Cadillac to Terminate Car Subscription Service by Year End
Technology issues made customer service cumbersome and costlier than anticipated.
While other auto manufacturers like Toyota, Jeep and Lexus are jumping on the car subscription bandwagon, Cadillac is about to hop off. According to CNET and The Wall Street Journal, Cadillac will terminate its car subscription service by year end. The Book by Cadillac service is currently available in three markets: Los Angeles, Dallas and New York. The Wall Street Journal reports there were issues with the technology that supported the subscription service, creating extra customer service work and costs. Current subscribers will be notified and have 30 days to return their vehicles.
Cadillac was one of the early adopters of the car subscription model, announcing a first-of-its-kind subscription service for luxury cars in January 2017. At the time of its launch, Cadillac said a growing number of luxury car drivers wanted easy access to a variety of vehicles with white-glove service. Cadillac launched the service in the New York metropolitan market with the idea that it would roll out to other markets if successful.
“With maintenance, insurance and detailing of the vehicle handled by Cadillac, members are freed from the baggage that comes with traditional vehicle ownership and given the freedom and flexibility to fit their lifestyle,” said GM in its January 2017 announcement.
Once a subscriber signs up for Book by Cadillac using the app and they are approved, they can choose from one of five Cadillac models: high performance ATS-V and CTS-V, the CT6 sedan, the XT5 crossover, and the Escalade SUV. Their vehicle was delivered to their home, and subscribers were allowed to exchange their vehicles up to 18 times a year for a flat rate of $1,800 a month plus a one-time initial fee of $500. The price includes use of the vehicle, concierge service including personal deliveries and exchanges, 24/7 roadside assistance, insurance with a $1,000 deductible, routine maintenance and repairs, vehicle registration, OnStar, Sirius XM, 4G LTE built-in WiFi, phone integration with Apple CarPlay, and state and local taxes.
Of course, some restrictions to the program apply. To get approved, drivers must be at least 18 years old, have a valid driver’s license for the jurisdiction where they live and be willing to have a background check done. Also, drivers must meet Cadillac’s “history eligibility standards” which excludes drivers who have had a restricted, suspended, revoked to denied driver’s license in the last five years, among other restrictions.
This action on GM’s part is not necessarily a surprise. While auto makers have been testing the car subscription service, there is no clear frontrunner in terms of business models. Each manufacturer is testing car subscriptions in individual markets and with slightly different terms and conditions to see what works for them and their customers. At the same time, auto makers are trying to satisfy a new type of driver – someone who doesn’t want a long-term commitment, wants convenience and choice.
Prices for car subscription services are pretty high, making them inaccessible to the average consumer which can be one barrier to entry. In addition, auto makers have to try not to alienate dealers who have been their bread and butter for decades. They have to be sensitive to their needs, while trying to adjust to the changing needs of the marketplace. It is a difficult balance for sure.
While Cadillac was not successful this time around, they always have the option to reinvent their program, using the lessons they learned through their test markets to make changes that are more in line with their needs and goals. They were smart to pull the plug while they rethink their subscription business model.