It’s hard to find a single carmaker that doesn’t offer a Certified Pre-Owned program and it may soon become the norm, rather than the exception, for manufacturers to add subscription services to their list of retail alternatives.
Mercedes-Benz is set to become the latest manufacturer to jump onboard, following Audi, Cadillac, Porsche and Volvo, while Lexus this week indicated it is also exploring its subscription options.
The automaker has been running a pilot program in Germany that is about to formally roll out across its home market, and “We plan to have something ready within this year” for the U.S., Mercedes’ global sales chief Britta Seeger announced this week.
As with smartphones, manufacturers are hoping that subscription programs can increase both revenues and loyalty by giving customers new options. But, unlike leasing and CPO programs, buyers will wind up paying a steep premium.
(Lexus mulling a subscription program. Click Here to see what it’s looking at.)
For the moment, the industry is still experimenting with the subscription concept and each manufacturer is taking a different approach. Volvo’s is arguably the most basic, for now covering only the new XC40. Shoppers go online, spec the crossover out as they’d like it and then close the deal, taking delivery from a dealer. The approach eliminates price haggling and the final figure includes taxes, registration fees and insurance. Buyers also have the opportunity to replace the vehicle with a new XC40 after 12 months.
Audi, Cadillac and Porsche take things a step further, laying out set prices that allow a customer to swap in and out of different models over a set period of time. With Caddy, that can be up to 18 times a year. Porsche buyers could do it every day, if they so wished. Porsche sets two different tiers, starting at $2,000 a month – plus a $500 activation fee for access to eight vehicles. The top tier increases that to 22 models for $3,000 a month.
Mercedes is creating four different tiers tied to its familiar product range: A-, C- E- and S-Class, and subscribers will be able to swap in and out of any vehicle in that segment up to 12 times annually. They’ll also have just about everything but gas covered, with a maximum 36,000 kilometers, or 22,369 miles annually.
Mercedes hasn’t yet said what the final pricing will be, and has been experimenting with different amounts different the pilot program but, according to Seeger, “Up to now, in all the tests, all that we have seen, what we’ve asked the customer to pay was a profitable basis.”
(Why are automakers looking at alternative retail options? Click Here to find out.)
The number of brands rushing to enter the subscription market suggests we could see plenty of others follow up. “We really think we can change the industry,” Volvo’s new CEO Anders Gustafsson told TheDetroitBureau.com last November, after revealing the company’s Care by Volvo program at the L.A. Auto Show.
The ability to swap between models is expected to be particularly popular among luxury brands, where manufacturers will have more flexibility to charge a profitable premium. Less flexible programs, according to several analysts, could click with buyers in more mainstream segments who simply want one-step shopping that covers all their costs.
Ford is experimenting with that approach in several parts of California. Prices start at $400 a month and, as with Care by Volvo, Ford’s Canvas service includes such things as insurance, maintenance and a roadside warranty, so there are no hidden costs. Like a lease or conventional purchase plan, the customer has 24/7 access to the vehicle but can drop out of the program at any time with just a week’s notice.
(Volvo subscription plan for XC40 starts at $600 a month. Click Here for the story.)