Subscriptions haven't paid off but worth the try

The early results from the Great Auto Subscription Experiment are in, and ... they've been canceled.

As reported recently in Automotive News, Mercedes-Benz USA, like Cadillac before it, will wind down its subscription program this summer after testing it in a few cities for a couple of years. Demand, according to sales chief Adam Chamberlain, was "just OK" — which doesn't scream "moneymaker!"

A lot of smart people at automakers, retailers and vendors such as Clutch Technologies have put considerable time and thought into the subscription model. It offers consumers an alternative to traditional ownership or leasing by bundling in the costs of maintenance and insurance, and some allow clients to swap vehicles to match their needs or moods.

To be sure, a handful of consumers have found a vehicle subscription appealing. Porsche plans to expand its U.S. program to cities beyond Atlanta. But other brands aren't seeing the scale or pricing to operate efficiently.

The fundamental problem with the subscription model is that it attempts to answer a question that few people asked. That kind of disruption worked for the smartphone, which quickly proved itself to be essential and yet was relatively easy to exchange or upgrade. But phones are not cars.

While the notion of sampling from a variety of vehicles to match a need or mood might sound attractive, it's not practical in practice. And it puts the dealers or other system operators in a challenging spot.

Customers paying a premium to be able to swap vehicles will be upset if they can't get into their desired vehicle because not enough are in the subscription fleet. But the cost of covering likely scenarios can easily be cost-prohibitive.

Most of the experimentation has been among luxury brands, which have customers who can afford to pay extra for convenience. If those affluent consumers can't find enough value in a subscription offer, it's hard to envision subscriptions taking off profitably in the mainstream.

Transportation is a huge industry that attracts new ideas to better serve consumers — and many of them are designed to take revenues and profits from industry incumbents. So it's healthy for longtime companies — from iconic brands to strong dealerships — to experiment and see what lessons can be learned. For now, it's time to go back to the lab.