Moving the Carly business model into NZ follows a $A1 million investment by the Turners Automotive Group in Collaborate, the ASX-listed company behind the Carly car subscription service.
Turners’ investment gives the NZ group a little more than 12 per cent of Collaborate – and in Carly and the rental business DriveMyCar.
Collaborate, as the name suggests, is basically an integrator and manager of assets owned by others. Its expertise is in lining up subscribers and renters and then using its accumulated knowledge and systems to maximise the utilisation of those vehicles which are owned by dealers and potentially OEMs.
The appeal for Turners, as arguably the largest holder of vehicle stock in New Zealand and a major automotive financier, is to both capitalise on unsold stock and to get a foot in the door of a new form of vehicle funding that could challenge traditional methods of finance.
While the exact operational details are yet to be worked out, and these are said to be the subject of meetings in the coming weeks, Turners and Carly will be launching the subscriber vehicle “ownership” model in NZ soon.
The investment is two-pronged. Turners not only wants to be part of the swing to an anticipated upside in providing subscription access to cars in NZ, but it now has a stake in the potential upside of subscriber vehicle access in the Australian market as well.
Carly is relying for its success on the long-term financial commitment involved in the outright purchase of a vehicle being increasingly questioned by a new generation which apparently wants the flexibility of more immediate short-term agreements.
The business model is also becoming attractive to an increasing number of car retailers and OEMs who are looking at new sources of much-needed revenue – especially from idle stock jamming dealerships due to overproduction and optimistic sales targets.
Turners’ announcement comes within weeks of Collaborate signing an agreement with leading NSW dealership group Suttons Motors to supply vehicles to the Carly and DriveMyCar businesses.
Suttons Motors, which is located mainly in the Sydney region, has agreed to provide new vehicles to Collaborate for car subscriptions, rental and ride-share rental demand in Sydney. Suttons operates 24 dealership sites covering 27 different brands.
Carly also announced recently that it is working with I-Motor to increase the exposure of the Carly subscription model to car buyers by giving the option to subscribe to a car listed in dealer sites as an alternative to buying the vehicle.
I-Motor manages more than 700 dealer websites which display over 50,000 vehicles and attract over 15 million page impressions a month.
I-Motor will offer the ‘Car Subscription Solution’ to each of these dealers and Carly and I-Motor will jointly promote this product to existing Carly dealers and all other automotive dealers in Australia.
The CEO of Collaborate, Chris Noone, told GoAutoNews Premium: “The investment by Turners comes as gaining access to vehicles by subscription, rather than by long-term leasing or ownership, is becoming more mainstream.
“Turners are most interested in subscription but what is underlying our subscription platform is the platform we developed for DriveMyCar as well. So that would give us the option to launch those types of services in New Zealand. But where we see the biggest market potential is subscription.
“Turners are the biggest seller of cars in NZ. They have the auction side but they also have a very strong retail side. Turners is very much a household name in NZ. Everyone knows Turners.”
Mr Noone said that given the very large used car element in NZ car retailing, the subscription model could be applied to both used-car buyers or new-car buyers but the exact nature of the business model was currently being worked out.
He said Turners invested for two reasons.
“One is to deliver an alternative revenue stream in NZ by adding subscription to their existing retailing business,” he said.
“Two, Turners are interested in growth opportunities in Australia. They see that subscription has great potential in Australia and one of the ways for them to take advantage of that potential is though their investment in our company.
“They do not have any operations in Australia. They stated in their latest investment update about four weeks ago that they do want to invest in other businesses. They see Australia as having potential and we are the first company they have invested in within Australia.”
Asked how many deals Carly had achieved so far, Mr Noone said that as a listed company he was limited in how much information he could release.
“We will be doing quarterly updates to the market on how we are travelling but some of the early insights indicate there is a lot greater potential for subscriptions than in what we have traditionally seen in long-term car rental,” he said.
“Now we are seeing a lot of interest in what we are doing from the dealers and the manufacturers – a lot more than in the past.
“Recently we announced the deal with Suttons. They have now come on board and there are also a lot of other manufacturers who are also interested in subscription as well.”
He said the company had “tried to keep the model as simple as possible” with a 30-day minimum commitment and 30 days’ notice to hand the vehicle back. Clients can also switch a vehicle during a subscription as well – as often as once a month.
“The research coming out of the US says there is a generational shift happening,” Mr Noone said.
“The baby boomers wanted to own their cars because they thought that was the smartest thing for them to do. But if you look at Gen Y and Gen Z, they are getting up around 40 years old so you are not talking about kids, but they more value access to a vehicle rather than ownership of the vehicle.
“So our customer segments are singles, young couples, young families and relocators moving to Australia for work for nine or 12 months. These are all a target for us.
“Also businesses as well. A lot of businesses have fluctuations in staff demand for vehicles and have changing fleet sizes and we see subscription as a great opportunity for that as well.”
Mr Noone said the key to the subscription business was achieving the highest utilisation of vehicles as possible.
He said that compared to a leasing company, which might have a car out for three years and then it comes back at the end of that time, with Carly a car can come back at any time.
“Our business is set up so that we get those vehicles back out on subscription as quickly as possible. So we aim to get the highest utilisation of vehicles, therefore we get a good supply of vehicles coming through,” he said.
“We don’t own or lease the vehicles, so we can turn to our providers when we need extra cars and, with the number of our providers, we can turn them on within 24 hours.
“We are essentially a virtual business where we utilise an existing stock of vehicles. Sometimes it just takes a phone call to say: Can we get an extra 40 cars? And we just list them and they are available the next day.”
Mr Noone said that dealers were keen on the business model because they can make use of excess stock and start making money from cars that would just be sitting around as an overhead.
“That is why we have done the deal with I-Motor which allows us to put the subscription button on the dealer stock on the dealer website,” he said.
“To us, that is the perfect situation because the dealer is already paying to get the traffic to their website through Carsales, Facebook or Google and what we are doing is giving dealers another way to transact with the customer.
“People are much more likely to subscribe to a car than they are to click a button and then spend $30,000 and buy a car directly from a website.”
By John Mellor
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