Thriving in the Face of Car Oversupply: Embracing New Business Models

The automotive industry has figured out how to handle the supply issues of 2022, but this year’s demand issues are more challenging. A report from UBS predicts that global car production will exceed sales by 6 percent, resulting in an excess of 5 million vehicles that need to be sold with lower margins. Tesla seems to be the most prepared to tackle this situation. Unlike other automakers, Tesla owns its entire supply chain and can quickly adapt to market changes. However, if automakers don’t take action, the market decline will continue in the coming years. So, how can automakers overcome this situation and create profitable business models? One option is to explore car subscriptions and leasing as alternative ways to sell vehicles. Car subscriptions offer flexibility with as little as one month’s notice period, while leasing usually requires a multi-year commitment. Although leasing doesn’t benefit automakers as much as traditional car sales, it is still a popular choice for consumers managing buying risks in today’s economy. To generate new revenue streams, automakers can consider direct distribution through subscriptions. This not only meets the demand for flexibility but also reduces vulnerability to market volatility. However, implementing car subscription services at scale requires infrastructure, efficient communication, and competitive pricing. Despite the challenges, the benefits of the car subscription business model outweigh the negatives. Treating access to a car as a service lowers financial and practical implications for drivers, increasing the likelihood of acquiring the product. Additionally, studies show that EV adoption numbers increase when drivers don’t have to make a large initial investment. Car subscriptions can also help overcome the uncertainty of getting a new EV. In conclusion, both car subscriptions and leasing can help automakers future-proof their business in today’s market. By leveraging technology and prioritizing customer needs, automakers can transition into the future of mobility.