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Australians are swapping their wheels for car subscriptions as the coronavirus pandemic hits auto sales

·4-min read
  • Car subscriptions are continuing to grow strongly as sales suffer their worst falls on record.

  • In April, car sales declined 48.5%, their largest year-on-year fall on record.

  • Meanwhile, car subscription services like Carbar and Carly are reporting "staggering" growth.

  • Visit Business Insider Australia's homepage for more stories.

Australians appear to be increasingly steering away from the car yard as growth in the subscription model accelerates.

As white-collar workers set up home offices and socialites cleared their calendars, fewer Australians are shelling out for a set of wheels, as car subscription services position themselves as a more affordable alternative.

"The flexibility and ability to pay as you go provided by a subscription is working to our advantage in these conditions," Des Hang, co-founder and CEO of subscription service Carbar, told Business Insider Australia. "Australians are reassessing their finances and are realising the true cost of car ownership."

While it offers users stewardship of a car from their fleet for a weekly fee, others like Carly and Blinkr go directly via a dealership. Typically the companies promise to take care of things like insurance, registration and roadside assistance.

The model has seen "staggering" growth, Hang said, with a four to six-week waiting list emerging for Carbar customers over recent months.

"We were always bullish on our growth, but this has outstripped anything we expected or have seen abroad," he said.

According to Hang, Carbar has grown more than 160% since the beginning of the year, at the same time that sales continue to decline. As has its competitors, like dealership subscription service Blinker.

"At Blinker we've seen this through a massive 52% increase in dealership enquiries since the lockdowns came into effect. We expect that even after the pandemic is over, consumers will be hesitant or unable to take on car loans, but dealers will continue to receive a weekly stream of revenue through subscriptions," managing director Michael Higgins said.

Meanwhile, growing at almost 80% year-on-year is Carly, operated by Collaborate Corporation.

"[The economic downturn] presents an opportunity for Carly car subscription to provide consumers and businesses with vehicles without the long-term financial commitment and risk normally associated with lease, loan and outright purchase," Collaborate CEO Chris Noone said, noting new enquiries were up 60% in May.

"It is likely that concern about the economy will accelerate the shift to car subscription."

With car sales considered a key economic indicator of consumer confidence, the latest stats paint a pretty poor picture. Sales fell nearly 50% in April compared to last year's figures, marking the single biggest monthly drop since records began in 1991.

"Clearly, the COVID-19 pandemic has had a major influence on the April sales result, and reflects a downturn in the broader economy right across the country," Federal Chamber of Automotive Industries chief executive Tony Weber said in a statement reflecting on the figures.

However, while current uncertainty has taken a bite out of the industry, sales have long been in decline with April marking the 25th consecutive monthly fall on the previous year's numbers.

Instead, Australians are increasingly holding onto what they already own. Falling sales of new cars has seen the average age of passenger vehicles jump to over 10 years, according to recent ABS data.

Hang sees an opportunity in offering both flexibility as well as variety, with subscription services allowing customers to change vehicles on a whim.

"These are difficult times for the auto industry but we see a clear path forward for it in the form of the subscription model," Hang said.

However, it still has some way to go. With the subscription model having been in Australia less than two years, the numbers of Australians using the services are still relatively small. Hang estimates there are only several thousand subscribers nationwide.

While the automotive industry anticipates a rebound after its horrendous slump so far this year, it's also expecting the economy to put a handbrake on potential buyers.

"COVID-19 has also seen many consumers struggling to get credit as individuals utilising JobKeeper are being treated as high risk by credit providers and being denied credit," Australian Automotive Dealer Association CEO James Voortman said in a statement.

"It is going to be difficult for this industry to recover if credit is frozen and there is an opportunity to provide a guarantee and exemption from responsible lending laws similar to that which has been provided to SMEs."

Without substantive changes, more people may be driven into subscription models yet.

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