What Hyundai and Startup Carma Learned About Car Subscriptions

The Hyundai Ioniq (via press kit)

Car subscriptions have been one of the hottest auto trends of 2018 so far. Less than 100 days into the year, BMW, Mercedes-Benz, Toyota Motor’s Lexus brand, and a host of startups have all launched services or said they intend to.

The subscription trend began in January 2017 when Cadillac piloted Book by Cadillac in New York City that has since grown to include Dallas and Los Angeles. Geared toward a luxury product, consumers pay a flat monthly fee of $1,800 for access to five of Cadillac’s higher-priced vehicles. Everything is taken care of except for gas. Other luxury brands and OEMs jumped on board last year including Porsche, Lincoln, Volvo, and  Ford through its Canvas program.

But since then, startups like Carma and OEMs like Hyundai have tried to tap into the non-luxury segment. Hyundai rolled out Unlimited+ for its Ioniq Electric in April 2017, which is provided through select dealerships in California, and is currently looking to expand to new markets. The monthly rate is as low as $275 per month and includes unlimited mileage and pre-paid maintenance services.

Carma car, which attended Auto Finance Innovation‘s DEMOvation this year, officially launched its service this past week. The Detroit-based startup — which previously participated in Detroit’s Techstars Mobility accelerator program — used that experience to better understand customer segmentation, Patrick Min, chief operating officer, told the Center for Auto Finance Excellence.

“It was a great experiment … to learn about customer segmentation,” he said. “[It served as a] test bed for the technology we were developing such as testing out the back-end software, and connected telematics.”

The tests showed that indeed people are interested in non-luxury subscriptions, Min explained. Non-luxury subscriptions may have a smaller penetration rate compared to luxury services coming from OEMs, but the overall customer base is larger.

“[Consumers] like the digital experience of going through an app to get a vehicle, not having to make maintenance decisions on a car, happy with the vehicles, and have no problems with staying in a vehicle month to month,” he said.

This is something that Hyundai also learned over the course of its subscriptions services this past year. Initially the service was marketed towards millennial customers, but Erick Gonzalez, national sales director for Hyundai Motor Finance said Unlimited+ is suitable for any type of commuter, regardless of age.

“I think the biggest lesson learned was the fact that we were able to combine [products] and do away with customer concerns about the mileage and target a program that is specific to the kind of customer who would like it – the commuter,” he told the CAFE. “They see value in the service.”

Additionally, Hyundai also learned that the entire process of getting into a subscription should be as seamless as a subscription itself. If the best part of a subscription is one single payment for maintenance, insurance and the car itself, why should the process of signing up be difficult?

“You can’t have a clunky process up front … and then hope customers forget about that later,” he said.”That ownership starts the moment someone begins searching for a car.”

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