The main benefit of the subscription model over traditional leasing is greatly increased flexibility: subscribers can adjust their term length, switch vehicles within a given range of models, use a car for a limited period or sample new brands or forms of propulsion without committing to ownership.

Who are the players in the market?

The majority of subscription providers today are rental companies or independent providers: Mycardirect, Wagonex, Cocoon and many more. But as evidence mounts that subscription appeals to consumers, traditional vehicle manufacturers will aim to dominate the market. And the change is coming: Jaguar Land Rover has its own subscription service called Pivotal; Volvo has thrown its hat into the ring with Care by Volvo; Genesis offers a subscription service called Flexibility and Hyundai launched Mocean in 2021 (it also owns Genesis). Renault and Nissan have limited offerings that are likely to evolve. But as with all major innovations in passenger vehicles, there are still barriers to mass adoption.

What needs to improve?

Consumer quibbles with the service are mostly to do with the restricted product choices on offer. Buy a car from a factory and you can get exactly what you want (or what you can afford) while the level of customisation available through subscriptions is limited. And subscription is predominantly available for premium vehicles, or aligned to the premium price-point, putting it out of reach for many. As with so many recent innovations, the market is top-down: wealthier consumers are the proving ground, before the product crosses into the mainstream and sees widespread adoption.

But subscription is also an enabler. It’s shaping up to be a key entry point for consumers who are reticent about the electric vehicle (EV) market, which makes perfect sense: there are plenty of drivers who’d like to dip their toe into the EV market without committing to buying an electric car outright. Combine the inevitability of all-out EV adoption with mixed publicity about the ease and reliability of charging, for instance, and it’s easy to see why many people might appreciate the ability to explore EVs with minimal commitment and no long-term contract in sight.

The future landscape for subscription

The trend towards subscription models will almost certainly mirror the adoption of EVs.  Younger generations, who tend to prefer flexibility and “turn on/turn off” services, are particularly drawn to subscription models. OEMs stand to gain competitive advantage if they can move quickly to meet this demand.

One of the key challenges they will face is getting the right vehicle models into the subscription market at speed, especially given the logistical difficulties involved. And then there’s the problem of wear and tear: cars in subscription fleets are driven hard for a few months and then passed on to the next customer, who does the same. As the subscription model evolves, we might see a shift towards more modular cars that can be customised and adapted for the next user. This could help mitigate the impact of wear and tear and make cars more sustainable.

We also expect to see a rise in used cars being funnelled into subscription models; this is beneficial for price sustainability, and could reduce the cost of entry, paving the way for more widespread adoption. Notions of car ownership will change, particularly for those living in cities like London, where cars might not be needed all year round. A wealthy holidayer might want to subscribe to a Land Rover for three months to explore the countryside during the summer, rather than owning a car full-time.

Changing buyer behaviours

The process of purchasing a car is changing, and with it, consumers’ perception of what it means to acquire a car. PwC UK research reveals that nearly half of UK consumers would prefer a car subscription model over traditional purchasing or financing – that’s a pretty rapid adoption rate for a relatively new service that some people still haven’t heard of.

A movement towards adoption of EVs is accompanied by a rise in cars being configured and purchased online. Throw subscription into the mix and it’s likely that pretty soon, we’ll be thinking about cars almost as we do phones. We’ll browse and click; the product will be disposable and convenient. Perhaps the day will come when nobody would dream of owning a car, which brings its share of inconvenience and upkeep.

As subscription takes off, it will cause a re-evaluation of the design and manufacturing cycle. Manufacturers will need to adjust their R&D, logistics, aftermarket support and supply chains to manage brand-owned subscription fleets. And in turn, we’ll see a corresponding investment in skills and infrastructure to maintain the vehicles. Look out as other big manufacturers like Audi, Ford and Volkswagen enter the space: the winners will be the brands that offer the right mix of product range, price point and customisation.

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What caught our attention this month

Robot company Nuro is set to expand its business model to include robotaxis and autonomous vehicles, licensing its autonomous driving technology to car companies.

Amazon Web Services is set to invest £8bn in UK data centres over the next five years, creating 14,000 jobs and contributing an estimated £14bn to the UK economy. This significant investment will bolster the country's expanding cloud and AI industries.

The UK’s first intercity battery-powered train has started passenger testing on routes between York, Manchester, Leeds, and Liverpool. Over the next eight weeks, tests will evaluate the train's potential to reduce emissions, fuel costs, and noise pollution, with the ability to run up to 100km on 100% battery power.