If no one bought cars, how would automobile manufacturers make money? Car executives have been asking that question as they look to a future in which ride-sharing replaces individual ownership, and no one has been more aggressive than General Motors. GM’s latest idea is to offer a subscription plan to well-heeled young professionals, The Wall Street Journal reports:
Ms. Sandall, a 35-year-old fashion executive who lives in New York City, used Cadillac’s brawny Escalade SUV for trips to the Hamptons and a football game in New Jersey. “It was great to have your pick of the vehicle best suited for what you’re doing,” she said.
After participating free of charge in a three-month pilot of General Motors Co.’s new Book by Cadillac subscription plan, Ms. Sandall said she is considering becoming a full-time member when it is time for a new vehicle. For $1,500 a month, the program covers ownership costs and lets members trade in and out of Cadillac’s 10 models up to 18 times a year.
The effort is the latest experiment by a car company to test whether people are willing to treat personal transportation like a Netflix account, where temporary, on-demand access outweighs the benefits of ownership.
GM’s plan is part of a larger strategy that sees self-driving cars bringing an end to car ownership for many Americans, particularly middle class people living in cities and dense suburbs, sometime in the next decade or two. Car ownership in a city is already an expensive hassle thanks to parking tickets, fees, street-cleaning, and the wear-and-tear of driving on crowded city streets. It is much easier to have a car show up on-demand, whether for a quick trip to the grocery store or a four-hour ride to visit family upstate. Much more than today’s vehicles, a car that drives itself will be a wasted asset if it sits in a parking lot.
GM’s idea is to capture that lost value by participating in the ride-sharing industry. Whereas GM now makes money by selling cars (through dealerships), it hopes eventually to make just as much if not more by selling people access to its transportation networks. A lot of money gets spent on taxis and trains and airplanes and buses right now. GM hopes those dollars will eventually go into its coffers and replace the profits it earns by selling vehicles to consumers. The company is already partnering with the Uber competitor Lyft to bring driverless cars to city streets.
This high-tech vision of transportation offers a glimpse of the radical transformations that are coming to traditional blue model industries. It’s good to see GM thinking boldly about the promise of self-driving technology, recognizing that the information economy will be good for consumers and for the company bottom line.