Vehicle as a Service Market Size

Vehicle as a Service Market Size

Vehicle as a Service Market size was valued at USD 8.7 billion in 2023 and is estimated to register a CAGR of over 20.5% between 2024 and 2032. The growing demand for short-term vehicle subscription services is boosting market growth. The extensive penetration and the rising popularity of vehicle leasing services are driving the demand for short-term leasing. Buyers must pay equal monthly payments for the duration of their vehicle ownership unlike traditional car ownership. Several leasing service providers impose a monthly fee that covers maintenance, insurance, and other recurrent expenditures.

To get key market trends

  Download Free Sample

The continually expanding popularity of automobile subscription services in the near term across geographies is expected to propel vehicle as a service (VaaS) market growth. Short-term subscriptions make Vehicle as a Service (VaaS) more accessible to a broader spectrum of users. People who do not require a car on a daily basis or simply on special occasions can profit from VaaS without making a long-term commitment.

For instance, in April 2024, the British Vehicle Rental & Leasing Association published data stating that, as of December 2023, the total number of leasing cars stood at 390,898. In addition, the number of personal contract hires has increased significantly in the past years. The emergence of subscription-based business models as well as extended flexibility over leasing are expected to contribute to the vehicle as a service market with a growing demand for vehicle leasing services.

The cost-effectiveness associated with vehicle-as-a-service is driving the market growth. Traditionally, an individual consumer would make a down payment, and the remaining cost was paid over a period of up to seven years in equal monthly instalments. Customers were solely responsible for paying interest on EMIs and insurance expenses. In terms of subscription services, users can purchase a vehicle with no down payment and fewer monthly payments. The monthly payment includes insurance, maintenance, and roadside assistance.

Furthermore, consumers have the freedom to switch automobiles as needed and return them at any time. These benefits, together with cost efficiency, are propelling the vehicle-as-a-service market growth. VaaS allows for flexibility based on needs. Users can choose a subscription plan that aligns with their driving habits, avoiding the extra costs associated with owning an under-utilized car.

The high ownership cost of vehicle as a service poses a major challenge, hampering its growth. The expense of procuring a new vehicle as a service requires a significant financial expenditure by building contractors. Businesses lease machines from manufacturers in the market to minimize this expenditure. The inclusion of sophisticated technology, such as IoT and remote monitoring, will increase the machine's initial cost.

Furthermore, these vehicles as a service have a number of other maintenance difficulties that need significant resources and time, which will raise the machine's maintenance and handling costs, slowing market growth. The primary prices of cars as a service are expected to fall in the next few years due to new and emerging technologies, as well as increased competition among industry participants.