Subscription Car: Volkswagen Brazil Launches Service, Promises Competitive Price

RIO DE JANEIRO, BRAZIL – The subscription car market is growing and one of the industry leaders, Volkswagen, has just announced its debut in the segment.

On Wednesday, November 4th, the German car manufacturer began to provide the Sign&Drive rental service, featuring the T-Cross and Tiguan SUVs, but it expects to expand the reach to the brand’s whole portfolio in the future.

“Even if the service will not currently find high demand, we believe that this trend will grow in Brazil. Abroad, the business model is already a fact. Consumers will choose the way they want to consume a car,” said Pablo Di Si, Volkswagen‘s CEO, in a press conference.

According to the executive, the new service is not intended to induce consumers to migrate from the traditional vehicle purchase model to the subscription system. “We focus on the client who wants a new car at all times, with a model in which he sees value and its pricing proposal is clear.”

The car manufacturer began to offer the service with two SUVs. One of these is the T-Cross, which has been quickly gaining ground since its launch last year. In 2020, the model is among the top ten best sellers in the country and even outperformed GM’s Onix in July, becoming the market leader that month.

The other SUV is the Tiguan, one of the most expensive models in Volkswagen’s portfolio in Brazil.

The subscription packages prices vary with the distances the customer plans to drive- the more mileage, the higher the monthly subscription rate. The advantage is that the subscription covers all documentation for the vehicle (motor tax, licensing, and plates registration), insurance, preventive maintenance; the VW plan offers a monthly exemption of 1,800 kilometers. In the case of the T-Cross, the 12-month subscription charge starts at R$1,899 per month. For the Tiguan, from R$3,659 in the 24-month plan.

According to specialists, the main difference with the traditional vehicle purchase model is the fact that the client does not need to disburse a high initial payment to use the car. The “ownership” culture, widely discussed today, is also a factor that will be decisive for consumers to choose whether or not to subscribe the vehicle.

Clients may complete all of the required steps to subscribe to the plan online. After contracting, the vehicle is picked up at the nearest dealership specified.

The subscription service’s target public are men and women between 30 and 45 years of age, who are looking for cars in the R$100,000 to R$220,000 range, with a good on-board technology offer.

Currently, car rental and insurance companies offer subscription cars. Assemblers such as Audi and the Osten luxury car dealership network also offer this service. But Volkswagen’s CEO states that the brand’s focus is the end consumer and rejects efforts to sell the service to app drivers, for instance.

Business model

In contrast with the standard in the market for car subscription services, at the end of the contract, Volkswagen will not offer the client advantages for the purchase of the vehicle.

Cars that are returned will be sold within the brand’s dealership network, a partner of the manufacturer for the service offer, along with Volkswagen Bank.

“This is one of our advantages, Volkswagen’s tremendous coverage, with almost 500 points of sale in the country”, says Di Si.

According to the company, the cars delivered by subscription will be invoiced as direct (or corporate) sales to Volkswagen Bank.

Market

According to Di Si, this will be a very difficult year for the automotive industry, despite the upturn in recent months. While automakers are adjusting stocks, retail and rental companies complain of the lack of models available for purchase.

“A few months ago we decided to reduce our physical stock to preserve working capital. With the current exchange rate, the cost pressure is very high,” says the executive.

Meanwhile, the chain has been reorganizing itself. “Automakers are choosing to offer less discounts,” says Di Si, and this includes rental companies, which are reporting precisely the reduction in discount levels. “Overall, it will take a while for the productive chain to settle, but this is quite natural”.

Source: Exame

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