South African vehicle dealerships expect a huge increase in subscriptions as cash strapped consumers look for cheaper options to outright ownership.
Toyota is one of several companies that offer various plans for motorists at affordable monthly fees without having to pay for maintenance, and in some instances even insurance.
Car subscription, or leasing, has been around for years, but was mainly designed for corporates and travellers. Besides Toyota, a number of other companies including JSE-listed vehicle rental group Zeda, have options for consumers who do not want to carry the full expense that comes with car ownership.
Vehicle subscription services offer several advantages, including no upfront costs, and packages that cover service, maintenance, insurance, and other expenses such as car tracking.
In its vehicle price index report for the third quarter of 2023, credit reporting company TransUnion says short- to medium-term leasing, or hiring, of vehicles is on the increase.
In July last year, Toyota South Africa started a subscription service — Kinto One — at all its local dealerships in response to changing global trends around car ownership. The subscription agreements extend from six months to 60 months.
Slade Thompson, GM for sales & marketing at Kinto One, told Business Times the total cost of driving a vehicle was not just monthly payments to a bank, but also maintenance costs and insurance.
“I think now subscription stands out as the most affordable solution,” he said, adding that the younger generation have a new attitude towards owning cars.
“They don’t want to own vehicles but want the flexibility of being able to get around in the most cost-effective manner possible. That shift is happening globally and the movement is happening in South Africa as well.”
For small businesses, which are also a target market for Kinto One, Thompson said the subscription model would help them focus on their core activities and reinvest the money that would have been used in the maintenance of company-owned vehicles into the business.
Kinto One is a global strategic objective for Toyota Motor Corporation and is available in 25 countries in South America, North America, Europe, Asia, Australia, and now Africa.
Thompson said the first couple of months after the local launch were slower than anticipated. “However, we have caught up, so this year we expect to deliver on the targets that we had set, and every month we are seeing more and more interest and excitement about the product. In fact, South Africa is the fastest-growing Kinto country,” he said.
We’re looking for 100% growth for the 2024 year. The opportunities are there. The young people are going to drive this change
— Slade Thompson, GM for sales & marketing at Kinto One
“We’re looking for 100% growth for the 2024 year. The opportunities are there. The young people are going to drive this change. They are also moving into businesses and that is where we have been very successful. Businesses are comfortable to let us manage their vehicle needs.”
Thompson also spoke of plans to increase the number of cars available for leasing this year.
New-vehicle sales declined in 2023 as consumer confidence and spending remained low due to rising inflation and fuel prices and high interest rates. According to industry body Naamsa, new-vehicle sales fell 13.4% in November last year, with the industry recording 43,281 first-time registrations compared with 49,986 in the same month a year earlier.
Thompson said the intention of Kinto One was not to supersede sales of owned vehicles. “It’s just to cater to those customers where ownership is not as important and who are open to usage-based subscription. This is to make mobility affordable and also may get individuals into vehicles slightly earlier.”
Imraan Moolla, MD of SANI Car Rental, said car rental companies are trying to diversify their offerings based on the pre- versus post-Covid experiences. Before Covid, companies focused on short-term rentals but the pandemic led to the realisation that the industry was too dependent on short-term bookings. Now, rental companies are diversifying to mitigate risk and expanding leasing to consumers to give them more flexibility, he said.
Zeda said the concept of car ownership is deeply ingrained as a status symbol in South Africa, with limited awareness of other options. But as consumers in mature markets transition towards vehicle leasing and subscriptions, the country is poised for a similar shift, it said.
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