Following the Adaptions to Consumer Buying Trends by Porsche, Volvo, and Cadillac, Mercedes-Benz Decides to Join the Subscription Service Revolution.
The specialization of automotive repair and the large investment in owning the most desirable models is forcing automakers to adapt their products to the realities of what younger consumers desire. Gone are the days of purchasing a muscle car that turned heads and was destined to last a lifetime due to the simplicity of upkeep. Today, the younger generations of car buyers have become savvy to the complexities of retaining the value of late-model luxury vehicles.
Automotive manufacturers like BMW have engineered vehicles that are so state-of-the-art that there is no method of ensuring quality controls in maintenance without remote real-time diagnostics and supervision by specialists in Germany. Considering that the quality of care is such a large X-Factor, it doesn’t make sense to spend $60,000 or more on a luxury vehicle that you cannot afford to have properly serviced at the dealership for the life of ownership.
Trend in Automotive
The general trend in automotive dealerships has been moving towards leasing and trading in new vehicles after the factory warranty is up for some time now. Leasing has always been an attractive option for its low monthly payments and the lack of mechanical service obligations. The reality that few independent garages have the tools or exclusive resources to properly service aging late-model vehicles makes it pointless to purchase a vehicle outright on the belief that you can upkeep the vehicle with cheap parts and maintenance after the warranty expires. The factory service Mercedes-Benz vehicles require may be less cost-effective than leasing unless you rack up high mileage. The stigma of leasing has turned some away from the trend when license plates used on leased Lexus’s, for example, in a region may all begin with LEX as an indicator.
The novelty of making the leasing of a vehicle trendier is found in subscription service. A subscription service allows drivers to choose from a selection of a dozen different vehicles a year at a flat monthly fee. The current trial subscription service experiment being carried out by Mercedes-Benz in Germany allows subscribers to choose from A, C, E, and S class models with some restrictions. The larger and more expensive models will require an additional premium. The name of the new service has been awkwardly termed the “Mercedes me Flexperience.” The subscription service has the potential to sell itself as something that makes up for the shortfall stigmas of leasing by its alluring pragmatism in achieving uber-wealthy vanity status.
The pricing for the subscription service has not been announced yet. If we look at the current price range, we can expect that it will be a lot more than monthly car lease payments. The Volvo XC40 subscription is currently $600 with all maintenance and insurance included. The Porsche Passport subscription allows drivers to select from 8 to 22 different models with unlimited mileage in a range of $2,000 to $3,000 per month, respectively. It appears that Mercedes-Benz will cap the mileage to 22,369 annually.
Mercedes may be pioneering some novel features by allowing subscribers to swap out their vehicles using an app. The service would likely be piloted in major US cities like New York and Los Angeles where a higher volume of eclectic customers have access to the service. BMW is planning to release a subscription service of its own. In essence, the automakers are pushing into the car rental business. They are segregating a set of vehicles to be used exclusively for this purpose in order to maximize the diversity of revenue streams as the costs of ownership and depreciation risks become steeper for luxury vehicles by the year.
This is a smart strategy that is sure to capture the attention of younger drivers who are looking for an automaker that identifies with their lifestyle choices. Renting any vehicle can cost as much as a thousand dollars or more a month. If the auto manufacturers themselves are able to compete with the rental agencies, this may become the preferred form of car shopping for less frugal consumers. A diversity may likewise develop in being able to rent any Mercedes-Benz at competitive daily rates directly from the dealerships if an application proved itself successful in managing the added traffic à la carte.
In conclusion, the realities of luxury car ownership are that the class of people who buy these vehicles expect to be treated with the best for their money. Luxury German manufacturers are best suited to cater to those who desire instant upgrades to innovation and the flexibility to drive different types of vehicles for fun, status, and statement purposes. It remains to be seen how Mercedes-Benz and other automotive dealerships will streamline the process to make it an industry standard.