Car rental delivery startup Kyte said it’s on a mission to disrupt the auto industry by making people think twice about buying a car. Starting Thursday, Kyte will now offer a car subscription service, following what the startup says was a successful subscription pilot with Teslas. The three-, six- and 12-month subscription plans will be available to all 14 markets in which Kyte operates, such as San Francisco, Chicago, New York City, Boston and, most recently, Fort Lauderdale, the company said.
A range of SUVs, sedans and economy cars, in addition to Teslas, will now be available for longer-term subscriptions. Kyte named a few makes and models it would add to its subscription fleet, including the Kia Forte, Toyota Camry and Jeep Compass. Subscriptions include registration, maintenance, roadside assistance and door-to-door delivery and pickup.
The move into the subscription business comes as the average price paid for a new vehicle in the United States continues to remain around the $48,000 mark, according to September data from Kelley Blue Book. With interest rates and average monthly payments up, many Americans are rethinking the purchase of a new vehicle. But does that mean they’re going to be okay with spending a minimum of $519 per month for a subscription service?
According to a recent Nationwide survey, consumers are shifting spending habits in preparation of an upcoming recession. Around a third have adjusted their budgets and reduced the amount that they drive, the latter of which is likely also attributable to the price of gas at the moment. Yet Erik Zahnlecker, Kyte’s director of new products, thinks there’s still a need for subscription car services today.
“Coming out of the pandemic, the way we live, work, play and travel has significantly changed. More than ever, ‘digital nomads’ are emerging, and Americans are looking for flexible options that match their new lifestyles,” Zahnlecker told TechCrunch via email. “Car leasing or ownership comes with hassles and commitments (like depreciation, lock-in, maintenance and more) that may not suit a consumer’s desired next move. At Kyte, we’re committed to creating options for anyone looking for a ride longer than a ride-share. This whitespace is highly desired, and we saw great success with our initial Tesla subscription rollout – so we wanted to make this offering more accessible.”
Kyte began offering Tesla Model 3s for $995 per month earlier this year; the company’s Tesla’s are only available for subscription, whereas the rest of the fleet will go between subscriptions and short-term rentals, according to Zahnlecker. Kyte wouldn’t share specifics on how many users signed up for a Tesla, but Zahnlecker said there has been zero downtime between subscribers due to demand.
“The majority of our subscription customers (>50%) choose to subscribe for 12 months, showing that subscriptions is not just for people ‘in between things,’ but is also a valid alternative to leasing or ownership,” said Zahnlecker.
It’s also possible that the Tesla subscription service worked so well because, well, Teslas are really popular vehicles. They’re a luxury status symbol, and renting one not only gets drivers out of paying $47,000 for what at the end of the day, is still just a car; it also allows drivers to test the waters of electric vehicle ownership. Kyte will start adding Chevy Bolt EVs and EUVs to its fleet in 2023, but initially only has the Teslas on offer. It’ll be interesting to see if Kyte’s customers are open to paying $600 per month for an unsexy car like a Camry. For Kyte’s sake, I hope so.
After all, subscriptions exist for a reason; they represent a mental shift from ownership to access, and consumers are undoubtedly putting value on hassle-free experiences. For companies, subscriptions can also counter high upfront operation costs — like the cost of leasing and buying a fleet of vehicles — with longer-term customer loyalty. But companies like Kyte that are offering both hardware and services as subscriptions need to be hyper-focused on unit economics and monitor their contribution margins in order to succeed.
Kyte appears to be well-funded for the moment. The company just closed out a $60 million Series B in November and secured $200 million in debt financing earlier this year from Goldman Sachs and Ares Global Management.
Correction: An earlier version of this article stated Kyte’s car subscription service started on Wednesday. It starts on Thursday.