Publications

Subscription Car Ownership

Ownership, Leasing – that was Yesterday. Subscription Car-Ownership is the Next Big Thing.

We have been using products such as music and films with monthly subscription fees for years. In the meantime, this trend is continuing towards larger objects such as cars, which has already proven to be a great success in the United States. Now, Carvolution is taking on Switzerland. An interview with the CEO of Carvolution: Olivier Kofler.

Carvolution came into the market in 2018. How and where did the story begin?

Carvolution originates back to the idea of two people - Peter Schuepbach, our Chairman and Léa Miggiano, Head of Marketing, who have known each other since long before Carvolution was founded. Together they realized how successful the concept of the car subscription became in the US and applied the case to Switzerland. Their good sense paid off and as the company grew from a small idea to a national brand, I was invited to join the team.

There is also a certain mission behind Carvolution. By rethinking car ownership, we can create a better solution for everybody, who depends on individual car mobility. A car subscription is affordable, flexible, and suits today's needs. Carvolution achieves price competitiveness by sourcing everything on a big scale. We combine this advantage with a clever bundling of the insurances, maintenance, tires with the cars, and offer an all-in-one solution for cars. The customer journey and the simplicity of our product are always at the very center of our developments.

From the beginning, Carvolution not only wanted to get better prices and better service for everybody but also open the doors, by lowering the hurdle, to electric cars. Buying such a car holds certain risks and is cost-intensive. This holds back a lot of people from switching from the combustion engine to an electric-powered car. With Carvolution, basically anyone can access their own electric car without having to accept a high investment or take a risk.

Through our mission and therefore through selecting carefully high quality and fuel efficient cars we not only generate value for every single customer but also contribute to a more sustainable and environmentally friendly way people access cars.

Young people want to remain flexible - they don’t own pets, they rent apartments instead of buying them and take an Easyjet flight for a quick trip - is the subcription car an option for them?

Yes, definitely! There are more and more people and not only young ones, who say to themselves: „I don’t want to be tied down choosing a car for the next five years“. Job options and job locations change so quickly these days. Or family planning starts and especially young consumers, who are usually on a tighter budget, simply cannot afford any unexpected costs coming their way and greatly appreciate this ability to plan [short term]. The older generation on the other hand, ask different questions, such as for instance: „How long will I be able to still drive?“ I mean, nowadays it is completely normal to rent skis and snowboards – you no longer buy them and you save yourself the trouble of transporting them back and fourth. This trend started with small things like Spotify and is now in the process of moving onto larger objects.

Could you briefly explain the advantages of Carvolution as opposed to the purchase of a regular car?

The customer experience is much better here - it is all in one place. As opposed to the regular car purchase, Carvolution offers different advantages. With Carvolution people don't regret or doubt their decision. In contrast to a traditional car purchase, where people need to go through the cumbersome process of evaluation, comparison, and negotiation, we focus on fair prices, transparency and a personalized and customer-friendly journey. A second advantage, which most definitely contributes to the first one, is the money-saving component. We buy in bulk and enjoy reductions which we pass directly to our customers.

Comparis has calculated that our subscription model turns out to be cheaper than buying or leasing if you drive the same car for about five years. This means looking from a purely rational perspective, everybody should subscribe to their own Carvolution car. The advantages are clear, we now focus on spreading them and staying top of mind.

Currently, the choice of car models in your fleet is fairly limited – there are only some more expensive - will there ever be a luxury car on offer?

The luxury of our product is less the car, but more the hassle-free and convenient experience you have. Where for many years a car was seen as a status symbol, this has clearly shifted. You could say, that saving time, having a reliable car, or even having somebody take care of your car, became more important than the actual car brand itself.

However, there are still people who prefer what we would call a luxury car. And we have indeed been thinking about testing this. As mentioned before, we choose our cars with specific criteria, such as product quality and fuel efficiency. At the moment in the more premium segment, we have Mercedes or also Tesla models. But from our experience demand is higher for small vehicles. But as we are constantly growing as a company a premium segment with a wider number of premium models is possible. In general, our car portfolio changes around every six months, as we are constantly watching the market, comparing models and prices, and purchase at exactly the right time.

Since 2019, Swiss insurer Mobiliar is strategic partner in your company. What next steps can we look forward to?

Yes, this was, of course, a great gain for our company. However, as a young company we wanted to remain independent. The largest share of Carvolution still remained with the founders and our early stage investors - however, the partnership with Mobiliar with regard to car insurance is a win-win situation for both of us. Across our investment rounds we raised capital adding up to 14,75 Million, but we will not invest it to finance our fleet. The capital was mainly raised for hires, technology, and of course marketing.

You were recently labelled one of the top 100 Swiss Start-Up companies. An important factor in the ability to expand is capital. How do you see the willingness of investors to invest in start-ups?

Over the last years, Switzerland has developed into a very attractive place for financial investments. The challenge is less to find investments for a seed round or a series A, but when raising money for a bigger round like our Carvolutions series B it gets a bit tougher. I have been part of a number of start-ups, such as Bexio, in the past and there it was the same. For high volume investments there are simply less potential investors, which makes it even more important to have a strong network. In our case it certainly helped that we could show our awesome track-record. Further we are backed from the very beginning by some of the most successful and trusted investors of the Swiss start-up ecosystem. Overall, we experienced a huge willingness to invest from all different kinds of investors, therefore we were in the lucky situation to rely on smart money, rather than just having the equity without other benefits, like synergies, network or knowledge transfer.

Even large car companies are starting to study mobility strategies for the future. What are the most important and most realistic developments in the area of private transport?

First of all, the question of ownership will - in my opinion - be a key factor in bringing about a shift in our industry. If you look at Amag for instance, they spotted the trend early on and are already acting on it. At the same time, we are seeing, that consumers are less interested in brands but more interested in a vehicle, which meets their individual requirements.

This brings me to the next shift: Autonomous cars. In this area, the technology is ready but politics, insurers and manufacturers first have to put the right legal frameworks and standards in place before autonomous cars find their way into our everyday lives. For Carvolution autonomous cars will bring a great opportunity, as with the self-driving car, which needs to be constantly driving in order to be most efficient, ownership becomes fully redundant.

May 14, 2020

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