At the end of 2020, there were 6000-8000 vehicles on subscription fleets in the UK, which is a number that’s set to grow dramatically to around 600,000 by 2025 (Frost & Sullivan). This trajectory reflects a general shift in consumer preferences towards greater flexibility and access over ownership in their purchase decisions.
We’ve already seen similar transformations realised in other verticals. This is most notable in music with Spotify, film with Netflix and Disney+, and enterprise software with Salesforce and Zuora. It is also touching every industry from journalism to manufacturing.
There is good reason to believe that the subscription model can achieve similar success in the automotive sector too. For me, this success will come, in particular, through the application of the subscription model to electric vehicles.
Before I explain, it will be useful to define what a ‘car subscription’ is. At elmo we think of it as a re-imagining of the traditional car lease to meet the needs of modern consumers. By removing deposits and lengthy contractual commitments (usually 24-48 months) and packaging everything into a digital-first user experience.
Essentially, subscription means you pay for your own car for as long as you need it. To achieve that flexibility the subscription must include everything needed to run the car including insurance, breakdown cover, servicing and road tax as part of the package.
The reason this model works so well for electric cars is the subscription eases many of the barriers impeding consumer adoption. It therefore becomes a mechanism for accelerating the consumer transition.
There are several principal barriers to adoption usually voiced. The price is often top of the list with electric cars currently about £5-10K more expensive than equivalent petrol/diesel models. There’s an unfamiliarity because consumers are accustomed to filling up at petrol stations, so the idea of charge points, cables and talk of kWh can be off-putting.
Another barrier consumers often mention is the change in lifestyle to their ICE vehicles. They see a range risk and the need to charge being potentially inconvenient. And finally, consumers are aware that the technology is evolving quickly and the costs are coming down, so why should they get one now?
All these variables form a proposition that many people are reluctant to embrace, at least for the time being. The knock-on effect of sitting on the fence for another year or two is the negative impact on carbon emissions and air pollution.
With the UK government recently bringing forward its 78 percent reduction target from 2045 to 2030, there’s little time for car drivers to remain on the fence. Decarbonising transport has such a significant role to play. It currently contributes around 26 percent of UK annual emissions.
The subscription model removes deposits and upfront purchase costs, offers consumers the flexibility to try an electric vehicle (EV) for as long as they like. Plus, it allows them to upgrade to newer makes and models as they become available. This model eases those concerns and empowers customers to switch to more environmentally-friendly driving sooner.
This only part of the story, though. Electric vehicles by their very nature mean that mobility and energy now interact in a way they never did before. Internal combustion engine (ICE) cars sit siloed on our driveways, while EVs form part of an increasingly connected household eco-system.
This presents a unique and exciting opportunity for players in both sectors. Once again, the ‘access over ownership’ model of subscription can be a key lever. Energy suppliers want to build increased profitability into their business models and empower their customers to adopt green technologies.
Energy suppliers do this by offering a suite of ancillary services including EV charge points, battery storage and solar energy that sit around their supply. These suppliers recognise that EVs are a gateway for customers on the path to consideration and adoption of those services.
At elmo, we’re now working with energy suppliers to support them in developing an EV proposition through our subscription model. Soon these suppliers will be able to offer low-commitment electric cars on an access/membership basis, powered by elmo, through their own customer portals.
Consumers can now look forward to a future where their electric car subscription includes all their charging requirements. This is from the charging unit to energy used, both at home and away, as part of a fully-integrated and seamless total cost of ownership solution. It may even sit on their energy bill.
Electric vehicles are moving inexorably from margin to mainstream. To achieve the required climate impact in the required timeframe, industry stakeholders must collaborate to accelerate that process and make switching as accessible and convenient as possible for consumers. The subscription model, if properly executed, can be a powerful lever for accelerating and democratising electric cars. Watch this space.