Geely-Owned Lynk Wants to be the Netflix of the Auto World
The one thing wrong with buying cars, according to many recent surveys, is the price-haggling with the salesman. Tesla identified this and tried out a direct-to-customer approach that allows for the customer to buy direct from the manufacturer. The advantages to the automaker are manyfold. Firstly, they can keep the profits erstwhile given to the dealership; next, they can not only set higher prices but also pull data directly from the customers and thus sell other services, or more likely subscriptions, and of course advertising for the local burger joint you are about to drive past.
Car companies no longer talk about selling cars. They now call it selling mobility and in more developed markets, buying a car with cash is now rare. Financing and leasing have long been around but now, all-inclusive monthly ‘subscription’ schemes are becoming the norm. These are designed to dramatically lower the cost of private car ownership, sorry, personal mobility, which apparently is so very much more attractive to younger customers who obviously do not understand what a residual is.
In the vanguard of this movement in Europe is Lynk & Co, a recent entrant into the market having been created by the Chinese Geely as recently as 2018. They want to be known as the “Netflix” of the auto world and has decided to offer a subscription that includes all expenses for the vehicle, including insurance road tax and maintenance. The scheme is only available in Europe right now but for a relatively low 550 euros per month, you get to drive a new car.
Hot on their heels are BYD and Nio, two more Chinese upstarts, sorry, I meant startups, who are trying to strike deals with rental companies to provide a similar service. Potentially, there could be as many as six million new cars on European and Americaland’s roads per year by 2030 and the Chinese manufacturers are thought to be targeting about 15% of these with their subscription-style service. Developed markets have always had an option to lease a car but the neat thing about a subscription is that although it may cost you a little bit more, there is always the option to change your car or return it early. For many, the ability to be fickle and change your mind is very seductive.
There may be a hidden agenda for the car companies. As EVs become increasingly ubiquitous, the rules concerning recycling will become increasingly tight. Already in the EU, by 2027, carmakers must recover 90% of all of the nickel and cobalt; this rises to 95% by 2031. A similar requirement will be in place for the lithium. This makes the secondhand car a virtual gold mine on wheels, making the scrap value of the dead battery worth more than the car itself.
In the future, you may well end up changing from buying a car to drive around in to borrowing one that drives you around. I just feel sorry for the millions of workers who may well lose their jobs as a result.