The group that represents auto dealers is watching the fall arrival of new-car subscriptions in Canada with a wary eye.
Car subscriptions are being touted as a third alternative for drivers who want to access new cars, but don’t like the commitment of either full ownership or leasing. With terms that stretch from a few weeks to a couple of years, subscription programs will allow Canadians to drive new cars without having to go through the purchasing experience, having to schedule maintenance or worrying about repairs and depreciation.
Dealer principals are quietly concerned about such features as smartphone apps that allow customers to arrange a subscription without ever stepping into a dealership.
“It’s a file that we’ll need to watch closely,” said John White, president of the Canadian Automobile Dealers Association (CADA). “It’s going to come; we want to see [automakers] use dealers in a positive manner.”
The first automaker out of the gate in Canada is Volvo. The company announced in June that its Care by Volvo all-inclusive subscription service will arrive this fall with the new S60 sedan and V60 wagon. Volvo’s no-dicker monthly payment program includes concierge services, maintenance, roadside assistance, winter wheels and tires, and normal wear and tear.
The term is 24 months with an option to switch vehicles as early as 12 months into another 24-month subscription.
Mary McNeil of Volvo Canada said pricing has not been set for Canada. U.S. prices for the S60 sedan and XC40 utility vehicle range from $600 to $700 per month.
Volvo advertises that customers can subscribe to a new Volvo in 10 minutes via the smartphone app, without a visit to the dealership. However, “we work closely with our retailers to ensure there’s something in it for them,” said McNeil.
Deliveries, for example, are arranged through the dealerships.
Ford-Lincoln, Porsche, BMW and Cadillac also are testing the concept in the United States and Europe, but have yet to announce plans for Canada.
Auto subscriptions already exist in Canada’s used-vehicle market; they were pioneered in July by AutoOne, a late-model luxury-auto leasing company with outlets in Halifax, Toronto and Vancouver.
The company’s planned mid-June launch of its Drive subscription service, however, was delayed when the company learned that Canadian provinces would not allow the company to provide insurance coverage for a customer, because the company would be considered a reseller, and that practice is forbidden. Instead, AutoOne employed a broker to arrange month-tomonth insurance for the client, and the client is billed separately.
Volvo also does not arrange insurance, but offers winter tires kits at no cost.
AutoOne uses technology developed by Carma Car Inc., a Detroit-based tech startup. Subscription clients download the AutoOne Drive app on their smartphone, and can see what vehicles are being offered. Interviewed just 10 days into the new program, Rozman Patel, senior vice-president at AutoOne, said the program has generated a lot of inquiries.
Azarias Reda, CEO of Carma Car, said subscriptions are in the spirit of the millennial generation’s sharing economy. Subscriptions target two types of users: people with high disposable incomes who want to try a variety of vehicles, and customers who are looking for flexibility in vehicle access. For example, they might only want a daily driv for a period of months rather than years. He said this generation of car buyers doesn’t attach as much value to auto ownership as the baby boom generation did.
“The notion of owning a car, taking pride in it, still exists,” Reda said. “But it is decreasing.”
Volvo’s McNeil compared the experience to cellphone ownership.
“You have the ability to terminate [a particular vehicle] and adjust models.”
On the subscription issue, a spokesman from the Dilawri Group, which has dozens of dealerships in Quebec, Ontario, Saskatchewan, Alberta and B.C. said the company was “unable” to comment. Calls to the AutoCanada dealer group, whose website touts 68 dealerships across Canada, were not returned.
CADA’s White said the 3,200 dealerships across Canada are important touchpoints that could ensure subscriptions succeed. He said CADA will keep those dealer ships in the loop.
“It would be naive of us,” he said, “to just stand back and think it won’t be a factor in Canada.”