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The global automotive industry finds itself at a critical crossroads. The rise of the Chinese automotive sector, particularly its ability to produce electric vehicles (EVs) at speed and at price points Western manufacturers struggle to match, has exposed vulnerabilities in the established players. With Chinese models rapidly gaining ground, automakers in Europe, the U.S., and elsewhere are facing unprecedented pressure.
Earlier this week, the Biden administration announced a move to ban Chinese-made software and hardware from U.S. vehicles, effectively barring all Chinese-made cars from entering the American market. This decision has given domestic automakers a brief respite, but it offers little relief for those competing in global markets, where Chinese manufacturers are still in full force.
Volkswagen, for instance, is reportedly considering shutting down two of its German factories—the first closures in its home country—as it grapples with the transition away from fossil fuels. Meanwhile, Volvo has tempered its earlier ambition to sell only electric vehicles by 2030. The road to electrification has proven to be more challenging than initially thought for the industry’s established giants, and Chinese manufacturers are racing ahead.
So, how can Western automakers compete?
The Rise of China’s EV Market: A New Benchmark for Global Automakers
At first glance, it might seem that competing head-to-head with Chinese manufacturers by matching their price or vehicle specifications is the obvious route. However, this approach may not be the most strategic. Instead, the auto industry could take inspiration from other sectors. To compete with Coca-Cola, one might think to offer a better-tasting alternative at a lower price. But in reality, the most successful competitor to Coca-Cola in recent years has been Red Bull—a brand that commands a premium price for a product in a smaller can and with a taste that many would describe as "acquired."
This begs the question: What is the "Red Bull" approach for the automotive industry when it comes to EVs?
Why Car Subscriptions Are Key to Competing in the EV Space
The answer could lie in rethinking not just the vehicle itself but the entire vehicle ownership experience. Increasingly, consumers are signaling a shift in how they want to interact with cars, particularly electric ones. Rather than committing to long-term ownership with all its financial burdens, they’re leaning toward more flexible options, such as vehicle subscriptions.
Recent studies support this trend. A PwC report found that nearly half (49%) of surveyed consumers would consider opting for a vehicle subscription within the next five years. Another YouGov poll showed that one in three individuals are interested in trying out vehicle subscriptions. At Loopit, our data reveals that 73% of prospective EV adopters would prefer to subscribe to an electric vehicle rather than purchase one outright.
Car subscriptions offer a practical solution to many of the hesitations consumers have around EVs—whether it’s the higher upfront cost, range anxiety, or concerns about long-term battery degradation. Subscriptions allow consumers to try out an electric vehicle with minimal commitment, offering flexible terms that alleviate the risks associated with outright ownership.
Rethinking Vehicle Ownership: A Path to Long-Term Success
Beyond the world of EVs, the financial landscape of car ownership itself is changing. Soaring cost-of-living expenses and the burden of vehicle loans are making traditional car ownership less attractive, particularly for younger generations. A new survey by CarEdge found that 31% of American drivers who financed their cars are currently underwater on their loans. EV owners are even more affected, with 46% in negative equity—a clear sign that the economics of car ownership are no longer as sustainable as they once were.
The automotive industry, then, must do more than just compete on price or specs. It needs to innovate in ways that align with changing consumer behaviors. Flexible mobility solutions, like car subscriptions, offer a path forward—one that addresses both consumer needs and the industry's growing pains in transitioning to electric vehicles.
As automakers rethink their strategies in a rapidly evolving landscape, it’s clear that the future of mobility will be shaped not just by what we drive but by how we drive. Car subscriptions represent a significant shift in this direction, offering a compelling alternative to traditional ownership models. For automakers, adopting this model could be the key to navigating the uncertainties of the electric revolution and staying competitive in an increasingly crowded market.
