Car subscription scheme a real threat to car ownership
Car

The new scheme eliminates costs related to owning a car like insurance, road tax, maintenance

by RAHIMI YUNUS/ pic by MUHD AMIN NAHARUL

RENTING a car on a monthly subscription basis is the latest emerging disruptor that can throw into disarray the widely accepted but high-cost car ownership practices.

The new scheme, which allows subscribers to pick and use a car for a month on a fixed rate, eliminates the costs related to owning a car like insurance, road tax, maintenance and value depreciation. Most cars lose about 10% to 20% of their purchase value a few months after they roll out from the showroom.

The car subscription scheme will hurt car sales as purchasers opt for the short-term and flexible scheme. Analysts said car subscription services would have an impact on vehicle ownership in the long term.

“In the medium and long terms, vehicle subscription, combined with ride-hailing, ride-sharing and car-sharing, will indeed impact vehicle ownership.

“The uptake of vehicle subscription will increase once original equipment manufacturers (OEMs) and leasing companies start pushing affordable monthly subscriptions to the mass market,” GlobalData plc head of automotive consulting Animesh Kumar told The Malaysian Reserve (TMR).

Animesh said the long-term outlook of car subscription services would largely depend on the economy, expatriate population, availability of vehicle finance, growth of public transport infrastructure and growth of shared mobility.

But he does not foresee a significant impact of vehicle subscription in the short term despite such services’ appeal to expatriates, young professionals and vehicle enthusiasts.

“Malaysians like to own assets and with low hire purchase interest rates, there is unlikely to be a mass exodus of customers from vehicle ownership,” he added.

Last month, a new car subscription platform called Flux entered the market, providing users an all-inclusive monthly car subscription service with zero down payments and a flat fee that covers insurance, road tax and maintenance.

 

 

Flux Sdn Bhd, a start-up founded by Aziz Ayman and Tan Sri Dr Zeti Akhtar Aziz, offers subscription plans based on time period and members can switch cars throughout their subscription with a standard switching fee.

Flux carries various cars including Kia Picanto (RM814 per month), Toyota Vios G (RM1,308), Honda City S (RM1,428), and BMW 630I GT M Sport (RM8,837), according to the website.

Kenanga Investment Bank Bhd analyst Wan Mustaqim Wan Ab Aziz said the car subscription service would be welcomed by expatriates and those under short-term employment.

Wan Mustaqim said locals would still prefer to own a vehicle.

According to the PYMNTS Subscription Commerce Tracker, the global car subscription market is forecast to grow 71% by 2022.

The automotive market is already under pressure due to the slowing global economy.

“Vehicle subscription services are coming up in all parts of the world and Malaysia is no different. Across the globe, several OEMs, either directly or through their subsidiaries or partners, are offering vehicle subscription and there are third-party companies who have also entered the market.

“Vehicle subscription is another offering in the growing range of services that will convert cars from a product to a service,” Animesh said.