credit options as well as how consumers, especially those in the millennial demographic, are paying online. The study is based on two surveys, totaling nearly 15,000 U.S. consumers.

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