North America’s first electric vehicle-focused monthly car-subscription service has debuted in the District of Columbia.
“Steer is making EVs accessible and reducing all the barriers that are out there,” co-founder Erica Tsypin said.
The company is offering a “concierge-style” service that delivers virtually any EV and plug-in hybrid available in the U.S. straight to customers’ driveways. Launched by the electric-utility giant Exelon ($EXC), the startup hopes to put more EVs on the road by helping the battery-curious overcome common anxieties about charging, range, and power, while free of the commitment of a years-long lease – let alone a purchase.
Sales of electric vehicles in 2019, which had soared in 2018, dropped by nearly 9 percent compared to the previous year, according to data compiled by InsideEVs.com.
“A majority of our members have zero to very little experience with electric vehicles. They probably would have never thought of purchasing one for a few years,” Tsypin said. “They see this easy, convenient mission-driven service, and they trust us and our expertise to jump in with both feet and go for it.”
Customers can choose from three month-to-month subscription options: an entry-level package at $889 a month, that includes a selection of mid-range Toyotas, Nissans, Chevys, and BMW EVs and plug-in hybrids; a Tesla Model 3 subscription for $1,089 a month; or a top-tier “Premier Performance Plan” featuring the luxe Model S, Model X and new high-end EV offerings from Audi, BMW, Jaguar, and Porsche.
The plans include insurance, maintenance, roadside repairs and the ability to swap vehicles, with pickups and drop-offs handled by Steer staff.
The service is the latest vehicle-subscription service to emerge, each one – whether from automakers or third-parties like Flexdrive – seemingly aimed to counter the drop-off in car-buying. A small subset, such as Borrow in California and a trio of similar EV services in Europe, has focused on EVs.
Steer’s launch last year was relatively quiet; the company reached customers through word-of-mouth, social media posts and ads on local news sites. It now boasts subscribers and a fleet of vehicles that both number in the “triple digits,” Tsypin said, and Steer is planning to soon launch in other cities. Meanwhile, Tsypin, who is 28 years old, was named to Forbes’ 30 Under 30 list for the energy sector.
“We've got a short list of cities that we're testing – they're all from the West Coast to the East Coast and the Midwest. It's all over. We can really go anywhere,” Tsypin said. “Demographics are a big part of it, charging infrastructure, how many people actually drive is a factor.”
Electric utilities like Exelon hardly have a reputation for innovation. But electric vehicles offer enormous market potential for the industry. Not only do the vehicles promise new sources of electricity demand, but their batteries – when hooked to the grid – can help with what’s known as “demand response,” allowing utilities to draw power from the vehicles’ batteries whenever energy demand peaks, averting the need for more expensive sources of power generation.
Between the anticipated surge in demand and decline in expenses, industry consultants have pegged the estimated value for electric utilities anywhere from $3-10 billion.
“The rapid acceleration in EVs ownership, alongside the shift to low carbon power generation (including by households), greater focus on energy efficiency and other technology-based innovations in the energy sector, is very much front-of-mind for utilities,” Giles Dixon, senior director of FTI Consulting’s Clean Energy practice, wrote in an email to Cheddar. “Increased EV ownership presents a great opportunity to increase sales of their core product (electricity) as well as new products and services (e.g. domestic electricity generation and storage, vehicle insurance and retail products and services).”
The car-subscription model, though, has faced significant headwinds. While such services are being looked to as a potential response to flagging car sales, which dipped about 1.5 percent last year and are down about 2.4% from their 2016 peak, subscription services have had uneven success.
Cadillac, for example, was the first major automaker – in industry parlance, original equipment manufacturer, or OEM – to drive into the space, introducing an $1,800 per month subscription it called “The Book” that drew comparisons to Rent the Runway. It suspended the service roughly a year later as costs outpaced the company’s expectations, although Cadillac’s parent company, General Motors, last week announced that it plans to reintroduce the service as “Book 2.0.”
“It appears to be somewhat of a mixed bag of success associated with that, and I don't see a tremendous amount of interest in either jumping into subscription models at this stage or feeling like it's a business model for [automakers],” said Joe Vitale, who leads Deloitte’s global auto practice. “It tends to be expensive for the consumers and, with the declining residual value of the vehicles, tends to be costly for either the lender or for the OEM to provide those solutions to consumers.”
Steer EV’s price-point is higher than ostensible competitors such as Volvo’s Care program, which ranges from $700-800 a month, or third-party services like FlexDrive, which offers vehicles like the battery-powered Nissan Leaf at rates in the $400s. But it’s lower than high-end subscriptions from luxury automakers like Audi, BMW, Mercedes-Benz, and Porsche.
Steer’s founders argue that the company’s month-to-month commitment, unlimited mileage, and ability to swap vehicles offers far more flexibility than the other offerings. Tsypin dismissed Volvo’s Care as a “lease in disguise.”
It’s also confident that focusing on EVs gives the company an edge: A report earlier this year from Deloitte, for example, found that while 41 percent of global consumers said that they’re “actively considering” an alternative-fuel vehicle like an EV – up from 29 percent the previous year – concerns about charging availability and other issues remain.
“Everyone is so busy, and if you just think about the very first time that you want to get into an EV, you have to do a ton of research that you've never even done before: How far can these cars drive, where are the chargers, are there enough, and how long is it going to take? On top of that is the fast pace that the technology is changing, so people are worried about making a bad investment," Steer co-founder Sonya Harbaugh said. “We're really looking to capture that mainstream market by making it so much easier, less risky, more effortless to go electric in the first place.”