A new subscription model trend for motoring is expected to gain ground in South Africa, as more vehicle companies offer a variety of high-end tech features as optional extras.
This is according to trends-as-business-strategy firm Flux Trends, which touts subscription models for vehicle add-on services as the next new frontier in SA’s e-mobility sector.
According to Flux Trends researcher and trend spotter Faeeza Khan, several vehicle manufacturers across the globe are already offering add-on innovative services or features, which are often linked to a mobile app – payable on a monthly or annual basis.
These are features already built into the vehicle, such as driving assistance, voice recognition, anti-theft services and attention-assist services that use sensors to alert the driver.
For example, Tesla allows new owners to choose between buying its full self-driving package when they purchase the car, or pay for it as a monthly subscription.
Recently, BMW started selling heated seat subscriptions for $18 (R250) a month in a number of countries, including South Africa. The move was met with much backlash from BMW customers.
Toyota’s remote start functionality is also offered to vehicle owners on a subscription basis.
According to Khan, if more automobile companies adopt the trend on a mainstream level, it presents a major shift in how vehicles have been sold for centuries.
“If a major car manufacturer such as BMW has decided to offer this feature in South Africa, it is likely that other high-end car brands will follow suit in the near future. This model could have a big impact on the auto industry if more retailers begin to adopt it.
“It allows car retailers to extend their revenue beyond the initial transaction, which could earn the company more income over the long-term than if the customer were to pay for the feature upfront,” explainsKhan.
“For consumers, it allows them to control what features they want and when they utilise them. However, critics regard this way of doing business as greedy and exploitative. Nonetheless, it appears the auto industry is moving towards a future full of micro-transactions.”
The global subscription e-commerce market is expected to increase from $72.91 billion in 2021 to $120 billion in 2022, according to the Business Research Company.
However,Khan cautions, the state of the South African economy is a factor that will determine how popular luxury features are, and thus have an effect on how much traction the subscription trend gains in future.
Nevertheless, she points out the rental economy has become a widely-adopted trend, as more local brands and start-ups offer consumers short-term, commitment-free use of products and services.
”The rental economy is a global trend that has also been taking place in South Africa. This is the notion of renting (furniture, household goods, homes, etc) versus owning. It’s a paradigm shift that is taking place. The subscription model in the motor industry is an example of this, whereby customers choose to ‘rent’ the high-end features instead of buying them upfront.”
In the rapidly-changing automotive industry, car-subscription schemes are increasingly being offered in SA as an alternative to car ownership – where car dealerships allow users to rent the vehicle on a long-term basis.
“Companies in the automotive industry should consider this subscription business model as it provides a predictable revenue stream. However, they should proceed with caution as critics view it with a jaundiced eye,” concludes Khan.
Share