Days of owning a car could be fading away
Subscription service being piloted for automobiles
Recent years have seen an explosion in services that offer a product for a flat monthly fee. No longer the domain of magazines or newspapers, the subscription model now supports everything from streaming music to clothing shipments.
Now, that approach is increasingly coming to the automobile. Since its debut in February, between 4,000 and 5,000 people have signed up for a Cadillac pilot project that lets drivers swap one automobile for another almost as easily as they can switch TV shows, according to the company.
The program, known as Book by Cadillac, charges $1,500 a month and lets drivers cancel any time. The premium service grants access to 10 Cadillac models.
Using a smartphone, customers can trade in their vehicles up to 18 times a year. So far, the program has only been available in the New York City area, but in light of its popularity, it could expand to other big cities, Cadillac said.
The Cadillac project is targeted at consumers of luxury vehicles. But GM also has explored a similar business model in its more mainstream Chevrolet line, with a test program launched earlier this month known as Maven Reserve. That service allows drivers in Los Angeles and San Francisco to rent a Chevy Tahoe or Volt for up to 28 days for a flat monthly fee.
Both programs appear superficially similar to leasing, but are more expensive, cover maintenance and insurance and come with added perks, such as Cadillac’s on-the-fly swapping system and Maven’s offer of $100 worth of fuel and a dedicated parking space for each rental.
The two programs reflect a big bet on the future of car ownership. At a time when rising debt and lower wages have forced some Americans, particularly younger ones, to put off major purchases such as homes and cars, alternatives to traditional car ownership are poised to become more common, said Johanna Zmud, a senior research scientist at Texas A&M’s Transportation Institute.
Other factors contributing to a long-term shift in ownership patterns are changing marriage rates, said Zmud, as well as a growing tendency for Americans to congregate in dense urban areas.
Shifting beliefs about ownership are not only giving rise to vehicle sharing, but also greater flexibility in vehicle types. Rather than purchasing and holding onto the same car for a decade or more, consumers who use car subscription services are able to choose different vehicles to suit different needs on-the-fly.
For example, the same car subscription could allow drivers to select a fuel-efficient sedan for weekday commutes while letting them switch to an SUV for weekend getaways.
Some competitors to GM have begun to offer this feature, as well. Car2Go, which serves Washington, D.C., New York City, Portland, Ore., and Austin, Texas, recently expanded its fleet of tiny, zippy Smart cars to include larger Mercedes-Benz sedans and SUVs. Those vehicles can be rented on daily, hourly and by-the-minute rates.
For short trips across town, Car2Go’s prices are competitive with those of ride-hailing services such as Uber or Lyft.
Both GM’s programs are substantially more expensive. Even Maven Reserve, which is targeted at Chevy drivers, costs upward of $1,100 a month.
Beyond the largely affluent markets where it’s being tested, it is unclear whether there is much of a market for GM’s subscription services. BMW had considered offering a similar platform for its vehicles, but balked at the business case, according to the Wall Street Journal.
Still, with societal trends pushing Americans to give up the hunk of metal and alloy sitting in their driveways, it’s clear that experiments with new business models are not going away.