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Mercedes-Benz, owned by German automotive firm Daimler, is bringing its subscription service to Atlanta after reporting early success. The expansion of the subscription service pilot, dubbed Mercedes-Benz Collection, marks the third market to receive access following its June 2018 introduction in Nashville and Philadelphia.
Hollis Johnson/Business Insider
Mercedes-Benz Collection is an app-based service that gives subscribers access to a number of different vehicles, which they can change as often as they like.
The service comes in three tiers — Signature, Reserve, and Premier — with the monthly prices ranging from $1,095 to $2,995, plus a one-time $495 activation fee. The types of vehicles available are dependent on the tier. Fees also cover insurance, vehicle maintenance, and 24-hour roadside assistance.
On top of the expansion announcement, Mercedes revealed that its service has been an effective customer acquisition tool. It stated that the pilot program far exceeded expectations, and that 82% of the subscribers were new to the company.
Here’s what it means: Automakers are becoming more aggressive in expanding their subscription car services — a trend we expect to continue.
In the last few years, a number of high-profile auto brands have introduced subscription services, including GM, Audi, Volvo, Lexus, and BMW. However, many of these were limited in scope, often only being offered as pilot programs in select markets, akin to Mercedes.
If Mercedes’ success is any indication of future results, then it’s likely automakers will have to get this offering in front of more consumers as soon as possible, or else risk interested consumers testing the subscription waters with a competitor. Even Cadillac, a GM brand, appears to value the opportunity as it has brought back a revamped subscription model it shuttered last year.
The bigger picture: Subscription services will likely provide more value to automakers in attracting new consumers and upselling, rather than the model becoming a massive revenue driver.
Analysis conducted by car marketplace Edmunds.com found the three-year cost of a car subscription — as high as $97,739 in one scenario — is often significantly more expensive than a lease over the same period. As such, subscriptions are unlikely to be the best long-term solution for most consumers. However, a subscription could be ideal for consumers who are shopping for a new vehicle, as it enables them to test out multiple vehicles without a long-term commitment.
This gives automakers the ability to attract consumers who might not have come to them previously, and whom they can subsequently convert into buyers. Mercedes is already experiencing this benefit, noting that its subscription model is "hitting the mark attracting younger drivers who might not otherwise have the opportunity to experience the brand at such a young age."
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See Also:
- Tesla has revealed its plans for China – including lower prices
- Daimler Trucks has formed a global autonomous tech group
- Autonomous taxis will become a $2 trillion market, UBS says
Source: Business Insider – aaouad@businessinsider.com (Ayoub Aouad)