June 11, 2019
A year after launching the vehicle subscription pilot program in Nashville and Philadelphia, Mercedes-Benz is expanding its reach to the city of Atlanta. The Mercedes-Benz Collection program offers subscribes access to 30 different model variants for an attractive monthly fee.
Mercedes-Benz is not the only automaker who is experimenting with the subscription program model. New technological advancements combined with the emergence of ride-hailing and ride-sharing services are putting pressure on the once-overarching car-ownership model that has shaped the auto industry of this country. Subscription programs allow customers to pick vehicles for the need at hand, rather than purchasing a car for every need, (e.g. an SUV for family trips, a convertible for weekend getaways and a compact or hybrid for the commute).
Results for these programs have been mixed up to this point. Both Mercedes and Porsche have a strong interest for their programs at this time, while others have not done so well. Book by Cadillac vehicle subscription services by General Motors was crawling along for over a year before the program was shut down in November of 2018 due to a poor response to the $1,800 per-month subscription fee. Care by Volvo caused an uproar from U.S. dealers. In a petition filed at the beginning of 2019, dealers complained that the service violates franchise laws that are intended to stop manufacturers from competing with retailers in the automotive industry.
Atlanta is the new target location for the Mercedes-Benz operation due to its advantage as the location of the U.S. Mercedes-Benz headquarters. The demographics of the area include an increasing population of high net-worth professionals, which makes the area a ripe market for launching vehicle subscription services. Atlanta is also a pilot market for the Porsche subscription program.
According to Heiko Schmidt, CEO of Mercedes-Benz Subscription Service, Atlanta is anticipated to be the largest market for the program in the country. The expansion into Atlanta would appear to suggest an increase in confidence in the viability of subscription programs. The model is also helping to attract customers to the brand. Surprisingly, only 20 percent of subscribers to the Mercedes-Benz subscription program have owned a Mercedes vehicle in the past. Subscription customers are also over 10 years younger than the typical Mercedes-Benz customer, which suggests that the program is helping introduce the vehicles to a younger and potentially more vital market.
The subscription program is also helping to drive sales. Some members use the program to test drive specific models they are interested in for a few months before making a purchase at a Mercedes dealership. The subscription program has three levels – Signature, Reserve and Premier. Prices range from $1,095 to $2,995 per month with a one-time activation fee of $495. Subscribers can choose from SUVs, crossovers, sedans, coupes, convertibles, roadsters and wagons. Each tier also permits access to the high-performance Mercedes-AMG models.