Luxury carmakers take a cue from Netflix

Red? It must be Monday. Source: Frank G. Heide

If luxury automakers have their way, you’ll soon be able to switch your car with a swipe of your phone, taking your sedan of choice to work on Monday and road tripping with your favorite convertible on the weekend.

Luxury carmakers Porsche and Cadillac are experimenting with a revamp of the traditional leasing arrangement, launching a new subscription service that imitates media streaming services like Spotify or Netflix. Customers in select areas are now able to pay a flat, monthly fee to be able to choose from a range of car models, with the ability to swap out one for another on a whim.

The new subscription service model is a further evolution for an industry preparing for a future in which owning a car becomes increasingly unnecessary, as ride-sharing services and driverless cars become ever more common.

The Cadillac brand may be more than a century old, but it was an early adopter of this modern take on vehicle use. The company first tested its subscription service in New York, where customers pay $1,500 (€1,275) each month. In October, Cadillac expanded the service to Germany, launching a six-month trial in the Munich area that offers subscribers a choice between nine different Cadillac models as well as two sports cars, the Chevrolet Camaro and the Corvette.

Cadillac Europe’s vice president Felix Weller said the carmaker wants to reach a clientele that is not drawn to traditional sales models. Cadillac’s average buyer is 60 years old, and the GM subsidiary is hoping to attract a younger customer base. Drivers can make reservations using an app, and a concierge service delivers the vehicle straight to subscribers’ doors.

This Netflix-like model has gotten the attention of German luxury brands too. Porsche chose the American market to test out its own subscription service, launching it in Atlanta this month. “Simply flip between vehicles via the app as your needs change,” Porsche advertises its website for the service, which costs, for a standard version, $2,000 a month.

The subscription model appealed to 47 percent of respondents under the age of 30.

Other carmakers are trying out subscription services that, while featuring less variety, still offer more flexibility than traditional leasing. The Chinese-owned brand Volvo, for instance, charges customers a monthly flat-rate over a two-year period for the use of one model, though customers have the option to try a different car for seven days each year (or longer with an additional fee.) By 2019, Volvo plans to offer a broader range of cars with its subscription program. Between 5 and 10 percent of its customers will use the service in the future, the carmaker estimates.

Younger drivers could account for a large portion of that clientele. Puls, a market research firm in Nuremberg, recently polled more than 1,000 people and found that the subscription model appealed to 47 percent of respondents under the age of 30. Beyond the Netflix generation, however, older participants in the survey were less enthused.

Frank Heide covers the automotive sector for Handelsblatt. Amanda Price in New York City adapted this article for Handelsblatt Global. To contact the author: heide@handelsblatt.com.

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