Car Subscription Services Are Hitting the Skids

The novelty wears off quickly for many buyers. And the pandemic isn’t enticing people to share vehicles.

byPatrick George| UPDATED Jun 29, 2020 11:04 AM
Car Subscription Services Are Hitting the Skids

Good Monday morning and welcome back to Speed Lines, The Drive's roundup of what matters in the world of cars and transportation. Today we're discussing the increasingly shaky outlook for car subscription services, the state of retail jobs and what's next for the ever-popular Apple CarPlay.

Mercedes Latest To Quit Subscription Service

"Mobility" has been the big buzzword in cars for the past decade or so, but automakers and tech companies alike are hard-pressed to explain what that even means, exactly, or how they plan on making money off of it. Case in point: car subscription services, which for a while seemed like they'd be the next big thing and a potential replacement for individual car ownership. But more and more companies are withdrawing from such services, the latest being Mercedes-Benz, and COVID-19 is accelerating that trend. 

On its face, a subscription service does make sense. Individual car ownership is wildly inefficient. You pay a bunch of money monthly (or in cash all at once) for something that spends the majority of its life parked in one place, taking up space that could be better used for other things, and often you're the only person who even uses the vehicle. Subscription services seemed like a more convenient and effective replacement for individual ownership, especially for younger city-dwellers who only needed a car sometimes and didn't want to mess with the hassles of parking. For a time, automakers like General Motors and Ford even joined startups like Zipcar in offering such alternatives to ownership. 

As Automotive News reports, getting customers to actually join them en masse proved difficult. One of the latest services, the Mercedes-Benz Collection, is winding down after two years in cities like Nashville, Atlanta, and Philadelphia. Sales chief Adam Chamberlain called it a pilot program and a "learning exercise," but said it only had a few hundred customers and declined to say whether it was profitable or not. (That means it wasn't.) 

Benz's program is the latest one to throw in the towel. Share Now, formerly known as Car2Go, wrapped up earlier this year. Ford did the same with its service last fall, and GM's Book by Cadillac is on hiatus while it's being retooled. Porsche's subscription service is doing better. (I forgot that existed. I should expense it.) Automakers learned a lot about buyer habits, like how they enjoyed vehicle-swapping at first but eventually wanted their own car to put their stuff in. And then there's the pandemic:

Subscription services are the "ultimate noncommittal car-ownership experience," said Jessica Caldwell, executive director of insights at Edmunds.

Pricey monthly plans, however, have kept these services from gaining mainstream adoption. Mercedes offered four membership tiers, with prices ranging from $1,095 to $3,595 a month. "While consumers enjoy easy car ownership, there's a limit to how much they're willing to pay for it," Caldwell said.

The subscription model also faces an existential threat from a pandemic that is expected to linger for months.

"COVID-19 really will put the nail in the coffin as the idea of swapping cars is off-putting to most consumers and likely unadvisable by health officials in this environment," Caldwell noted.

Subscriptions aren't a model that should be abandoned. It's just looking like they'll be one tool in an automaker's arsenal, rather than the future of ownership itself. 

Dealer Jobs May Not Come Back

Car dealers are surviving the pandemic downturn by doubling down on online sales and finally moving their businesses into the internet era, something that should've happened years ago. But many have had layoffs and furloughs as they seek to control costs as sales tank, and some of those car retail jobs may not be coming back at all. This, from Automotive News:

Franchised dealers terminated or furloughed about 300,000 employees, or more than a quarter of the industry's work force, during the first crushing months of the U.S. coronavirus outbreak, and about half of dealership jobs were reduced or altered in some way, recruitment technology firm Hireology estimates. Dealership employment started to rebound as states began easing stay-at-home restrictions and retailers leveraged federal Paycheck Protection Program loans meant to support payrolls.

[...] The trends might trigger permanent changes to dealership staffing models. Some of the biggest dealership groups in the country, citing lower vehicle sales and success with digital channels, already have said thousands of their job cuts are permanent.

Basically, if car buying stays being a largely online affair, dealerships will simply need fewer staffers to make that happen. Unfortunately, "doing a lot of business with fewer people" may be a trend we see in every industry moving forward. That story's worth a read in full.

What's Next For Apple CarPlay

Since the infotainment systems that come standard on cars are often so, so bad, systems like Android Auto and Apple CarPlay are increasingly popular. In fact, the latter's now available on 97 percent of new cars sold in the U.S., according to the Detroit Free Press, and one big feature that's coming next is iPhone-based locking and unlocking

A few other useful features are coming soon to the system as well, the newspaper reports, including info on EV charging, new wallpapers, parking apps, food ordering, and control over what teenage drivers can and cannot do. Since the OEMs can't get it together, expect Apple and Android developers to pick up the slack.

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Your Turn

Do you have experience with a car subscription service? What's your take on them?