More car makers are rolling out new car subscription services. In mid-2017, I took a look at the still-new car subscription service trend. At the time, I found just four of these services — but another dozen have launched since then. I also looked at car production and concluded that a surplus of manufacturing would drive new ways to move that inventory. Those trends are continuing.

The result of producing more cars than the market can sell using conventional means is that car makers become willing to try unconventional means. One of these less conventional strategies is to expand the market and sell more cars using predatory subprime lending. Another strategy is to put excess vehicles to use via subscription services. But first, let’s look at the evidence for this glut.

(Source: FRED, via MishTalk — the revisions note is from the original)

As “motor vehicles and parts posted a gain of 4.7 percent in December,” according to MishTalk, the numbers suggest that car production is indeed up. This report suggests caution, with revisions expected if automaker claims of poor sales are to be credited.

Still, here’s a WardsAuto report quoting a JD Power’s analyst that “manufacturers will have to make some meaningful production cuts to align supply and demand at a lower level.” That’s for an industry that “habitually overproduces,” says the analyst.

And what happens when there are more cars driving out of factories than the market knows what to do with? Well, making it easier to get a car loan can be part of the problem. That may be a good thing when it means extending credit to minority or other disadvantaged groups who have had a hard time getting credit in the past. But it is a bad thing when predatory loans are extended to those who cannot carry them. That’s the danger of subprime car lending, and as auto debt rises in general, so too does subprime, risky lending.

(Source: The New York Federal Reserve)

The lowermost part of that graphic, the green component on the bottom, shows total U.S. auto lending. Currently, that debt stands at $1.26 trillion (for the third quarter of 2018), and that’s up since I last reported on auto debt. CNN Business reports that “A record 107 million Americans have car loans.” And not only is debt rising, but so are defaults, as Bloomberg reports, “Subprime Auto Debt Is Booming Even as Defaults Soar.” Let’s not dwell on whether all this debt is a good thing, or what it may say about the health of the economy more generally, but instead just take it as a sign that car makers are stretching for ways to sell more cars.

The other strategy to make use of excess auto inventory is much more relevant to our interests here. Car makers are pushing — and car customers are embracing — new ways to own cars, starting with auto subscription services. Last year Capgemini polled 8,000 car shoppers in eight nations (including the United States) and asked them about their willingness to try a car subscription service — 43% of them said they would be willing to consider trying a subscription service instead of buying a new car.

(Source: Capgemini, via Statista)

It is also worth pointing out that a July 2018 PYMNTS.com report forecast big growth for subscription offerings: “The anticipated compound annual growth rate (CAGR) of the global automotive subscription services market through 2022 is 71 percent.”

With so many consumers willing to take a chance on subscription, car makers have been eager to offer them new options. Here’s a survey of the ones I have discovered — let me know in the comments if I’ve left one out.

In July 2017, I reported on Flexdrive, Book by Cadillac, Ford’s Canvas, and Hyundai’s Ioniq Unlimited.

> Cox Automotive’s Flexdrive program, still going since 2014, is adding value with Cox’s purchase of Clutch Technologies, a technology platform that supports subscription access to vehicles and it is at the heart of several new services, including Porsche Passport. That’s according to Asset Finance International, reporting in August of last year.

> Book by Cadillac met with higher-than-expected costs and was put on hold in November 2017 and actually canceled a year later, per the Wall Street Journal. However, in January 2019, Cadillac announced it was trying again with “Book 2.0.”

> Launched in November 2017, Volvo’s “Care by Volvo” subscription service started strongly, and a year later Automotive News declared it a success with “promising results.” That success has made it a target — in January 2019, a coalition of California dealers petitioned a state board to halt the program. According to The Verge,

• The push to stop Volvo’s subscription service from taking off is the latest sign of growing tension between dealers and automakers stemming from the latter’s attempt at finding new business models. While total car sales remain strong overall, the recent growth trend tapered off in 2018. Meanwhile, companies like Tesla have put pressure on traditional automakers to try out new ideas like subscriptions, or even direct sales.

> Turns out Ford and Lincoln have been quietly piloting subscription services, and announced a ramp-up for Lincoln in March 2018, according to The Drive.

> In April 2018, BMW, Mercedes-Benz, and Lexus all started car subscription programs, as reported by Auto Finance News. BMW and Mercedes Benz are also using Clutch Technologies service. The Lexus offering was announced in April but launched in December.

> In June 2018, Prime Motor Group, a New England-based company with 30 auto dealerships, announced its own Prime Flip service.

> Also in June, Dana reported that Jeep would launch a subscription service in 2019. That was confirmed in January 2019, as reported by AutoWeek and Bloomberg, with Jeep announcing a pilot subscription service.

> In July 2018, Toyota launched Hui, but only in Hawaii, as my Subscription Insider colleague Dana Neuts reported. Toyota is also reportedly launching a service in Japan in 2019.

> In September 2018, Audi launched a luxury subscription pilot program in Dallas, according to Engadget.

> Also in September, a “brand agnostic” service called Revolved launched in Florida — and expanded to California and Texas a month later, per Auto Finance News.

> In November 2018, bucking the trend toward luxury offerings, AutoNation and Fair partnered to launch a used-car service.

With so many programs launching, it is no surprise that awareness is percolating down into mainstream reports. In a recent article for consumers in Long Island’s Newsday newspaper, reporter Ted Starkey talked about local offerings and interviewed a Consumer Reports spokesperson:

• Patrick Olsen of Consumer Reports said most automakers are being cautious in adopting the subscription model. …. Olsen does see some benefits for consumers in the subscription model, especially those who like to get behind the wheel of different models. “You’re not committed to one particular car for a minimum of three years or longer … so it gives you a chance to try out different cars,” he said. …. It’s impossible to predict if subscriptions will become a major way to get vehicles in the future, or remain more of a niche product, Olsen said. “All these automakers are putting their toe in the water because they can’t see the bottom,” he said. “It could go either way; it could be a common thing that people do, or, hey, we tried that, it just wasn’t perfect for the type of cars we were trying to sell or the way we were trying to sell them.”

As one considers all these new options, it seems obvious that the auto industry is keen to at least give subscription a serious tryout. Indeed, AutomobileMag.com is predicting electric cars by subscription in 2019. Investors, analysts, and the business press are gung-ho on the trend. Sarwant Singh in Forbes prognosticates:

• By 2025-26, vehicle subscription programs could account for nearly 10% of all new vehicle sales in the US and Europe. Throw in predictions of over 16 million vehicles being part of vehicle subscription services by 2025, and of 1 in every 5 cars in a subscription offering being new and it’s little surprise that everyone-car manufacturers, automotive dealership groups, car maintenance and repair companies, insurance firms, technology startups, AI companies, lending companies, concierge operators, and, most importantly, customers-are salivating at what appears to be a rich and ever-expanding pie.

And of course, the auto market is so vast that even 10% of that pie adds up to a huge slice of the subscription economy.

Insider Take:

The trends I saw in mid-2017 have continued apace: car and truck manufacturing has not slackened, and with surplus vehicles on hand, more and more automakers are launching or expanding their auto subscription service offerings. These are early days for a new business, and some services will falter — just look at Cadillac. However, if consumers embrace the subscription model, this may be the start of something big.