By Hanniz Lam
I didn’t really pay attention to Car Subscriptions until I stumbled upon this ad where my friend’s brother was a model.
Good job, Redha (if you’re reading this!)
I then posed the question “Would you subscribe to a car?” to a few groups and responses ranged from “Huh?” to “Babe, tell me more” to “Yes! It’s completely changed my life!” Ok, the last one was a bit of an exaggeration but I must say the converts are hardcore fans.
While automotive companies have been providing financing for customers for decades, it is only recently that some original equipment manufacturers (OEMs) have come up with a subscription service for cars.
According to Boston Consulting Group (BCG) in a July 12 report, some forecasts of subscription market growth envision penetration rates at 20% to 40% of new car sales by 2030. BCG notes, however, that this could be overstated.
“We estimate the market in Europe and the US could reach US$30 billion to US$40 billion by 2030 — up to 15% of new car sales — based on the volume of five million to six million subscription vehicles,” says BCG in the report.
In Malaysia, several car subscription services are available. Toyota Capital Malaysia Sdn Bhd offers Kinto One, a subscription service that allows customers to choose from a range of new or pre-owned Toyota and Lexus cars.
Meanwhile, TC Euro Cars Sdn Bhd, the distributor of Renault cars, gives customers the option to subscribe to the Captur, Koleos and Megane RS models through three subscription packages. The tenures range from a three-month trial to a three-year fixed and “switch” packages.
While one can subscribe to almost the entire range of Toyota and Renault cars available in Malaysia through their respective subscription models, Nissan, through Edaran Tan Chong Motor Sdn Bhd, provides for the subscription of only the all-electric Nissan Leaf.
Rathi Nair shares that she has been using the Renault subscription car since 2020. “I think for me it’s more pros then cons. I just pay for my monthly subscription, petrol and car wash and the service, insurance and road tax is all taken care of by Renault.
The only thing I would suggest is to reduce the monthly payments especially during tough times. Not everyone can get a car loan so the car subscription option is good.
After the tenure I have the choice of continuing another 2 years with the same car or I can opt for another.
I don’t have to think of the resale value of my car if I decide to change my car compared to owning a car where there is a lot to think about- value of the car, resale price, if I can afford the car that I like. Easy for a single person in a big world.”
Anwar A Zaki shares, “I subscribe to the Renault Captur. It’s a fun car to drive. It’s agile for city driving and comfortable for long distance driving because it comes with auto cruise.
I switched to subscription or pay per use cars because I don’t like the idea of burning money while the car is always in ‘parked’ mode either at home or parked in the office. And when you own a car, you’re hit with a double whammy, one is that you have to pay interest on your car loan and it depreciates over time.
Pros
– Short term commitment.
– Hassle free and a peace of mind. No need to worry about insurance, maintenance and breakdowns.
– Better management of your money.
– You don’t own a depreciating liability.
Cons
– Not many choices.
If you’re new to subscriptions, choose a car that justify your purpose not your wants.”
I managed to interview the founder & CEO of FLUX, Aziz Ayman and Wong Hoe Mun, CEO of GoCar Malaysia to get their side of the story.
1. What exactly is a car subscription and how different is it from a lease?
Aziz Ayman: A car subscription is a more convenient and more flexible mobile solution, which is typically technology driven, when compared to a traditional lease.
In a lease you’re still tied to a particular car throughout the lease tenure and you are locked in due to the exorbitant cancellation fees.
Subscriptions give you complete flexibility with added convenience. A Flux subscription allows you to easily swap cars or even cancel your subscription as your needs and budget changes. No lease can offer you this level of flexibility. In addition, our door-to-door concierge service handles everything on your behalf so that all you need to worry about is just driving.
Picture: Aziz Ayman, Founder and CEO of FLUX
Wong Hoe Mun: A car subscription is a similar concept to film, television and music subscription services. It is a plan that provides customers complete access to a car for a monthly fee.
Through subscription, customers get to “own” their favourite car, even a premium luxury one, without having to fork out hefty down payments, service high loan interests, be tied down by long hire purchase tenures, worry about depreciation costs.
Furthermore, they won’t have to deal with the additional financial burden and hassles of a traditional car ownership such as yearly insurance and road tax renewals, servicing and maintenance and wear & tear as these are typically covered in the subscription fee.
Besides being affordable, car subscription also offers flexibility as customers can SWAP to a different vehicle at regular intervals, so they can upgrade to a bigger model or downsize to a smaller one depending on their needs and budget considerations.
Leasing essentially also works on a monthly fee basis and there is no down payment. But that’s typically where the similarity ends.
Leasing tends to be more expensive than car subscription for the following reasons:
• Leasing companies usually add on costs for ancillaries like insurance, road tax, maintenance to the monthly fees. Or these ancillary costs are separate from the fees so customers have to pay for these costs on top of the monthly fees.
• The depreciation costs are also factored into the calculation of the fees.
Leasing also tends to be more rigid and restrictive. For example, you can’t swap cars in the middle of your contract. Or if you can, there are usually hefty penalties.
Leasing companies are also known to charge excessive wear and tear fees even for the smallest dings and scratches.
2. How did your car subscription business model come about?
WHM: GoCar saw an opportunity during the pandemic. With domestic air travel halted and amidst concerns about safety, people were wary about taking public transportation and e-hailing. At the same time, many were also financially affected and unable to secure a hire purchase loan to buy a car, opting to rent instead.
We realised there was a gap we could fill. That’s when we decided to launch our subscription service to offer plans for a month, a year and up to three years. So, people who still needed to be mobile for work despite the on-going pandemic have a safe and private mode of transportation.
While those who are financially impacted can still have full access to a vehicle that is an affordable alternative to the traditional ownership model.
Picture: Wong Hoe Mun, CEO, GoCar Malaysia
AA: It’s unbelievable that in 2019, the only financially attractive way a Malaysian or expat can have access to a car 24/7 all year round is through a hire purchase loan.
Consumers are burdened with high upfront costs, surprise fees throughout ownership and time consuming administrative chores when it comes to buying a car. This doesn’t make sense for many, especially since a car is a depreciating asset.
From my time at Silicon Valley, I observed firsthand how the tech industry was disrupting the mobility space, allowing consumers to no longer make hard decisions with the same trade-offs.
This was about the same time many subscription services started to gain traction in Southeast Asia. Flux was founded to offer an alternative to the traditional car loan that provides greater accessibility with unparalleled convenience.
With a Flux subscription, members can enjoy the perfect car with just one monthly payment, encompassing all aspects of typical car ownership including road tax, insurance, maintenance and wear & tear.
3. By 2030, car subscription models in Switzerland is estimated to reach
a market share of 40%. How do you see it growing in Asia where owning a
car is a status symbol?
AA: Globally, the car subscription phenomenon has been gathering considerable momentum over the past couple of years. Shifts in consumer behaviour have given rise to new forms of mobility options that no longer require consumers to own the car outright.
In more mature markets, especially those where car leasing is a norm, the car subscription business model has experienced a rapid uptake. In ASEAN, car subscription is still a relatively new concept and the market is in its infancy and requires a lot more awareness and education.
Nevertheless, the growth is inevitable and we can expect to see more and more car brands offering subscription based services. However, car ownership will not be displaced or become obsolete. In the near future, we anticipate the market will be a hybrid of those that own and those that subscribe.
4. What do the sceptics usually say?
WHM: The status symbol comment is one of the most common remarks made by sceptics. Another one is “but you don’t own the car”.
However, in recent years, there has been a shift in consumer mindset and preference. People are increasingly opting not to buy as car subscription is not only financially sound, it also offers other benefits like privacy, safety, flexibility and convenience, in addition to those I’ve mentioned above.
Car subscription also gives them an affordable and flexible model to drive a premium luxury car, which may not be an option for them if they were to purchase one.
This trend is catching on in Asia. With the growing popularity of subscription services like Netflix and Spotify, familiarity with and preference for subscription models that offer affordability, flexibility and choice will continue to gain momentum.
To go one step further and help simplify the selection process for customers, we have structured the GoCar Subs fleet into six categories, from affordable to luxurious. Each category offers a range of models at one standard rate for each of the plan options available. Customers can also SWAP between categories every six months.
We believe that subscription is the alternative that consumers are looking for in their vehicle ownership experience and it will continue to grow.
AA: The biggest challenge is always going to be those who say, “If I pay for something, then I must own it”. These are usually car shoppers who have been buying cars for decades and have only known the hire purchase loan as their only means for accessing mobility.
This is where Flux emphasises the key benefits of a subscription that some may overlook. Such as the fact we don’t charge a downpayment and how you can save significant amounts of cash upfront with a subscription.
5. Tell us what offers or good deals customers can expect this year end.
WHM: For Subscription, we will be running an attractive campaign this year end. We recently added the 6-month trial plan and it’s available with discounts of up to 38%. Customers who opt for our FIXED plan of 1 year or more also get to enjoy our PAYLATER benefit which comes with 2 months of free usage.
GoCar is also promoting our new GoCar Garage services – where ladies will get to service their cars for FREE and also enjoy free pick-up service.
GoCar Garage is our digital one-stop solution that offers seamless and transparent car servicing and maintenance.
AA: Flux is an all-inclusive monthly car subscription service, offering all the benefits of having your dream car without the drawbacks. Members pay a monthly fee to drive a car of their choice without commitment. No downpayment, no debt, no problems. Flux offers a wide variety of new and preowned makes and models.
Choose the perfect car for your needs, even as they change over time. Switch when you want, switch back when you’re done. You don’t need multiple cars in your garage, just one Flux subscription. Flux’s concierge service will help manage all your car-related administrative and maintenance matters.
From 1 November to 15 December 2021, Flux is offering all our cars at RM5 for the first month. Just visit our website, select your car, choose your subscription plan and mileage package and we will deliver the car to your home in 7 days. It’s that easy.
6. How much can a person expect to save when subscribing to a car vs
purchasing a car?
AA: In the first year alone, people can save up to 33% on a subscription versus a car loan.
With Flux we allow our members to adjust their mileage package at any point during their subscription. So for example, if a member is planning a lot of inter-state trips next month they can increase the allowed mileage that comes with their subscription for that particular month. Just pay for what you use. It’s that simple.
WHM: We have flexible mileage options available to customers. By default, our subscription plans come with a 1,650km monthly cap for 12 to 36-month plans, which is sufficient for heavy driving in the city. If customers need additional mileage, they can opt to top up to 2,500km for between RM200 – RM300 per month and unlimited mileage for between RM500 – RM800 per month.
The additional mileage fee is to ensure we continue to maintain the vehicles at the rate that customer will be needing with the increased travel needs.
However, GoCar Subs will still offer savings back to customers because we cover wear & tear, regular servicing, insurance and road tax. This is in addition to them already not having to bear the cost of a down payment and hire purchase interest rates.
Based on normal usage – the estimated savings in 12-36 months for subscribers are:
Based on our customer usage tracking, below is the standard travel distance data:
Khairi Rizal Ismail who is also a Renault subscriber shares, “Its an opportunity to use a car you wouldn’t normally put in your “I think I’m going to buy” list.
Its like renting a model for a live-in girlfriend instead of getting married with next door Jane.
Look at your usage style. There is a mileage cap to think upon so urban usage is perfect.
Heavy inter-state, off road activities kind of user should think again because only normal wear and tear is covered.”
So will you be subscribing to a car? Leave your comments below!
