Whether you call it a micro-lease, a subscription, or long-term rental, flexible, turnkey vehicle access without any long-term commitment now dominates personal transportation in Europe.

And developments suggest that a larger presence in U.S. dealerships will be coming soon.

I was listening to a panel discussion with some very esteemed automotive economists recently, and in discussing the prospects of electric vehicle sales growth in the United States, a shocking, though true, fact was agreed to by all. New-car purchases now were only for the affluent, and that middle class folks are priced out of the market for new vehicles — not just for EVs, all new vehicles.

With the average price of a new car over $48,000 now, it’s hard to argue that fact.

Given that EVs, are now, on average, 20% more expensive than ICE vehicles, and come with a lot of hesitancy as to charging capability, etc., it’s clear that the mainstream EVs and PHEVs coming onstream (100 new models in the next 30 months) are going to have a tough time selling even with generous customer incentives.

By last count, they are already sitting on dealers’ lots roughly double the time of ICE units.

Note: whether you use the term “subscriptions,” “micro-leases,” or “long-term rentals” it all represents the same thing (“a rose by any other name…”), flexible, turnkey, convenient personal transportation for a single vehicle “owner,” without any long-term financial commitment.

Some recent developments suggest that this type of personal use case for vehicles may become a much larger “sales” channel for U.S. automotive retailers.

First, the research.

Just last month Deloitte published a very well-documented report, written by Rodolfo Dominguez, autotech subsector Lead, and Ryan Robinson, automotive research leader, entitled, Beyond Vehicle Ownership  Changing the Way Consumers Think About Mobility.

The study makes a robust case that the dominant vehicle “buyers” of the future prefer the benefits of a subscription/rental over a purchase, and, indeed that may be one of the best ways EVs go “mainstream.” It even suggests that OEMs and dealers should partner with third-party technology start-ups to most effectively and quickly implement a subscription program.

This author found that part particularly interesting.

Second, “in the field.”

After a few judicious hints, in July, AutoNation launched its new “micro-lease” program through AutoNation Mobility. Given the time and investment in technology, it’s clear that long-term strategic planning and research preceded the decision to launch, with a vision perhaps based on the same findings as the Deloitte study, combined with the added benefits of creating their own “premium used-car inventory.”

Third, look at other areas of the world.

Subscriptions are already a dominant form of personal transportation in other parts of the world, just not in the U.S. yet.

Europe is significantly ahead of us in EV sales penetration right now, even before the on-slot of cheap Chinese vehicles, and has, in general, no more an affluent population than the US. Perhaps there is a clear link between the substantial percentage of vehicles in subscription/long-term rental service and the growth of EVs.

Take a look at numbers compiled by Horizon Automotive out of Italy about the market share of subscriptions/long-term rentals as a percentage of personal vehicle use for consumers in Europe as of May 2023:

Italy – 26% (a 61% growth rate over 2022)

Spain – 27%

France – 28%

England – 53%

Do these percentages surprise you?  They surprised me, and I’ve been following this for a while now.

While tax structures in England certainly have something to do with this, the percentage and growth just in the last few years in the other European countries suggest more fundamental changes afoot.

A long time ago, an automotive retailer sold vehicles. Then about thirty years ago consumer leasing entered the picture, which made vehicles affordable for a whole new group of buyers and developed into a substantial percentage of retail “sales.”

Could subscriptions/micro-leases be the next wave, the nascent third “sales” channel for dealers to make EVs and ICE vehicles affordable for a new generation of “buyers?”

Some automotive retailers are testing the waters right now before inventory grows into a substantial floorplan expense.

John Possumato is the CEO of DriveItAway, an app/platform to facilitate dealer-based consumer vehicle subscriptions and leases.