Recently, Porsche just allow us (well, some of us who are lucky enough to live like a king) to apply for a monthly subscription plan that lets us drive various Porsches. (see video)
Porsche Passport
The service is called Porsche Passport, it is essentially a mobile apps which match our driving needs with the available Porsches. Initially offered in Atlanta, US, Porsche expand this offering into four other cities; three in the US and one in Canada (Korosec, 2019). Starting with a flat fee of $2100 or $3100 per month, users can choose to drive a Porsche across eight or twelve available variants. Furthermore, the process is done hassle-free through a mobile app. Users should provide their identifications and can simply have the cars delivered home or agree to a meeting point.
Customer Related Risk and Benefits
For users, this feature comes in handy. Before, people need to commit to a huge cost by purchasing a Porsche. Also, they cannot easily switch their Porsche with another variant should they be bored with their current Porsche. The Porsche Passport is released to answer the customer needs of higher flexibility, more individual choice, and more mobile engagement (Wright, 2019). Furthermore, this service also aimed to gain a new wave of customers, as shown by its pilot program in Atlanta where 80% of the acquired customers are not previous Porsche owners (Wright, 2019).
Effect on the Industry
However, Porsche is not the first carmaker who bandwagon into the subscription-based, or car-sharing, business model. Other large carmakers such as BMW, Audi, Jeep also offer similar service: a monthly car subscription, covering insurance and maintenance. There are also companies like Fair and Carpe which offers monthly subscription for various car brands, from standard to premium brands (Autoblog, n.d.).
These services breathe new air to the car industry. The industry has been enjoying a modest growth of 4.8%, translating to 88 million cars sold globally in 2016 (Strategy&, 2016). The margin of top-10 manufacturers have also recovered to about 6%, and stagnating, since after the crisis (Strategy&, 2016) .However, this car-sharing business model is changing the industry as it can increase the industry output by 30% or amounting to $1.5 trillion by 2030 (McKinsey, 2016). Now, customers need not to own a car to drive it, instead they can easily open an app on their mobile phone, click some buttons, and have the car delivered at their doorstep.
All in all, this subscription-based service is indeed a new one for automotive industry which has survived and prosper for decades through selling cars to customers. Will this new business model complement the industry? Or will it disrupt and change the automotive industry landscape for years to come?
References
Autoblog, n.d. COMPLETE GUIDE TO CAR SUBSCRIPTIONS. [Online] Available at: https://www.autoblog.com/car-subscription-services/?guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAD3N31n8PmpSw0UH4fI2NJMCAfMjTZQm46De404THfKwPgulBv5M-t0SuCeC-CHIAE5PHof5Wt9uinGHFWoQ7oJSmYzgrAoN7ywjHc67f1tisOJMyMogxqDRDkQB8dGeBSEfQ2y [Accessed 18 September 2019].
Joseph, N., 2019. CARBUZZ. [Online] Available at: https://carbuzz.com/news/porsche-considers-subscription-plan-to-keep-out-the-speculators [Accessed 17 September 2019].
Korosec, K., 2019. Tech Crunch. [Online] Available at: https://techcrunch.com/2019/08/29/porsche-expands-on-demand-subscription-plans-to-four-more-cities/ [Accessed 18 September 2019].
Wright, I., 2019. CARBUZZ. [Online] Available at: https://carbuzz.com/news/porsche-expands-subscription-services-in-us [Accessed 17 September 2019].
Cool article! I consider myself a big car fan and hope to be one of those lucky ones someday 🙂
As for your last sentence, I think that the future of the automotive industry in big cities lies in the subscription model. However, I would like to address one trend: to my knowledge, there are currently no electric vehicles included in these programs. In my opinion, there should also be a focus on (used) electric vehicles to be included in a subscription model pilot. In doing so, a more favorable circumstance for the use of electric vehicles in the mass market would be stimulated. Moreover, if the manufacturers or subscription based-owners could somehow find a way for the EVs to always be fully charged, it could result in a significant rise of electric vehicle users and consequently lead to less fuel emissions. What is your perspective on this matter?
Hey Moises! I agree that this subscription model may be the future of car industry. And as we are moving to a ‘greener’ transportation, offering such service for electric cars will be very interesting. In fact, companies such as Evezy in the UK offer such services! As you said, this type of service may stimulate the demand for electric cars. However, regarding your idea of an always-charged-EVs, I think it’s amazing, but let’s see what Elon Musk can do about that!
Hey Vizzado, this is a very insightful description of the changing automotive industry. I think this subscription-based model is interesting to look at, especially in such a niche market. Analysing this from the perspective of Smith and Telang (2019) in their HBR article, I think this business model is an excellent move for established players in the market to pursue. By offering subscription-based bundles, these high-end car brands can extract maximum value from customers’ willingness to pay. They are able to serve more customer groups (than the current customer group, which are only people with higher income ranges) and take a larger pie of the automobile industry in general.
Dear Vizaddo,
This is such an interesting article and I like how you present it in this blog. I have never heard of this before. Despite the company’s and industry’s growth by applying this business model, I am curious about how car-sharing business model will affect the current customers of Porsche since it is a luxury brand? The first thing that will cross my mind if I were an owner and found this news is “What is the use of this luxury car if it does not show that only certain people could use or own it”.
I am not sure how this certain perspective will affect the industry but do you think this will bring a negative impact towards the business model?