The Latin America car subscription market has witnessed significant growth in the past and is expected to expand at a CAGR of 33.9% during the forecast period (2022-2030).
A car subscription is a service where a customer pays a set cost regularly to use one or more cars. Some car subscriptions include insurance and maintenance as part of the monthly payment, while others let the subscriber switch cars anytime. Additionally, the strong consumer demand for automobile leasing services and the expansion of government regulations to control vehicle emissions significantly impact the penetration of automotive subscription service providers. Population growth, rapid urbanization, and industrialization are anticipated to promote the growth of the car subscription market during the forecasted period.
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A short-term lease of an automobile that doesn't charge the consumer for repairs or insurance is known as a car subscription. The service provider-consumer agreement also stipulates that a car subscription permits multiple automobile exchanges. As a hybrid alternative to automobile rental services and car leasing choices, vehicle subscription has grown in popularity recently. It has several advantages over these two services. Additionally, a car subscription allows you to choose and switch between different car models, which might be anywhere from one month to two years.
As a result, millennials are drawn to the adaptability of car subscriptions since they provide a short-term, more affordable option to car-as-a-service. The advantages of car subscriptions over leasing and rental services will likely increase demand for them shortly.
One advantage of a car subscription is swapping between various automobiles and shorter-term servicing contracts. A subscription is more expensive in the long run than leasing or buying an automobile. Monthly billing cycles and mileage limitations are available for car memberships. An auto subscription costs more monthly than leasing or outright purchasing a car for more than two years. Additionally, most service providers place a distance restriction on cars for a predetermined time; exceeding this restriction leads to additional costs for the end user. These monthly servicing fees and other charges are insignificant when leasing or purchasing a vehicle. The high cost of the subscription model is projected to reduce demand for car subscriptions in the upcoming years.
Automobile subscription customers choose reputable, vetted providers for their automobiles. Additionally, manufacturers are launching their segment for automotive subscription services and building a partner network to reach untapped markets. To create long-term business prospects and establish a competitive edge, car subscription market participants must form a strategic alliance with providers to change customer attitudes regarding vehicle subscription when they accept the service from a certain vehicle brand.
Latin America is a significant market for car subscriptions. The market for car subscriptions in Brazil is expanding steadily due to the entry of numerous market participants offering various services. Kovi, an automobile subscription network founded in Brazil, promises to increase drivers' access to car ownership and rentals across Latin America. Additionally, the company offers users maintenance and insurance services. According to reports, the company's user base grew by 70% in 2020, with 11,000 users in Brazil and Mexico. Currently, the corporation operates its fleet by renting 12,000 automobiles from manufacturers such as Toyota and Volkswagen. Kovi believes that their ARR (annual recurring revenue) is approximately USD 45 Million, with a month-over-month growth rate of 15%. It has 700 employees and operates in Mexico and Brazil at present. In Series B fundraising, USD 104 million was raised. Valor Capital Group, Prosus Ventures, Quona Capital, Broadhaven Capital Partners, and Norte Ventures participated in the round. Additionally, the financing will help new market entrants build their teams and investigate expansion opportunities in Latin America.
The Latin American car subscription market is segmented by Subscription Type, Subscription Period, Service Provider, and End-Use.
The car subscription market is divided based on the subscription type into single-brand and multi-brand segments.
The multi-brand market holds the major share of the segment. It is expected to grow at a robust CAGR of 35.4% because it allows subscribers to switch between brands, increasing flexibility and convenience. Some consumers strongly prefer staying loyal to a single brand because they are satisfied with the consistency of that brand's products and services.
The car subscription market is segmented based on the subscription period into 1 to 6 months, 6 to 12 months, and more than 12 months.
The 1 to 6 months subscription period holds the major share of the segment and is anticipated to increase at a respectable CAGR of 34.3% during the predicted period. The demand for subscriptions of 1 to 6 months is driven by the employer category, who often rent the automobile during their vacations; this segment also maintains a sizeable portion of the market. Long-term subscribers leased vehicles for six months to a year or more.
The car subscription market is segmented based on the service provider into OEM/captives, mobility providers, and technology businesses.
Independent/third-party service providers are anticipated to rule the market with a CAGR of 31.9% during the forecast period. OEMs can use existing consumer segments and loyal brand advocates excited by getting the newest vehicle model through this subscription service, but they are limited in several ways. To accelerate OEM adoption, dealerships have been established to use the dealer channel’s benefits fully. Dealerships benefit from this circumstance because they can offer their inventory and draw on their expertise in selling pre-owned, traded-in, and leased-back vehicles.
The market for car subscriptions is divided into two categories based on end-users: private and corporate.
The corporate segment holds the major share of the market and is anticipated to grow at a CAGR of 31.3% during the forecast period. The corporate section comprises car subscription services only intended for corporate or business purposes, such as daily trips to the office, business trips, and company-related marketing activities. For some time less than two years, corporate automobile subscription services used all company operations and business procedures to deliver a successful mobility solution. Most end-user companies have recently opted for subscription services to lower risk and capital costs. Market participants also provide unique car subscription services for businesses.