It’s no secret that the automotive industry is in the midst of massive transformation.
A global pandemic, the proliferation of EVs and fewer people owning cars than ever before have all raised questions about the future of dealerships.
For forward-thinking dealers, there are opportunities not just to survive but to thrive – and revolutionise the automotive industry on the way.
One of the biggest disruptions in the automotive market in recent years has been the emergence of car subscriptions.
This has been driven by rapidly changing consumer habits with the desire to pivot should circumstances change.
Similarly, extended lead times for new vehicles have also triggered ‘stop-gap’ solutions where subscription has been a more viable solution versus rental.
Digital used-car marketplace Cazoo recently cited increased investment in technology and infrastructure by traditional car dealers as one of the key potential threats for their business.
Software subscription platforms such as Loopit are now making it simple and cost-effective for car dealerships large or small to offer ‘subscription as a service’ and to gain a fast adoption advantage.
Loopit says there is a misconception that car subscription will come at the expense of new car sales. However, this is largely not the case.
Rather, car subscription is another product available to dealerships that will allow them to serve entirely new market segments, typically from customers who would otherwise not be in the position to purchase a car or those not looking to tie up substantial funds in a vehicle.
It is more accurate to say that subscription fills a void between rental and ownership, and in the context of a dealership can often provide an alternative path to purchase, especially as new car waiting times continue to balloon.
Loopit UK executive chairman Andrew Mortimer said: ‘Loopit’s “car subscription in a box” software solution has rapidly gained traction, with dealers looking at new revenue streams.
‘The speed, simplicity and low cost of entry are the key drivers for dealer adoption, meaning that typical friction points are eliminated.
‘Car dealers can flourish and keep up with market shifts by embracing car subscription as a weekly recurring revenue stream.
‘They see the path set by non-auto subscription brands such as Spotify and Netflix as the benchmark for future consumer behaviour.’
Mortimer continued: ‘Beyond the lucrative new source of revenue, dealers are also understanding the true value of subscription in the dealership ecosystem as a means to increase aftersales retention, build better customer relationships, provide an opportunity for upsell and increase life-time value through stronger margins.’
Looking ahead, used car pricing will start to normalise and subside as supply issues resolve themselves.
This will lead to more automotive businesses adopting subscription as a future-facing business model.
Subscription will start to take significant market share from traditional finance/leasing as the preferred ownership model for businesses because of the flexibility and pricing advantages.