It was supposed to be a compelling option for consumers in the connected economy, but the subscription model for automobiles is hitting some speed bumps as BMW and Audi are pulling back on their programs.
BMW announced last week that it is pulling the plug on its “Access” vehicle subscription service less than three years after launching the single-city pilot program in Nashville, Tennessee, in 2018. While the company did not release any sales or financial data concerning the program or its decision to end it, a spokesperson was quoted in The Verge as saying the alternative financing method had “reached its capacity limits.”
“Unfortunately the Access by BMW subscription program is ending on Jan. 31, and we are no longer taking new members,” a sales representative told The Verge.
Under BMW’s two-tiered program, consumers could pay either $2,000 a month for a base subscription, or $3,700 per month to gain access to sportier M-class models. Unlike leasing or owning a vehicle, the all-inclusive fixed price subscription services allow drivers to swap into a different car whenever they want, and also covers the costs of maintenance and insurance.
“The top-tier $3,700-a-month plan is almost three times the cost of leasing an M5 sedan in the Nashville area,” The Verge calculated, noting that a down payment of $5,700 was required for a lease.
Audi has also canceled its subscription service. According to Kelley Blue Book, the Audi Select program was tested in the Dallas-Fort Worth metro area beginning in 2018. For $995 per month, it allowed consumers to choose from several of Audi’s less-expensive models, including insurance, maintenance and reduced fees for the option to rent other vehicles when needed.
“Facing increasing competition from Cars-as-a-Service companies like Zipcar and app-based ride-hailing services like Uber and Lyft, automakers have been experimenting with new ways of doing business,” Kelley reported. “Subscription services, it seems, may not be a workable answer. Still, BMW’s and Audi’s abandonment of subscriptions doesn’t mean the model is a failure.”
To that point Volvo continues to be aggressive on its Care by Volvo subscription program. Late last year, Volvo changed the program to allow owners to select a new car every four months. Prices start at $650 per month.
And according to AutoBlog, Cadillac is testing a rebooted version of its subscription service in a dealer pilot now. The Book by Cadillac website says Cadillac “will be debuting a new program in early 2020.” It’s now early 2021, so Cadillac is officially a year late on its announcement.
Down but Not Out
Although BMW is ending its current subscription pilot, the company suggested that it would be revisiting the issue in the near future.
“We are in the process of developing the next iteration of Access by BMW and will share more information with you as it becomes available,” BMW said, without giving further details.
BMW joins a small but growing list of automakers rethinking the subscription model, including German-rival Mercedes Benz, which dropped them in July, and Ford. At the same time, other manufacturers are moving ahead with their programs, including Porsche and Nissan.
Whether it’s buy, lease or subscribe, carmakers and dealers are unified in their desire to sell cars, or move metal, in order to meet strong consumer demand for cars. At the same time, they are also in the process of adapting to the increasingly digitized methods being used to buy and finance cars and trucks.
“For digital, this whole disruptive period with corona is an inflection point from which there’s no turning back,” AutoNation Chairman and CEO Mike Jackson said, according to PYMNTS.
There’s also a supply and demand dynamic at play that has recently tipped the balance of buyers toward used cars rather than new ones, in part because of factory shutdowns, but also due to rising pricing and falling manufacturer incentives, especially for large SUVs and pickups.
According to Kelley Blue Book, the average price of a new vehicle was recently up 1.3 percent to $39,259. However, full-size pickups rose 7 percent to $54,854 on average.
The Smart Alternative
While consumers may not agree with the math, legacy rental agencies like Enterprise and Hertz are both in the vehicle subscription business.
For its part, Hertz calls its “My Car” program “the smart alternative to owning or leasing a car” and extols eight “exceptional benefits” that offer worry-free driving, including fast service, vehicle exchanges, roadside assistance and no depreciation charges, as well as the usual inclusions of maintenance and insurance.
Even though the roster of makers has lost a marquis brand, the auto subscription business continues to move forward, including last month’s $400 million debt deal between subscription platform NextCar Holding and Westlake Financial.