Ford Drops Vehicle Subscriptions, As The Space Accelerates

Ford Drops Out of Vehicle Subscriptions

The whole culture of driving is changing – no doubt more quickly than many could have imagined. Further proof of that comes from Ford, and the hot-and-getting-hotter world of vehicle subscription commerce. The venerable automaker has agreed to sell its own vehicle subscription operation to Fair, a startup in this space.

Fair reportedly will buy Ford’s Canvas operation, though terms remain undisclosed. The move comes as Ford tries to shed costs over the next three years or so under what CNBC called an $11 billion restructuring plan.

As part of its ongoing research into subscription commerce, PYMNTS has regularly covered Canvas, which offers subscribers access to a selection of used Ford vehicles. “The two main ways to get into a vehicle today are short-term options, like ridesharing or renting by the day or hour, and long-term commitments, like leases and loans,” CEO Ned Ryan previously told PYMNTS. “There isn’t anything in between. We wanted to create a simple and easy way to get into a vehicle somewhere in between those two worlds.”

Subscription Growth

The deal comes during a period of growth for vehicle subscriptions, which is poised to continue into the 2020s.

The anticipated compound annual growth rate (CAGR) of the global automotive subscription services market through 2022 is 71 percent. That growth, in turn, is part of several other trends, not the least of which are significant revenue increases in the wider subscription economy and the shift in driving culture that is seeing more consumers want to rent vehicles instead of outright own them.

Indeed, according to Fair, cars-as-a-service represents the future of driving, at least according to a previous PYMNTS interview. One factor? Retail and wholesale pricing for cars at all levels – new and used – is now transparent to anyone with a smartphone in their pocket or an internet connection via a computer. That transparency, apart from being good for consumers in obvious ways, is also good for the car industry as a whole, as it has forced manufacturers and dealers to rethink how cars are bought, not just sold, according to that interview.

Other Players

Other players – including those at different levels in the automotive world – could also have significant roles in part of the subscription commerce game. For example, Mercedes-Benz recently marked the one-year anniversary of its luxury vehicle subscription service by expanding the program to Atlanta, Georgia. In addition, Mercedes-Benz Collection is expanding its Nashville, Tennessee offering to include the Premier tier. As well, Atlanta is testing a new subscription tier made up exclusively of the company’s high-performance AMG models. And a recent agreement between Clutch Technologies and Mercedes-Benz will offer Clutch Georgia members the chance to transition to a Mercedes-Benz Collection subscription.

Toyota is trying to make its own presence felt in vehicle subscriptions, too. Early this year, it launched KINTO, a company to manage and operate its car subscription service. KINTO is funded by Toyota Financial Services and Sumitomo Mitsui Auto Service Company. KINTO offers two services that will soon be available in Japan: KINTO ONE allows customers to drive one Toyota-branded vehicle over a three-year period, while KINTO SELECT allows customers to drive six Lexus-branded vehicles over a three-year period. Both are monthly fixed-sum services that include insurance payments, vehicle taxes, registration charges and regularly scheduled maintenance of the vehicles.

BMW also offers subscription access to its vehicles through its Access by BMW program, which costs between $1,099 and $2,699 per month. Audi gives subscribers access to five vehicle options – the A4, S5 Coupe, A5 Cabriolet, Q5 and Q7 – for $1,395 per month. The automaker’s plan also includes unlimited mileage and allows customers to swap vehicles twice per month.

As for Fair, it is supported by SoftBank and has partnered with Uber for vehicles intended for that service’s drivers. Fair has a mobile app and website that makes it easy to search for and purchase a car while staying within a predetermined budget. Through the app, users search for a car and sign the lease without the need to go to a car dealer.

When it comes to subscription commerce for vehicles, the trend seems to be picking up speed even as Ford drops out.