Mercedes Benz Launching a Car Subscription Pilot in Two U.S. Cities

author: Derrick Smith   

German luxury automaker Mercedes Benz is launching a new subscription pilot in two U.S. cities. Starting this week, customers can get access to 30 different Mercedes models in Nashville and Philadelphia. The new pilot doesn't come cheap, it starts at $1,095 an month and goes up for access to more expensive Mercedes Benz models.

Mercedes is joining brands including BMW, Porsche, Volvo and Jeep in testing alternatives to traditional vehicle ownership. Personal vehicle ownership is expected to decline in the era of on-demand transportation services and other car sharing. Automakers are experimenting with subscription plans to offset the expected decline in ownership.

Just last week, Fiat Chrysler Automobiles NV announced it would launch its own service starting in 2019 with its Jeep brand.

The app-based service, which Mercedes calls Mercedes-Benz Collection, has three pricing tiers ranging from $1,095 to $2,995 a month, according to a company statement.

Subscribers will get access to 30 different models depending on what tier they choose. There are no mileage limits and the subscription plan includes maintenance, insurance and "flips", which allow customers to swap to a different model as desired. The monthly fee also includes 24-hour roadside assistance.

Mercedes is trying to appeal to younger customers by offering access to cars through a subscription, the same way customers subscribe to Netflix or a mobile phone plan. It's also challenging its biggest German rival BMW, which launched its own subscription pilot in Nashville that charges as much as $3,700 a month. However, many younger drivers may be put off by the high cost of a subscription.

"Our pilot is first and foremost a conquesting tool and a way to attract incremental customers interested in the Mercedes-Benz brand," said Craig Walters, senior manager of mobility services. "It was obviously something that was becoming more ingrained in what our customers wanted, not just in the automotive space but other spaces as well."

Mercedes chose Nashville for the subscription service, dubbed Mercedes-Benz Collection, because it has high job growth, a lot of young, affluent buyers and high-performing dealers, Walters said. The cross-town competition with BMW was just a coincidence, he said.

To get started, customers download the app, take a photo of their driver's license and enter credit card information to pay the $495 activation fee. Subscribers can choose any vehicle within their tier with no mileage limits. The pilot is 18 months long and Mercedes will assess its performance early next year, Walters said.

Clutch Technologies LLC which sells analytics software to predict which models will be in demand based on factors such as past customer behavior and weather conditions, is providing the tech for the subscription service.

Clutch also works with BMW and Volkswagen AG's Porsche, which started an app-based pilot in Atlanta last year after General Motors luxury brand Cadillac introduced its service in January 2017.

Derrick Smith