Australian Vehicle Subscription on the Rise

Competition in the Australian vehicle subscription industry is heating up with the announcement in Sydney today (9 April 2019) that Collaborate (ASX: CL8), the business behind peer-to-peer car rental platform DriveMyCar, has officially launched their own vehicle subscription service.

The new service, to be known as "Carly" was initially mooted by a Stock Exchange announcement on 29 March 2019 and makes Carly a very early player in the burgeoning Australian subscription market. This follows on the back of Australia's first subscription service launched by CarBar in 2018 and a smattering of smaller services around the country through various dealerships and OEMs.

An Alternative to Purchase

CEO of Collaborate Chris Noone said: “Car subscription is a viable alternative to saving for a deposit or taking on a loan or a lease as it provides the customer optimum choice and flexibility, without the downside of long term financial commitment." He says that “Carly is fully online and we deliver the car to you. You can join today and drive tomorrow."

The service will be very much consumer focused with pricing starting at $119 per week and a range of vehicles provided by automotive manufacturers, leasing companies and automotive dealers.

City by City

While the initial launch is in Sydney, Carly is engaged across the industry to develop subscription propositions Australia wide and is bullish about the future of car subscription. Their ASX announcement notes that "an initial small take up of 0.5% per annum would represent approximately $150 million of vehicles per annum in the subscription space and would represent approximately 5,000 customers."

Competition

There will be challenges for Carly as they expand, especially into Melbourne where Carbar is already well established. CarBar CEO Des Hang suggests that Carbar might well be taking the challenge to the newcomer, saying "Sydney is a natural expansion for Carbar." When asked about their Sydney expansion plans, Hang said that "We're currently in the process of setting up a warehouse where we can store and manage our NSW inventory. We have a core team already based in Sydney and will be adding to that over the coming months."

Corporate Targets

Like Carly, CarBar initially focused exclusively on the consumer market but are now turning their attention to corporate fleets with Hang saying that there is already substantial interest from fleets. "Carbar has had a number of inquiries come through from corporates that want the same subscription product but tailored for businesses," he says. Carbar are now planning the launch of a business to business arm during 2019 that will "target corporates that have traditionally used leases and offer a more flexible alternative."

More to Come?

The launch of Carly is unlikely to be the final word of the Australian subscription industry. Industry sources are saying that at least 3 OEMs have plans in the works along with more than one of the Fleet Leasing businesses.

Article authored by Shane Curran