Mercedes readying subscription program for U.S.

GENEVA — Mercedes-Benz is close to deciding when, where and how to launch a U.S. pilot program for a flat-rate vehicle subscription service.

"We plan to have something ready within this year," said Britta Seeger, global head of sales for Mercedes-Benz, at the auto show here. "We are in the final conclusion" stage.

In Europe, Mercedes said this month it is teaming with Daimler Financial Services to launch the service — called Mercedes me Flexperience — as a pilot program at Germany's two largest Mercedes dealership groups.

Subscription customers can select and drive up to 12 new vehicles for a year at a fixed monthly rental rate, which Mercedes did not disclose. The rate includes insurance, maintenance, repair, tires and up to 36,000 kilometers (22,369 miles) a year. Customers make vehicle changeovers online through the Mercedes me Flexperience app.

As for the U.S., Seeger said, "We are currently in investigation in which area to try it out."

In Germany, subscribers can choose 12 vehicles per year from one of four segments: A-, C-, E- and S-class models and their crossover and sporty offshoots. Subscriptions will be offered for each of the four vehicle classes. "If you want upgrade, you have to pay," Seeger said. "For example, if you have your wedding day and you are subscribed in a C class and you want an S-class cabriolet — you can, but you have to pay."

Seeger said that within a segment, subscribers can arrange for a different vehicle on "short notice," but conceded that "short notice" is a relative term.

"Cars are a rare resource," she said. "If it's sunny and everybody asks on Friday, 'Can I switch to a cabriolet?' maybe you will not get one. That's obvious."

Some industry observers view this as a problem for the subscription model.

"We will see," said Seeger. "Up to now, in all the tests we did with the customers, they do understand. If it's announced that it will be a sunny weekend and they call Friday evening at 6 o'clock and do not get a cabriolet, they are understanding.

"If they ask a month before and they say, 'I have a wedding day' and you cannot secure me a car, then they are disappointed. This is the trade-off."

The key to the service, Seeger said, is that customers have flexibility — and they know it.

"They love to have this potential that they can change if they want to," she said. "Maybe it's not always the wished-for car, but, if they have a little bit clarification … this is so attractive to them."

Profitability is another question that has dogged subscription services planned by various automakers. Daimler CEO Dieter Zetsche has raised the question publicly. But Seeger said, "Up to now in all the tests, all that we have seen — what we've asked the customer to pay was a profitable basis."

Another issue is that some dealers fear that automakers are trying to bypass them by offering subscription services managed online. Seeger says that isn't an issue with Mercedes.

"We are not at all bypassing them," she said. "We base all our activities on very strong cooperation with the dealers, because if we do not have their buy-in it will not work."

Even though changing vehicles is done online, "you need to provide personal service in case you need it," Seeger said, so "in all our activities, we rely on strong cooperation with the dealers."

Dealers "pushed us" to offer the service, she added. "They said, 'We want a test. We want to try. We want to have this as one additional offer for customers who are looking for this.' "

Some U.S. dealers offer their own subscription services, which Seeger doesn't see as a problem.

Dealers "were moving because we were not moving," she said. "Therefore, we said, 'C'mon, we do one offer with our financial services as a corporation.' And this is the program and you just have to offer this to the customers.

"We are absolutely sure if this is working out as we foresee it — as we discussed with the first group of dealers — that they will come into it."

As for dealers' subscription offerings, Seeger said, "We don't consider this competition because they informed us and we have a very open relationship with the dealers. We know what they are doing."

Seeger said vehicle subscription services are part of the wave of the future.

"With everything we see from the markets, from the customer … going forward, choice is really the topic of the future," she said. "Customers are so diverse and they want to have different offers. Subscription is another part of how to offer mobility to our customers."