Cadillac Cancels $ 1800-Month Car Subscription Service
General Motors
GM -1.21%
wrap down a car insurance service that was rolled out almost two years ago for Cadillac, emphasizing the challenges traditional car manufacturers face when they try to diversify into new transport offers.
Book of Cadillac service available in Los Angeles, Dallas and New York – will shut down operations by the end of this year, according to people informed about the plan. Subscribers who pay $ 1800 per month to access Cadillac's model model will have 30 days from the time they are notified about turning their vehicles, they said.
The subscription plan, launched early last year, allows members to swap in and out of different Cadillac models for monthly fee, which provides an alternative to customers who may not want to make long-term obligations to buy or rent a car.
A GM spokesperson confirmed that the service was over, but said it could start again later. "We hit the pause button for a short while to make some tweaks to Book [by Cadillac] based on our teachings," said the spokesman.
A letter prepared this week for subscribers in New York said that Book by Cadillac would close its program in the city on December 1[ads1], and included an offer to buy or rent a new Cadillac, a person who underwent the letter said.
Some aspects of Cadillac's program proved to be more expensive than expected, people familiar with the program said. Snags with back-end technology that supported the service, some customer service features became boring and time consuming, adding costs to the company, these people said.
Many car companies have introduced subscription plans in the last year. It's betting people who are interested in handling personal transport, just like a Netflix account.
Auto executives are concerned that the century-old model of customers buys and repairs their own cars will lose reason to ride-hailing services such as Uber Technologies Inc., and other forms of transportation. Many car manufacturers collaborate with technology launch to launch new smartphone-based apps that give customers new opportunities to get around, for example, to greet driver-driven cars in the future.
Cadillac was among the first brands to offer a subscription plan. Since March 2017, the launch,
Porsche
AG
, Daimler AG's Mercedes-Benz,
Volvo
AB and other premium brands have followed Cadillac's leadership and launch similar plans that allow subscribers to run different models for a monthly interest rate.
The move, like GM clamps, comes down to the cost of slowing sales in two of its largest markets, China and China. The United States Detroit car manufacturer this week sent buyout offers to over a third of its 50,000 employees in North America, a attempt to shrink its cost base while the economy and car market remains strong, the company said.
The car model is still in its childhood, and many brands now limit the service to only a few cities and several dozen subscribers.
Hyundai Motor
Co.
Recently closed the subscription service for electric cars, but said it plans to reintroduce a revised version.
"Hype on subscriptions like the next big wave of car ownership has not materialized yet," said Ivan Drury, senior analyst with the car industry's website Edmunds.com.
Cadillac's subscription service allows customers to pay month to month without a long-term commitment. They can order cars via their smartphone, switch models up to 18 times a year. It could not be learned how many subscribers Cadillac had registered.
Analysts say that customers can rotate in and out of cars, which can often be difficult to manage. Logistics to repair damaged cars, clean them between use and deliver them within 24 hours, is dull and expensive, say analysts and operators.
Cadillac also offers other services as part of the subscription plan, Off, it's hard to pull out on a larger scale, said Drury.
"Some of these services will even transfer things from car to car, from the phone ladder to the children's stroller," said Drury. "The problems that arise by offering this service level on a large scale are huge."
Subscriptions usually allow subscribers to trade cars a few times a month and may range from $ 650 a month to over $ 3000 a month, depending on the car manufacturer, analysts say. Most plans include insurance, and the company handles repairs and routine maintenance as an oil change.
The Mercedes-Benz MB Collection program, for example, offers a dozen models. Monthly monthly rates range from $ 1,095 to $ 2,995.
In most cases, however, consumers stop paying thousands of dollars more in the long run to subscribe to the service than if they rented a car, according to Edmunds.
For example, a Cadillac Escalade sports utility vehicle hires for three years would cost around $ 49,000, Edmund's estimates. The cost of subscribing to Cadillac's book service during that period will be over $ 64,000, says the company.
Startup companies offer subscriptions that give members access to cars from the car brands, including Atlanta-based Clutch Technologies, purchased in August by privately owned Cox Automotive Inc., which sells services to retailers.
Some retailers have also started offering subscription service. A service called Flexdrive is jointly owned by Cox and Holman Automotive, a major retailer based in New Jersey.
Write to Mike Colias at Mike.Colias@wsj.com
