The Atlanta Journal-Constitution
Subscription programs offer new access to auto mobility
Amazon and other e-commerce sites changed the way we shop. Netflix and Hulu transformed the way we watch TV. Now car manufacturers are taking another step in the digital revolution, hoping to take advantage of consumers’ changing habits.
Brands such as Ford, Porsche, Cadillac, BMW, Volvo and Mercedes Benz are now offering subscription programs with the goal of capturing tech-savvy millennials who may be averse to ownership and leasing contracts.
While there are variations, basically it works this way: Potential customers are given access to an online app, which they use to sign up. The app allows them to order the type of car they want and have it delivered. They pay a monthly fee for use. But it differs from leasing in these key ways: There are no contracts; customers can change cars sometimes weekly; insurance, registration fees and taxes are baked into the monthly payments, as well as maintenance and detailing costs.
“We know that the model is shifting from ownership to usage,” said David Liniado, vice president, consumer mobility at Cox Automotive at Cox Automotive. “We wanted to solve the [mobility problem] for the masses.”
Auto sales fell short in 2017 with 17.2 million vehicles, down 1.8 percent from 2016, according to Autodata.
Liniado said many consumers are being turned off by long-term bank loans and complicated lease agreements. “The key for many consumers is flexibility,” he said.
Of course, the subscription program isn’t for everyone. Some programs require customers to pay an initiation fee. The monthly costs range from several hundred dollars to several thousand dollars, depending on the vehicles and type of subscription program.
Flexdrive, which is partly owned by Cox Automotive, offers full-size or mid-size late model sedans and compact vehicles, as well as full-size and compact SUVs in its program.
“We had this idea about four years ago,” said Liniado. “You download the app and get a car.”
Like Flexdrive, other programs, such as Clutch, allow customers to exchange cars as many times as they want during that month. Clutch is another Cox Automotive investment that provides consumers with an alternative to ownership.
“It couldn’t be easier,” said Liniado, adding that there is no credit check with Flexdrive.
Atlanta-based Cox Automotive is a business unit of Cox Enterprises, owner of The Atlanta Journal-Constitution.
These programs also allow customers to drive vehicles they might not necessarily be able to afford to buy.
For example, Atlanta-based Porsche North America has launched a program in the metro Atlanta market. (Watch an AJC editor’s experience with Porsche’s Passport program on myAJC.com)
“Let’s remember, Porsche does not just build superb sports cars, we deliver a superb experience,” said Klaus Zellmer, president and CEO of Porsche North America. “Piloting our own subscription program allows us to continue to provide that same experience to customers who want a new mobility model. Just because they may want an alternative to buying or leasing does not mean we should leave them to third parties, who may offer our cars but not our close connection to the customer.”
There are two subscription levels in the Porsche Passport program — Launch and Accelerate, which can be used on a month to month basis without a contract.
Under the Launch category, customers will pay $2,000 per month for access to eight models such as the 718, Boxster and Cayman S, as well as the Macan S and Cayenne.
For $3,000 per month, subscribers in the Accelerate level will have access to 22 Porsche models, including the 911 Carrera S, Panamera 4S sports sedan, Macan GTS and the Cayenne S E-Hybrid SUVs.
“We want customers to have access to our cars at their fingertips” said Zellmer.
Porsche customers have access to two concierges — one, digital; one, a real person. When a subscriber engages the app, the digital concierge opens a dialogue with the customer to determine which Porsche model should be delivered. A trip to the mountains? An SUV is suggested. A date night on the town? A convertible may do the trick.
When exchanging cars — a ‘flip,’ as Porsche dubs it — the human concierge arrives at your location and transfers any of your personal items from the previous vehicle to the new one. You don’t have to lift a finger. That concierge also walks you through all of the key features of the vehicle to make sure you’re comfortable with the automobile.
“Catering to our customers’ desire to experience our sports cars is part of our core strategy,” Zellmer said. “The Porsche Passport subscription program is an extension of that strategy.”
Flexdrive has thousands of subscribers, according to Liniado, with hundreds of news subscribers downloading the app each week.
“We expect to have tens of thousands [of subscribers],” he said.
Most automotive industry experts don’t believe these programs will overtake traditional car dealerships or car purchase and lease programs.
“The dealership still has the best model and opportunity to support vehicle subscription,” Liniado said.