FlexWheels: Ready-made Dealer Platform

By Automotive News:

Six months after starting a subscription service called FlexWheels, Warren Henry Auto Group has learned that the business model is not profitable until it gains considerable scale.

So the group is looking to help make it more lucrative by creating a platform that it can sell to other dealers. Getting more dealers on board also could help prevent retailers from getting marginalized by factory-run subscription programs.

“It would give smaller dealers, who don’t have scale, a way to plug into something in a larger market,” said Erik Day, Warren Henry’s CFO. “Consumers are expressing an affinity for access without obligation. Our goal is to put the dealer at the center of this transformation of mobility.”

The platform Warren Henry is developing based on its FlexWheels service would provide operational, financial and insurance support. It also would let dealers manage vehicles they use as loaner or rental cars, in car sharing and through subscription programs.

FlexWheels has grown from 20 subscribers at its launch to 72 this month, 51 of which were considered “active.” The program has a fleet of 57 vehicles, Day said.

Warren Henry has nine dealerships in Florida that sell about 7,000 new and used vehicles a year. It carries mostly luxury makes, so FlexWheels caters to a high-end clientele who can afford to pay the $1,200, $2,000 or $2,800 per month — prices drop slightly with a six- or 12-month commitment — for packages that let them flip between vehicles from Porsche, Lexus, Jaguar, Land Rover, Maserati, BMW, Mercedes-Benz, Audi and Cadillac.

Customers get up to three vehicle changes per month, and most flip two or three times, Day said.

Before starting the program, Day said the group spent half a year “working out a ton of different models” to determine how many and which models to have in its fleet, how to manage that fleet and the depreciation curve for each vehicle to sell them profitably as used cars.

“Our breakeven is pretty close to about 100 vehicles because you have some startup costs,” said Day. “We’re getting very close to it being profitable. It’ll take a little over 100 cars.”

There are other benefits. Warren Henry puts vehicles in its loaner fleet for 3,000 to 8,000 miles. Then, they go into FlexWheels for about 12,000 more miles before ultimately being sold as certified pre-owned.

“We’ve had a lot of pressure by the manufacturer to do CPO with the large number of leases, so our acquisition costs for those vehicles are higher, our reconditioning costs have been higher and the margins are suppressed,” said Day. “To open a subscription channel for CPO creates another revenue stream for dealers.”

Day said Warren Henry officials are meeting with a number of dealership groups interested in learning about FlexWheels and buying into it as a turnkey platform. FlexWheels runs on software from Clutch Technologies, augmented by the dealership group’s own technology that integrates other mobility channels to manage loaner and rental cars, transport services, car sharing and valet services.

The product Warren Henry wants to build for other dealers would help with managing the costs and insurance required for a car subscription program.

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