Car subscription services: explained

UPDATED: 17/08/18

Since we outlined the various car-sharing models under consideration by all the premium German manufacturers, Mercedes-Benz has now thrown its hat into the car subscription ring, detailing its ‘free-floating’ Car2Go service.

It’s not yet confirmed for Australia, but the world’s largest car-sharing company is honing in on the east coast for a pilot program as early as next year.

Car2Go would introduce a sizeable Mercedes fleet to roads around the major capitals, potentially removing many privately owned cars that are used less frequently.

Unlike some sharing services, which require the cars to be kept at specifically designated spaces, the ‘free-floating’ model allows participants to leave the vehicle at any legal parking spot, and uses a sophisticated smartphone application to book, manage and coordinate the pick-up and drop-offs.

Mercedes-Benz Australia is keen to offer the service with only the legislative side of the strategy and the authorisation of various town councils standing between the car maker and a roll-out.

If successful, Mercedes’ Car2Go service is likely to continue the success of other ventures by the decade-old vehicle sharing giant, which already has 3.2 million subscribers in 28 cities around the world.

The article below was first published April 2018

For car enthusiasts, the annual expenses of owning a special car are like any other part of a hobby or passion, but many regard registration, insurance and maintenance costs, as well as the inconvenience of arranging all of the above, a chore they would rather avoid.

It’s the discerning but time-poor driver that a number of brands are targeting with revolutionary subscription services that allow you to swap the hardware sitting on your driveway according to your lifestyle, without the commitment of car ownership.

At this stage, no subscription services are on offer in Australia but a number are available overseas from premium brands. As it stands, Audi is the only manufacturer locally that has committed to offer its version, dubbed Audi On Demand, which will be here before 2020.

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The format varies from brand to brand, but each service revolves around the same principle. Here’s how it works.

For a monthly or annual subscription fee, customers have access to a range of models from their chosen brand. If, for example, the subscriber is off to the snow for the weekend, they might request a large SUV to cart people and kit.

When back home, a smaller passenger model may be the more practical vehicle to live with for the daily commute into the city and, for the odd summer weekend, the customer can get into something convertible or a little more rewarding to drive.

Besides the flexibility to swap vehicles depending on a user’s lifestyle, the manufacturer also looks after all the necessary insurance, registration, servicing and upkeep as part of the subscription fee.

It’s a little like a mobile phone plan in which all costs are covered by one monthly payment, but you could change the handset whenever you like.

Of course, the service comes at a cost, with the existing trials ranging between $2300 and $3800 per month, which might sound like a significant ongoing expense, but for many users, the fee may be less than their ownership costs.

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When all associated costs are factored in, including depreciation, registration, tax and maintenance, the subscription may be the most cost effective solution, particularly if a customer is able to replace more than one car with the plan.

With the exception of Audi, the other premium brands are waiting to see how consumers respond to the subscription services overseas before making any commitment to a local roll-out.

Porsche is one such manufacturer and an Australian version of its Porsche Passport trial will depend on how popular a pilot scheme is in the US.

“We’ll get the results of that and that’s what we’ll base our decision on for our market”, said Porsche Australia head of public relations Chris Jordan. “Of course the automotive space is evolving so we have to be open to new ideas, but at the moment it’s a matter of wait and see how the US pilot program goes.”

BMW Australia is also watching the response of its Access by BMW trial, which is underway in Europe, but corporate communications general manager Lenore Fletcher said it was likely that the premium brands would be the first to adopt subscription services.

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“As always we will be looking to Europe to see where the trends and technology is coming from,” said Fletcher. “I think over time, all of these applications will have some relevance in Australia.

“I think that this is where the starting point always is because of the R&D that the premium brands put into the technology. There’s also a certain level of trust that is inherent in the premium brands. It’s a perception.”

Mercedes rounds out the mainstream premium brands in Australia and is maintaining a similar stance of the services until proven in other markets, but public relations, product and corporate communications senior manager David McCarthy said the introduction depends heavily on the price and demand.

“I think there is [potential ] it’s just when, because people are very wedded to their own car,” he said “We don’t have any plans in the near future but that could change.

“It comes down to price and what’s available. It really depends what the market wants and at the end of the day, it’s no use introducing something that the market doesn’t want.”

Car sharing programs are already on offer in Australia, which appeal to many drivers that only need occasional access to a vehicle, but for those drivers that need a car on their driveway around the clock, but don’t want the full responsibility of ownership, subscription could be the perfect solution.