Mercedes-Benz expands subscription service to Atlanta

ATLANTA — Mercedes-Benz is expanding its vehicle subscription program to Atlanta, a year after launching the pilot program in Nashville and Philadelphia.

Mercedes-Benz Collection gives subscribers access to 30 model variants for a monthly fee.

Several automakers are experimenting with subscription programs in a nod to changing realities. Rapid technological advancement in the auto industry, coupled with the emergence of affordable and abundant ride-hailing and ride-sharing services, has put pressure on the historical car-ownership model.

Subscription programs, instead of forcing consumers to buy one vehicle for every driving need, allow customers to pick the vehicle for the need -- an SUV for when extended family is in town, a convertible for a weekend getaway or a compact for the downtown commute, for example.

Yet, results have been mixed. While Mercedes and Porsche appear to see strong interest for their programs, others have had a more wobbly start.

The Book by Cadillac vehicle subscription service had skittered along for more than a year when General Motors executives shuttered the venture in November. Few customers bit at the service's $1,800-per-month price.

Volvo's Care by Volvo drew protest from U.S. dealers. In a petition filed in January with the California New Motor Vehicle Board, dealers claim that the service violates franchise laws intended to stop manufacturers from competing with retailers.

In addition to being Mercedes-Benz's U.S. headquarters, Atlanta's demographics and surging population of high net-worth professionals makes the region a natural expansion market for subscription services. Atlanta is also a pilot market for Porsche's subscription program.

"We do anticipate that Atlanta is going to be our biggest market," said Heiko Schmidt, CEO of Mercedes-Benz Subscription Services.

The Atlanta expansion suggests growing confidence in the viability of subscription programs. The new model is helping attract new customers to the brand — only about 20 percent of subscribers previously owned Mercedes vehicles, Schmidt said. Subscription customers are more than 10 years younger than the typical Mercedes-Benz customers.

"We are addressing a certain kind of clientele that we otherwise might not be able reach to the full extent," Schmidt said.

The subscription program is also driving sales. Some members use the program to test drive models for three or four months, before buying a Mercedes at a dealership, said Dietmar Exler, who announced his resignation as Mercedes-Benz USA CEO on May 16.

Mercedes' subscription program has three tiers -- Signature, Reserve and Premier -- with prices ranging from $1,095 to $2,995 per month. Subscribers pay a one-time activation fee of $495 and can choose from SUVs, crossovers, sedans, coupes, convertibles, roadsters and wagons. Each tier also allows access to the company's high-performance Mercedes-AMG models.

The program is a collaboration among MBUSA, Mercedes-Benz Financial Services USA and Mercedes-Benz dealers.

Porsche is seeing robust interest in its program — it plans to expand its Porsche Passport subscription program to four new markets.

"Eighty percent of the people in the program, or who have been in the program, have not owned a Porsche before," Porsche Cars North America CEO Klaus Zellmer told Automotive News in April. "The customers are five years younger than the typical new Porsche car buyer."

Even so, the future of Porsche Passport hinges on one unanswered question: "How can you make money with the program? That's the next step," Zellmer said.

Mercedes-Benz's Exler was noncommittal about the future of the subscription program.

"That's part of the year-one review. I'll be looking at what's the business case," Exler told Automotive News in April. "The program will continue for at least another year, but we might make decisions to expand it or might make decisions not to expand it yet. The ideal scenario is to develop something that is turnkey, to use in other cities with our dealer partners in a way that makes sense for the customer, for the dealer and for us."

Porsche, like Mercedes, sees dealers play a bigger role in the subscription program.

"In the future, dealers will be some kind of mobility provider, not just a facility where you buy a car," Zellmer said. "They will have to provide access to a brand, be it for three hours, a day, a week, or one month or three years. We are inviting them to provide exactly that type of service."