Volkswagen Tests a Subscription Offer with Drover

Volkswagen Tests a Subscription Offer with Drover

FACTS

  • The financial arm of Volkswagen’s British subsidiary, Volkswagen Financial Services, launches a car subscription service in partnership with a specialised FinTech, Drover.
  • A pilot phase has been conducted in February 2019.
  • 4 cars are proposed: Polo, Golf, Passat and Tiguan.
  • Cost: monthly subscriptions start at €600 + €170 entry fee, with no deposit to be paid.
  • The subscription offer includes car use, insurance, maintenance, assistance option to upgrade or downgrade at any point.
  • 2 options:
    • Flexible and monthly: a one-month rolling contract automatically renewed, which can be cancelled for free at any point as of the first month. Customers may change car every time they cancelled their contract.
    • Contract for a fixed period of time, from 2 to 12 months, defined when subscribing. Fees apply in case of early cancellation and discounts are available for longer contract periods.
  • All contracts are managed entirely online.

CHALLENGES

  • Staying competitive and meeting customer demand. Car makers may no longer avoid featuring subscription-like offers. Volkswagen is making adjustments to include this trend.
  • Making profit from a model still under construction. Volkswagen opts for a highly flexible model, whereby customers may cancel their contract after just one month and even change car. They stay cautious, however, and try to make sure this model can earn them profit: a test phase is underway and the fees they apply are quite high.

MARKET PERSPECTIVE

  • Subscription offers are increasingly popular in the car industry. These offers are no longer only featured by very high-end manufacturers and less premium have managed to enter this market segment.
  • Even if much alive, this market still is fragmented and the issue of its business model hasn’t yet been solved. There is now a gap between brands running tests on highly flexible offers (Seat and Volvo, for instance) and other more cautious industry players (e.g.: Renault).

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