The maker of Jeep SUVs and Chrysler vehicles is keen to offer customers some new retail programs, executives say, but semiconductor shortages are holding back launches.
Stellantis NV has launched a subscription-based model at some dealerships nationwide, Jeep CEO Christian Meunier told The Detroit News at the Detroit Auto Show. The program would allow owners to swap vehicles within the Stellantis family of brands, giving a Jeep Wrangler owner, for example, access to a Chrysler Pacifica minivan or a Ram 1500 or Jeep Gladiator pickup truck for a limited time.
However, having too few vehicles on dealer lots is holding back the start of the program. This is due to a global shortage of microchips that is hampering production and is expected to continue into next year. Meunier said he expects the offering to launch nationwide once more vehicles are available on dealer lots.
“The problem is that the traders didn’t have enough to make it really successful,” he said. “The concepts are good. Execution is not the right moment for it.”
Wall Street favors more consistent, recurring revenue models. A esteemed disruptor like Tesla Inc. uses a direct sales model and adds features with over-the-air updates. Car manufacturers are therefore rethinking their sales model in order to be able to offer customers a streamlined approach and more flexibility. They predict billions of dollars in revenue from paywall offerings. However, running subscription services by other companies has historically faced logistical and cost challenges.
In 2017, General Motors Co. launched Book by Cadillac, an all-inclusive service worth $1,800 per month that allowed users to switch vehicles as many times as they wanted, but the program was discontinued in the December 2018 interrupted. Leading companies had suggested it would return in 2020, but then the pandemic happened. Ford Motor Co.’s financial services arm also sold its vehicle subscription service Canvas to a California car rental app in 2019.
“While it’s very attractive from a customer perspective, because the flexibility to have different vehicles at different times based on need is nice,” said Sam Abuelsamid, senior e-mobility analyst at market research firm Guidehouse Inc. “You don’t always have to have a Wagoneer drive, but if you want one for a family outing or a Pacifica for a road trip, you can switch at different times.
“The problem with this type of model is the logistics of getting the swaps,” he said. “It was very expensive. Every time you swap vehicles, clean the vehicles maintenance and everything. To make it viable, the price was so high that it wasn’t attractive to consumers.”
However, Stellantis said it showed it could make subscription-style rentals work and make it profitable. Its mobility services brand, Free2move, offers monthly on-demand rental cars throughout California and in Austin, Texas; Columbus, OH; Portland, Oregon; and Washington, DC Based on results at those locations, Free2move says it is expanding. Cost depends on location, but it’s around $799 per month, including maintenance and insurance.
Randy Dye, a Stellantis dealer in Daytona, Fla., and chairman of the national dealer council, said discussions about a subscription model have been going on for four to five years. The idea would be that customers could pay a fee to get a certain number of swaps for a certain period of time.
“With the environment we’re in, it would create frustration because we don’t have many cars in this program,” he said. “In the current reality, it would be a disaster from a customer satisfaction perspective.”
Inventory will not fully return to pre-pandemic levels when the automaker conducted its own destocking efforts, said Mark Stewart, Stellantis’ chief operating officer in North America. The company anticipates it will insist on maintaining smaller but healthy supply levels.
Not only has the pandemic impacted inventories, but it has also accelerated ongoing changes in retail spaces, Stewart said. Dealers pick up and bring vehicles to service. The Stellantis e-shop connects buyers with dealers and allows them to complete the entire vehicle buying process online.
And as automakers are taking steps to limit dealers’ ability to negotiate prices with consumers, particularly on electric vehicles, Stewart says Stellantis customers who are happy to swap needn’t worry: “Certain customers like it.” , when a price without haggling is offered. I go online and there it is. Other customers like the art of haggling. … We have both.”
Executives say they see opportunities in more flexible vehicle conditions. Chrysler CEO Chris Feuell emphasizes that while automakers often emphasize the manufacturer’s suggested retail price of vehicles, customers rate them based on their monthly costs.
“They have a budget they want to live with and we want to be able to meet their needs,” she said. “That’s why we’re looking for different ownership models and more flexible purchase and lease terms that help customers hit the sweet spot of the monthly payment they want to hit.”
She said some customers only want a vehicle for a few months or a year, which makes a subscription program appealing. Tests in Europe have shown that most owners have kept their vehicle for more than a year.
That’s more in line with Care by Volvo, an all-inclusive subscription the Swedish automaker offers in the US and other countries that can be canceled after just five months. It starts at around $650 per month, not including taxes and registration fees, which vary from state to state. However, even this program is currently limited to vehicles on dealer lots due to inventory restrictions.
“It’s a lot simpler operationally,” says Abuelsamid, since the vehicles are swapped out less often.
Feuell says she spoke to Free2move about subscriptions and the possibility of a rent-to-own model. She is also in active discussions with Stellantis Financial Services US Corp, the automaker’s new captive finance arm. The acquisition of F1 Holdings Corp. and its First Investors Financial Services Group over the past year, Stellantis is paving the way for it to play with different models, soon offering cars insurance and facilitating financing for available over-the-air post-purchase updates like 5G connectivity or satellite radio.
Chrysler is well positioned to test these new payment models, Feuell said, with its current two-vehicle lineup and vision to appeal to younger, tech-savvy buyers. Chrysler plans to become an all-electric brand by 2028.
Stellantis Financial Services is also joining the automaker’s e-mobility team’s efforts to develop a national EV charging network with partners to be announced. A subscription could offer access to this full network, and a premium membership could include unlimited top-ups and the ability to make a reservation at a specific station.
Stellantis is committed to making it easier for customers to sign up for such offers out of today’s “confused” system, said Ned Curic, Stellantis’ chief technology officer. In the future, they can expect to be able to do this with a click through an infotainment screen or after scanning a QR code.
This will be available when Stellantis introduces its new software platform STLA Brain for vehicles starting in 2024. However, the company aims to integrate the numerous back-end systems across brands and regions to offer a similar experience to owners of existing vehicles. It’s one of the priorities of Chris Taylor, the chief digital information officer that Stellantis hired this month, Curic said.
Curic emphasizes that these subscriptions should add value to the vehicle, as Stellantis estimates that revenue from them could total $22.5 billion by 2030. Automakers are taking different approaches to the paywall model. BMW, for example, is charging $18 a month for heated seats in the UK, an approach that Curic says is hard to sell to consumers.
“You can’t give customers something and then take them away and ask them to charge,” he said. “How many cars will you buy in your lifetime? Three, four, five maybe? It’s a big investment. So we’re going to try to provide really amazing customer experiences when they buy these vehicles, and there are other things that we can bring with us when the vehicle departs that add value on top of that that we can subscribe to.
“The Jeep model is a good model, while you can subscribe and have a pickup truck or a van – I mean, it’s different, right? So you might be willing to actually pay for that subscription because you might need a van or a pickup truck one of those days. We look at what makes sense for customers versus what makes sense for the bottom line on our end.”