The winning model in subscription cars

Wednesday 28 March 2018

Article

Fully autonomous cars are years away, and that timeline seems to be stretching further. But the less talked about wave of mobility - moving to all-in subscription ownership - is much closer.

It's really exciting to see all the innovation in vehicle ownership models. Barely a day goes by without someone launching a new way to own a car, like this Ohio luxury car dealership which lets you switch between luxury brands when you like.

One of the more interesting mobility startups we have seen recently is Drover, the all-in car subscription marketplace. We like three things about it:

1. It is starting off by targeting the fleet market, which has a much more demonstrated appetite for all-in ownership than the consumer market. Drover can start building scale with its supply partners by taking share from existing SME-focused leasing providers, instead of having to fight to change consumer behaviour
2. It is a marketplace, allowing it to be capital light and to arbitrage between whoever has car availability
3. It is taking risk (on insurance, payment default and early lease termination), so it is adding more value to the customer and supplier than a simple intermediary transaction platform would.

Of course, there are no guarantees that this business model will be the mobility winner, but it is innovators like this who will find their way through trial and error to the new way of owning cars.

This will be great news for customers, but for the insurers, maintenance providers, auction houses and dealerships who are part of the monthly car "bundle", this presents a problem: their often higher margin consumer sales are about to be professionally procured.

Find out more about Nicholas Farhi, Partner