You Wouldn’t Download a Car?

…but you might subscribe to one. Volvo recently introduced their new XC40  a mid-sized SUV with one special feature, you can subscribe to its usage. Subscription services have been at the forefront of recent consumer technology advancements and I believe that it will do the same for the automotive industry. To make a true subscription service Volvo has made three key distinctions in their offering when compared to leases:

  1. Insurance – included in the flat monthly fee
  2. Upgradability – after a year on contract you can upgrade your current model
  3. Convince and Service – one fee through one servicer

We have seen the subscription format revolutionized key industries before it. In the music industry, record sales turned into streams, as consumers we were essentially locked into a lifetime of membership to maintain access to our curated collections. When it came to movies and TV we look to both Netflix and Hulu who have destroyed traditional TV, TiVo, Blockbuster, and I would argue RedBox. Not only did this disrupt industries, but it increased the presence Rokus, Smart TVs, and various internet-connected devices into the home. Finally, when it came to cellphones, subscriptions have led to a faster adoption of AR and VR technology through higher performance phones that can function accessories like Google CardboardSamsung Gear VR, and apps like Pokemon Go.

Volvo looks to be the first auto company (others have attempted, but at unreasonable price points) to bring the subscription model to the average customer. Whether you buy or lease a car there is a whirlwind of confusing fees and alternatives that make the whole purchase a confusing ordeal. Volvo solves this problem by combining the insurance, repair fees, and usage fee into a simple $600-a-month fee.

Just as subscriptions evolved their various industries I see the automotive subscription model to serve as a driving (no pun intended) force behind the adoption electric cars. Instead of being attached to a car for 5-7 years subscribers will have the opportunity to upgrade every year and put these emerging technologies to the test. This constant upgrade cycle combined with the only additional cost being fuel (petroleum or otherwise) will motivate drivers and manufacturers to minimize that cost and move toward electric. It may take years, but Volvo is paving the way for automobile usage in the United States and I look forward to see the outcome.

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