Mercedes canceled its subscription service, Mercedes Collection. The two-year old pilot offering fee-based access to 30 different models, insurance, roadside assistance and maintenance had about 100 participants. Mercedes Collection gave people a car-driving option other than a purchase or a lease. Apparently, the expected profit did not materialize. On the other hand, Mercedes learned a lot about drivers and their wants and needs. For example, Mercedes learned what a lot of us know: our cars can become extensions of our closets. After a while, users of Mercedes Collection did not want to change vehicles because it meant moving all the items such as running shoes, dress shoes, gym bags, golf clubs, sunglasses, highway transponders and assorted clothing into another car.
Mercedes Collection generated a great deal of data, especially on younger drivers and others for whom Mercedes had always seemed out of reach. Additionally, as most of the car companies and dealerships are learning, Mercedes Collection showed the benefits of a digital approach to the car experience, benefits that will be soon put into use across the brand.
The Allure Of Subscriptions
Vehicle subscriptions are designed for those people who shun the commitment of car ownership. They do not want to drive the same car for the length of most leases. They want the flexibility of having a car versus using a Lyft or Uber. They want to drive different vehicles with different levels of appointments, performance and luxury. Also, someone who does not qualify for credit can use a subscription service without accumulating massive debt.
Access by BMW (Nashville, TN only), Care by Volvo and Audi Select are just some of the options on the market. Porsche currently has two mobility programs: the pricey Porsche Passport and the short-term car rental Porsche Drive. Genesis, the upmarket Hyundai brand, was supposed to be testing a program, Genesis Select, in Florida but coronavirus may have delayed this. Cadillac had Book by Cadillac, but it was canceled in 2018. It may be resurrected as personal mobility increases post pandemic.
The majority of the vehicle subscription programs are promoted by luxury car brands. You might not be able to afford a Porsche 911 but for a fee, you can drive one for a while. However, Nissan is taking a chance on a subscription program called Switch. Launched in a Houston, TX test in February 2020, just prior to coronavirus, Nissan Switch is a two-level program at $699 and $899. For an additional $100 ($999) a subscriber has the option of driving a Nissan GT-R.
There are several third party mobility options as well. Flexdrive is one of the best-known app-based services. Flexdrive customers pay by the week and mileage is extra. Third party services do not provide new cars, unlike the OEM services. In fact, these services somewhat mimic traditional rental car services in terms of pricing except you have more say in the make and model and access is easier. Even Chapter 11 Hertz got into the subscription model program in a few test markets in 2019.
Some dealerships initiated their own subscription models. However, for many of these dealers the financials did not make sense. One of the things these programs did highlight is the popularity of having your own car to drive yourself at your own disposal without actually owning a car. This is personal mobility without responsibility.
Ownership of cars for many people has many responsibilities and commitments. Many of us want the ability to move around without the encumbrances of leases, payments, insurance, maintenance and/or service visits. Car subscriptions are the ultimate of no commitment driver-ship. Uber and Lyft provide this but someone else is doing the driving. ZipCar and other like it also provide a commitment-free drive but the vehicle choices are not luxury.
Welcome To The Commitment-Free Economy
The idea of no commitment is foundational to our increasingly commitment-free economy. Renting is convenient and provides enormous choice. People are increasingly accessing products and services through leasing and renting rather than owning. Clothing, ski equipment, jewelry, beach houses, scooters, just about anything can be rented. People want the participatory experience without the actual possession. As far back as 2015, a PriceWaterhousCoopers study concluded, “Consumers are finding more satisfaction and status in experiences rather than material possessions.” Owners are becoming subscribers.
In our commitment-free economy, subscription car brands leverage the idea of owning the usage with short-term possession. You possess the car for a while but you do not possess the problems. You experience the drive for a while but you do not experience the downsides. Audi Select leverages this idea on its Audi Select website with the headline, “All of the Power. None of the Responsibility.”
Analysts predict that vehicle subscription options will grow to approximately 10% of new vehicle sales by 2025. Currently, the subscription model is hovering at about 1% of new vehicle sales. However, one research and consulting firm forecast (before coronavirus) about one half million new and used vehicles in subscription fleets by then end of 2020. The forecast for 2025 is 16 million new and used vehicles utilized by subscription fleets.
Automotive brands have driven onto the personal mobility subscription highway. Some may not survive. Like Mercedes, some may find the financials unrewarding especially when vehicle depreciation is a huge cost. For those automotive subscription plans that remain, there is reason to believe in future success.
Ownership can be wonderful but it can also be burdensome. As the world opens back up, the concerns about public transportation may cause more personal driving. People who do not own cars may want one but would prefer none of the hassles and other ownership costs. If there ever were a time to put resources behind subscription services, now seems right. Mercedes might want to try again.
Contributed to Branding Strategy Insider by: Larry Light, CEO of Arcature
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