Car Subscriptions: Not only advertisers from Zurich are customers

Alyson - November 8, 2023

Car Subscriptions: Not only advertisers from Zurich are customers

For about five years, car subscriptions have been offered in Switzerland. A business model with potential, say not only the providers.

Raffael Fiechter is a co-founder of CARIFY and is responsible for the operational business. "We offer around 5,000 vehicles, but we don't own a single one." This is the essential difference from other car subscription providers. CARIFY offers vehicles that are available at dealerships. These are demonstration vehicles or cars with daily registration, both new and used. It's a sustainable approach because it offers what is already available.

As is typical with new business ideas, there are many providers initially. The same goes for car subscriptions. Among them are established companies like Europcar and Sixt. Besides their traditional business of renting and leasing vehicles, they have discovered the subscription offer as a new part of their business model. The difference lies in the durations: rental is short-term, subscriptions are longer, and leasing is the longest.

Despite strong competition, CARIFY's concept seems viable. "Our business is doing very well, and we are the first car subscription provider in Switzerland to turn a profit," says Fiechter. The company is mostly self-funded, with only a small amount of money coming from investors. This makes CARIFY largely independent in decision-making.

Car Subscriptions are also of interest to businesses

Initially, it was hip people who rented cars on subscription. "Advertisers from Zurich, now it's becoming more widespread," says Fiechter. Approximately 80 percent of the customers are between 35 and 54 years old. So far, it has primarily been individuals who have used a car subscription. Now, business customers are also joining in. These are mainly small and medium-sized companies.

CARIFY collaborates with around 500 dealers and manufacturers, including the dealer Th. Willy, as well as manufacturers like Audi, BMW, and Porsche. They can all offer their available vehicles on CARIFY's platform, with CARIFY managing all processes such as contracts and returns. "Our software platform is our actual product," says Fiechter. The company's business is IT and optimized processes.

High growth rates are possible

Are car subscriptions truly a lucrative business idea? In 2021, the consultants at the Boston Consulting Group estimated that about 15 percent of new car sales in Europe and the USA would be replaced by car subscriptions. German automotive expert Ferdinand Dudenhöffer from the Duisburg Car Institute even anticipates a share of up to 40 percent in Germany.

Professor Andreas Herrmann, Director at the Institute for Mobility at the University of St. Gallen, finds the model interesting because it represents an important step away from vehicle ownership. He sees lasting opportunities in this business model, "because vehicle ownership will lose its appeal for various reasons: reduced parking in the city center, potential city tolls, ongoing discussions about emissions and space. Ad hoc vehicle use could become more appealing."

Are these subscriptions also interesting for companies? For Ralf Käser, Managing Director of the Swiss Mobility Association SFFV, car subscriptions only play a partial role within corporate fleets. "Primarily, when it comes to interim vehicles for limited-time projects or preliminary company vehicles, such as for new employees during their probation period." Employers can wait for the probation period to end before ordering a vehicle.

Car subscriptions in corporate fleets are, for Käser, a temporary solution to bridge certain situations. When such a situation arises, it's quite common: "I estimate that about half of all new employees eligible for company cars use a car subscription until they order their own vehicle."

The advantages of the model, for him, are the short-term availability in brief timeframes, ease of use, straightforward return, and predictable budgeting.

Total costs are crucial for corporate fleets

Total costs are crucial for corporate fleets. In a car subscription, everything is included: a monthly fixed price, service, insurance, taxes. Everything. "But this is not new; it already exists with full-service leasing," says Käser. For very short usage periods of a few days to several months, it may be cost-effective for corporate fleets to rent cars traditionally.

According to Markus Aegerter, a member of the management of the Swiss Automotive Trade Association AGVS, car subscriptions also have market potential. He doesn't see a problem with new market players like CARIFY taking away sales from dealers because the vehicles from CARIFY or Clyde come from garages. But even for vehicles owned by car subscription providers, garages often benefit from service and repair orders.

In contrast to CARIFY, Carvolution is a provider with its own vehicles and typically offers at least 50 models from various brands. Carvolution is also a Swiss startup, predominantly financed by external sources. In the summer, they raised 24 million Swiss francs from the Zuger Kantonalbank for the expansion of their vehicle fleet.

Olivier Kofler is a co-founder and Chief Executive Officer at Carvolution. He says, "Our business is very promising. Car subscriptions are gaining popularity rapidly in Switzerland." He doesn't disclose the exact number of fleet vehicles, but there are a few thousand vehicles added each year. On the other hand, older vehicles are also sold, reducing the fleet inventory.

Carvolution's clientele is diverse and includes both private and corporate customers. "Our customers particularly appreciate the price advantages over buying or leasing, as well as the flexibility of a subscription and the all-inclusive service for the vehicle." One-third of corporate customers are small, another third are medium-sized businesses, and the remaining third consists of large companies with several thousand employees.

Model aligns well with mobility budgets

"Among our customers, we particularly notice that Swiss companies are increasingly switching to mobility budgets," says Kofler. Employees are assigned a fixed monthly budget with which they can determine their mobility freely. Car subscriptions align very well with this trend, according to feedback from corporate customers.

The text is from the magazine verkehrsmonitor.ch.

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