Autonomy, a startup Santa Monica automobile provider that unveiled its app only in January, has made a big move that will allow it to go nationwide in a hurry.
The company earlier this month placed orders worth $1.2 billion to buy 23,000 electric cars that will be marketed through AutoNation, the country’s largest automobile retailer. Autonomy had been operating regionally with about 1,000 Tesla-made cars that it provides on a subscription basis.
“For us it is really about selection and scale and running our business responsibly,” Scott Painter, Autonomy’s chief executive, said of the deal. “For AutoNation, it is about leveraging their infrastructure, understanding the modern consumer and being digital.”
Autonomy will provide the cars on a subscription basis through its app instead of by leasing them or selling them. AutoNation will manage Autonomy’s inventory of cars at its locations and service and repair them. Under the subscription model, customers do not pay to service their cars.
AutoNation, which is headquartered in Fort Lauderdale, Florida, has more than 300 retail outlets across the United States.
Autonomy’s colossal order of electric vehicles also necessitated the need for a physical partner to manage the logistical side of landing, receiving and testing its vehicles across the United States.
“With the acquisition of 23,000 cars, we are going to begin the national rollout in partnership with AutoNation, so you will be able to get a car anywhere in 50 states,” said Painter, a serial entrepreneur who previously founded CarsDirect.com and TrueCar Inc., a vehicle listing-services company.
“In all these markets, they will help us land the cars when they come from the manufacturer,” Painter continued. “What this does for us as a young company is that it gives us the ability to scale without having to invest in infrastructure.”
The huge order includes electric cars from BMW, Fisker, Ford, General Motors, Hyundai, Lucid Group, Mercedes-Benz, Rivian, Toyota, Volkswagen and several others. Autonomy up to now has only been dealing in Tesla’s Model 3 and Model Y electric vehicles, although it will also buy additional cars from Tesla.
Autonomy, which has been around two and a half years, is now considered one of the largest electric vehicle subscription-based services in the nation.
The company had been operating in stealth mode until its official launch in January, when it unveiled its Autonomy app in Apple and Android stores. Through the app, customers can order a car complete with insurance through Autonomy’s partners, Digisure and Liberty Mutual.
Under Autonomy’s subscription system, customers pay a $100 reservation fee and $500 deposit, which are refundable if the customer doesn’t go through with the deal. Then there’s a flexible starting fee and a monthly charge; the higher the starting fee, the lower the subsequent monthly payments.
For subscribers seeking the lowest monthly payment for Tesla’s Model 3 compact sedan, which Painter calls “this generation’s Prius,” they put down a $5,900 starting fee and pay $490 monthly for the vehicle, which retails at $46,990.
Subscribers seeking lower start-up costs can put down a $1,000 starting fee for the Model 3 and pay $1,000 a month. Subscribers can throttle their monthly payments and starting fees among 10 different options.
Consumer websites say that leasing a car is generally less expensive, but a subscription can be cheaper for those who need a car occasionally or seasonally. After the minimum 3-month term is completed on an Autonomy subscription, customers go to a month-to-month arrangement. If a customer turns in a car for, say, a month, the customer won’t pay that month.
Ryan Robinson, a research leader in the global automotive sector for Deloitte LLP’s Consumer Industry Center, has seen a growing appeal of the subscription-based model – vehicles as a service.
“Within the 35- to 50-year-old consumer age range responding to our survey, about half of those consumers are interested in a vehicle subscription service and that’s a lift of 20% on a year-over-year basis,” Robinson said. “It may connect all the way back to the affordability issue. If the personal ownership of vehicles is becoming increasingly prohibitive for consumers, then vehicles and mobility as a subscription or vehicles as a service may make sense.”
Not only is Autonomy banking on the subscription model, but it is tapping into the conversion to electric vehicles.
“By doing this, we’re going to be able to open access to an electric car for less than $250 a month,” Painter said. “That is powerful. We are excited about being the place where people go to when they think about wanting to experiment or even give an electric vehicle a try.”
With the new vehicles, subscribers are expected to have access to the Chevy Bolt for $250 a month. But even those who want higher-end models, such as the Hummer EV, which retails for $110,000 to $120,000, can do so without the big up-front price of buying one.
“Subscribers are not forced to pay a premium for their car at a time when debt is going to be very costly,” Painter continued. “Inflation, interest rates, supply chain issues with building new cars, the semiconductor shortage. There are many reasons to go electric.”
“From a manufacturer and investment point, we are past that point of no return, so to speak, with electric vehicles,” said Robinson of Deloitte.
Numerous factors play into the surge of electric vehicles, such as President Biden’s goal that by 2030 half of all new vehicle sales must be emission free, in addition to his administration’s numerous investments in the industry, plus tax breaks and credits, according to a report by McKinsey & Co. titled “A turning point for U.S. auto dealers: The unstoppable electric car.”
Painter believes the electric vehicle has reached two tipping points.
“One is clearly consumers believe they are going to be able to drive electric. And the other side of this is the industry,” he said.
“Every major carmaker has said that they are ‘all in’ on electric – not that they are only going to make one or two electric cars. Ford has said that they are out of the internal combustion engine business by 2026. Everybody is going all-electric – from consumers and the industry. And that is what I mean by tipping point.”