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forakzai forakzai 04/17/2018 - 02:41am

Subscription Plans Have Automakers Walking A Fine Line

Automakers are treating vehicle subscription programs like startups: new, innovative and filled with potential — but economically and operationally unproven. So far seven automakers, mainly through luxury brands, have launched or announced plans for vehicle subscriptions. The programs, aimed at consumers who balk at the long-term commitment a lease or loan requires, package car ownership into a monthly fee that includes insurance, routine maintenance and the option to frequently switch vehicles as their needs change.

The programs operate mainly as concierge services, delivering and picking up vehicles that customers have requested via an app or website. Some programs have announced partnerships with dealerships to handle such tasks or maintain the vehicles, while others deliberate what role retailers should play in vehicle subscriptions.

Cadillac was the first auto brand to market with a subscription program — Book by Cadillac, which began in March 2017 as a pilot in New York and has since expanded to Los Angeles and Dallas. Since then, Volvo, Lincoln, Hyundai, BMW and Mercedes-Benz have launched or announced plans for vehicle subscriptions. There are also differences in what kinds of vehicles customers can use and how often they can switch vehicles. Cadillac and Porsche say most members in their programs are new to the brands, affluent and younger than their average customers — all achievements that other automakers would love to replicate.

This year, Lee said, Book started testing a "multicity access" program that lets some subscribers access vehicles in different cities.

Lee said Cadillac is using Book as a test bed for the maintenance, service and logistics of operating autonomous vehicle fleets.

Lessons learned

Cadillac has increased the monthly fee to $1,800 for new members, from $1,500 originally, and imposed a 2,000-mile monthly mileage limit — changes made roughly six months after Book launched in New York.

Cadillac increased Book's service range from a 50-mile radius to pick up and drop off vehicles in New York to 75-mile radius in Los Angeles and Dallas because of the urban sprawl surrounding those cities. The popularity of the brand's vehicles also varies in each of the markets, Lee said.

Cadillac says the average age of Book members is 41 — 22 years younger than the brand's traditional owners — and about 75 percent male, with the vast majority never previously owning a Cadillac.

Book subscribers aren't switching out of vehicles as often as the up to 18 times a year the program allows. The average member is keeping a vehicle for nearly four months at a time, according to Cadillac.

Lee said the price increase was a result of Cadillac noting that customers were willing to pay more for the service and came out of discussions with dealers who wanted to ensure that the program wouldn't encroach on their conventional model of selling and leasing vehicles.

Cadillac on March 1 launched a dealer referral initiative that financially rewards retailers for directing customers to the service — the first step in getting dealers involved in supporting the program.

Lee said Cadillac wanted to launch Book initially without significant dealer involvement as a way to test the model and keep the costs on the company's books.

Will Churchill, chairman of the Cadillac National Dealer Council, said it would be logical, as the service expands, to involve dealers more in servicing and maintaining the vehicles. That dealership, the lone BMW outlet in a metropolitan area of nearly 2 million people, will manage the vehicle fleet, providing maintenance and delivery service to customers. The dealership will also get the first chance to sell a vehicle after it's removed from the subscription fleet.
 
 
 
 
Source:
http://www.autonews.com/article/20180416/RETAIL01/180419839/subscription-automakers-fine-line

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  • The Giffriend
    1 week ago 1 P-Nos Points
    This is what everyone is figuring out, they are seeing the costs and everything to see if they can make more plans!
    • forakzai
      1 week ago 1 P-Nos Points
      yep, soon everyone will be on board
    • The Giffriend
      6 days ago 1 P-Nos Points
      Yeah, but they still have a lot of testing to do, and also try it in other countries not just US
    • forakzai
      6 days ago 1 P-Nos Points
      Yep, and I think the insurance process will be really complicated at first too
    • The Giffriend
      6 days ago 1 P-Nos Points
      Maybe, I think it will be a bit like the rent places or something like that!
  • michael_andersen
    1 week ago 1 P-Nos Points
    Main issue I have is the price compared to leasing.

    Cadillac most expensive car is around 100k something like the Escalade suv can be leased for $950ish per month. Now insurance in that even in shitty cost area is not going to be 850/mo unless your driving record is absolute garbage

    I know there is something to be said for options but a lot of cadillacs are more in 50-60k range so I’m just not following the cost
    • forakzai
      1 week ago 0 P-Nos Points
      yeah for now it is pretty expensive
  • Dirtyfivethirtygarage
    1 week ago 1 P-Nos Points
    It makes sense if you have a business (write-off), if you don't commute daily, if one type of vehicle doesn't cover all your needs, and are ok with inhaling someone else's fart particles.
    • forakzai
      1 week ago 1 P-Nos Points
      The whole subscription thing sounds amazing to me because it allows for getting a Porsche subscription for example and writing off the use of a Cayenne or Panamera as a business expense while enjoying a 911 whenever basically for free
  • forakzai
    1 week ago 0 P-Nos Points
    i'm personally a really big fan of the subscription model