The report by Straits Research forecast a big upswing in popularity based on advantages (including short-term mobility solutions, new-age commute solutions and reduced vehicle expenses) which are said to appeal to most urban commuters.

Subscription funding also permits vehicle changes through the subscription period and the researchers said the user experience is much simpler than lease services. 

“Flexibility, affordability, and simplicity of car subscription and advantages over leasing are anticipated to boost global market expansion,” the researcher said in its report.

Australian subscription service platform provider Loopit, in its own research titled 2023 Global Car Subscription & New Mobility Report, said more than $US395 million ($A593m) of funding has been raised in the first two months of this year to support subscription services.

Much of this goes to providers expanding their businesses and funding the purchase of new cars, making it a big win for OEMs and dealers and for the commuters taking up a subscription service.

But Straits Research said the growth was tempered by the higher cost.

“The well-established and dominant nature of the car leasing, rental, and sharing business and the fact that the leasing model is more cost-effective than subscription schemes has inhibited the sector’s expansion,” it said.

“Several factors are anticipated to contribute to the growth of the car subscription market, including: 

• The formation of strategic alliances with automakers to gain a competitive advantage
• The creation of a robust digital platform to operate the services efficiently
• The expansion of the dealer network to reach more customers or provide services more effectively.”

In its report, Loopit said that fast-followers of subscription services “will flourish from the opportunity opened up by (UK used car and subscription provider) Cazoo’s exit.”

Cazoo closed its subscription offering – initially marketed as Drover – in June 2022 saying it was part of a wider “business realignment plan” aimed at “cash conservation” rather than growing the business.

Drover was bought by Cazoo in December 2020 for £65.4 million ($A120m). At that time, Drover claimed to be the UK’s leading independent car subscription service with 2000 active customers. 

It relaunched under Cazoo branding in mid-2021.

Global funding rounds this year that were raised for subscription providers included

• $US121 million ($A180m) by Onto to expand its EV fleet
• $US100 million ($A150m) by Planet42 to support its expansion into South Africa and Mexico
• $US59 million ($A88m) raised by Instacar to develop a “one stop app” that offers micro mobility vehicles.

Loopit said that it was aware that the growth of car subscription was limited by the lack of vehicle supply in the market which, in turn, was driven by inflated used car prices and an overall shortage of vehicle production. 

It said that this “ultimately caused strong consumer demand for subscription-based mobility solutions to significantly outstrip access and supply.”  

“With companies reporting that the majority of the money raised will be used for acquiring new vehicles to their subscription fleet, Loopit expects that demand will soon be met with the new influx of vehicles,” it said.

“The fact that car subscription providers from over seven countries are raising capital to grow their fleet and expand their services to new markets is evidence of car subscription gaining global traction; and that the paradigm shift from ownership to usership is accelerating faster than ever,” Loopit said in a statement

“The increase in demand for car subscription will only continue to grow, especially as providers continue to diversify their fleet offering with new vehicle models including electric vehicles, and become even more price-competitive in the face of new market entrants.”

It said that would also come hand-in-hand with the growth of the EV market. Its report said that subscription-based ownership provided an accessible and flexible way for consumers to trial an EV. 

“This prediction is now coming to fruition with the uptake of new EVs from brands such as Volkswagen, Opel and BYD. This trend is expected to continue as the appetite for EVs grows.”

By Neil Dowling