Not your parents car lease
In an appeal to younger drivers (who aren’t thrilled about car ownership), car manufacturers like Volvo, BMW, Audi and Ford have started piloting car subscription services.
These services are similar to a car lease but with less commitment and more perks. They all offer some variation of a flexible subscription term that includes insurance, maintenance, and roadside assistance. It’s essentially the IPhone upgrade program with AppleCare for cars.
Pump the brakes
This month a car dealership trade group in California filed a petition to halt Volvo’s subscription service, claiming that it is in violation of state laws that prohibit dealer-manufacturer competition.
Car dealerships are concerned that these new manufacturer direct-to-consumer subscriptions will cut them out of the equation. But wait, aren’t car dealerships and manufacturers on the same team?
Dealership or no deal
Not exactly. Car dealerships are privately owned businesses that operate a near-monopoly on car sales in most states. They have extensive political clout and have lobbied for laws that bar manufacturers from selling cars directly to consumers.
Dealerships see this new subscription product as a loophole for car manufacturers to go behind their backs.
Tesla charging in hot
These car subscription services aren’t the only innovation ruffling feathers the auto sales industry. Tesla has been facing off with dealer trade groups for years over the right to sell its cars online and through manufacturer-owned stores.
Frustratingly for Tesla, many states haven’t budged on the issue and limit or deny the company’s efforts to open stores. In response, Tesla has opened “showrooms” in those states where potential buyers can learn about the cars but cannot discuss purchasing.
Regulatory limitations aside, the status quo of auto sales and leasing is ripe for disruption. Car dealerships are notorious for poor customer service experiences, leaving room for new startups and manufacturers to find better ways to get customers behind the wheel.