The Polestar 3, an eagerly awaited electric vehicle (EV), is creating a buzz despite its mass deliveries being a few months away. Polestar, not wanting to miss out on potential customers with expiring leases, has introduced a “flexible lease” option since October, allowing customers to lease the current Polestar 2 sedan for as little as five months before transitioning to the Polestar 3. This trend of short-term leases, subscriptions, and other flexible arrangements is gaining traction in the automotive industry, particularly fueled by the ongoing transition to electric cars.
The shift to short-term solutions is not entirely new; between 2017 and 2019, various automakers introduced subscription products, offering month-to-month microleases, only to abandon them shortly afterward. Elaine Buckberg, a Harvard economist and former General Motors employee, points out that the initial failure was attributed to the buffet model, allowing consumers to switch cars monthly, which led to expensive, idle inventory and failed profitability.
However, a resurgence in short-term leases is underway, targeting consumers who are hesitant about committing to ownership and are waiting for specific electric models to hit the market. This approach helps them avoid substantial upfront costs, especially as EV prices and interest rates remain relatively high. With an increasing number of electric models expected to enter the market (projected to grow by 20-30% next year), customers have more choices, making short-term arrangements an attractive option.
Several players, including Polestar, are exploring short-term leases to monetize growing EV inventory and cater to customers who are becoming accustomed to renting various products. According to Philipp Sadek from Boston Consulting Group, subscriptions and short-term leases could soon constitute up to 15% of new car transactions worldwide, a significant increase from the current “low single digits.”
While the traditional three-year lease may not suit everyone, microleases provide an alternative for those hesitant about committing to a longer-term agreement, especially with EVs. Companies like Finn in Germany and Sixt SE in the US and Germany have embraced this trend, offering online-managed subscriptions with convenient delivery options.
AutoNation Inc., a US-based dealership network, has also joined the trend by introducing “microleases” in shorter increments, responding to the growing interest in EVs and the changing preferences of consumers. This shift toward short-term arrangements reflects a broader trend of moving from ownership to “usership,” according to Sadek.
Volvo and Porsche are notable exceptions, as they have stuck with subscription models for the long term. Volvo’s seven-year-old “Care program” provides subscribers with a comprehensive package that includes insurance, maintenance, and other fees. While the micro-lease enthusiasts are a diverse group, ranging from young drivers uncertain about their future to affluent couples, the trend reflects a growing acceptance of separating access from ownership in the automotive market.
Polestar’s Gregor Hembrough sees the flexible lease program as an extended test drive, acknowledging the challenge of attracting EV buyers who may be less brand-loyal. The flexible lease option allows Polestar to entice potential customers away from other brands while also preparing for a secondary market of slightly used Polestar 2 sedans to appeal to more budget-conscious buyers.
In conclusion, the resurgence of short-term leases and subscriptions in the automotive industry, particularly in the electric vehicle segment, is driven by a desire to cater to consumers’ evolving preferences, bridge the gap until more EV options emerge, and monetize growing EV inventory. This shift is seen as a step towards a more flexible “usership” model, providing alternatives to traditional ownership and aligning with changing consumer habits.