Will mobility subscription models work?
Written by Brit McGinnis
This article was originally published on October 23, 2018
Chances are that you pay a monthly fee to watch movies and TV shows whenever you need. But would you do the same for a ride home?
Ridesharing company and Uber rival, Lyft, is rolling out a subscription model for its ride services (as reported in Wired) that would allow commuters the chance to ride at a set price for a certain amount of rides per month. Their new carpooling feature Lyft Line is being promoted in tandem, offering more options than ever for people looking for a less expensive commute.
Lyft has persistently stated their mission to cut down on traffic, perhaps to silence accusations that they’re a big part of the problem in large urban cities. They also announced recently that they will award $300 in Lyft credit (in addition to credits for public transportation Divvy, and Zipcar credits) to any Chicago residents willing to hold off on driving for an entire month. Regular subscribers mean more consistent income — and more people potentially willing to carpool using the new features.
But the minimum $299 per month price tag for Lyft’s subscription has us wondering just how many takers this plan will attract. (This isn’t even the most expensive plan on offer — that would be the $399 per month package, with a $300 choice.)
The answer is: Probably enough. Because these prices are actually some of the best out there.
Ride prices are the real perk of these subscription choices. The $199 package buys a subscriber 30 rides a month at a guaranteed $15 each (customers would be charged for expenses in excess of $15). That’s very attractive for customers of a service where surge pricing is a common complaint. Lyft takes it a step further with their Personal Plansubscription option, allowing customers (namely, heavy commuters) to select routes for fixed pricing. If you’re likely to use Lyft just for getting home or going to work, the Plan will ensure you know the price of that trip every single time.
If you’re willing to let someone else drive, you’ll end up saving a lot of money with Lyft’s plan. Zipcar talks a big game with a $7 per month package, but the customer also ends up paying in travel time. That price also doesn’t count the $25 application fee. Their Commuter Plan from Zipcar, at $199 per month, also charges additional fees by the mile. Though customers in big cities will be happy to hear that this plan comes with weekly car cleaning and — gasp — a dedicated parking spot.
Perks like a parking spot are the factors that set the transportation subscription services apart. Mercedes’s Collection subscription service is pretty extensive — it lets you drive anything within four classes of it’s vehicles (fewer if you want to go for a cheaper package). But even better is the complimentary concierge that helps you find the exact car you’re looking for, and then drives it to your door.
Volvo’s $600 per month option gives you “pretty much everything but gas.” Most flexible of all is Mobiliti, a general car subscription service that offers regular car switching across different models. For between $600 and $1,400, customers can skip fees for insurance, roadside assistance, etc., while not being tied down to one model of car.
That’s the big question: Will customers actually use these subscriptions? Research and Markets recently reported that the auto subscription field is due for a 71.38% Compound Annual Growth Rate (CAGR) from 2018 through to 2022. The report suggests there will be an initial boom in the market, but that interest will wane over time. Car subscription is an attractive option for customers looking to avoid the cost of car upkeep. Though it can be incredibly expensive for the companies themselves — more so than just renting or leasing their cars.
Yet Lyft’s subscription service isn’t just for cars. The closest app in comparison is actually Whim, based in Helsinki, Finland. This all-in-one app opens the door for customers to purchase transportation options for cars, taxis, and even city bikes. Even bus rides are included in this app’s packages. People are watching and waiting to see if the app will meet it’s solvency goal of 60,000 monthly subscribers. The app’s already offering West Midland, Antwerp, and Amsterdam-based options.
Dodgy as it is, the best response to whether Lyft’s subscription model will succeed is “wait and see.” And we probably won’t have to wait long — we’re likely to see a pricing battle between mobility companies looking to ensure their subscription services are profitable. Lyft is standing out for good reasons: They have more than just cars to offer, and the price may be right for those who don’t need something too flashy. It’s only a matter of time before their competitors come along for the ride.
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Please note that this article expresses the opinions of the author and does not reflect the views of Move Forward.
