FREMONT, Calif. -- An Internet startup catering to the well-to-do is preparing to lease, license, insure and maintain custom-made automobiles for a flat monthly fee, offering motorists more luxury and fewer headaches.
The company, Model E, will allow motorists to order upscale vehicles over the Internet, with customized features.
In partnership with Model E, a fleet management firm owned by Avis will buy already-built cars from major automakers and then contractors will customize the vehicles for clients.
Model E's customers get a three-day test drive and then agree to "subscribe" to the vehicle for two to three years. Unlike a traditional leasing arrangement, Model E's subscriptions will include all the car's licensing, insurance and maintenance costs -- just about everything but gasoline.
The fee includes emergency roadside service and a concierge service that will pick up and deliver cars that need servicing.
"We have not underestimated what it will take to pull this thing off," said William Santana Li, who left a job running a Ford Motor Co. subsidiary last year to become CEO of Model E. "It will be a huge undertaking, but we think we can make the second century of the automobile a much better one than the first."
The convenience offered by Model E won't come cheap. The company is aiming for affluent, time-pressed households with annual incomes above $100,000.
For example, a 2001 Audi TT Quattro coupe would cost $1,119 a month. A comparable three-year lease at other online auto sites would cost between $800 and $850 per month.
Fremont-based Model E was formed last fall by prominent Japanese venture capitalist Softbank, which has invested $16 million.
The company plans to formally announce its arrival on the automobile scene next week, but won't open its virtual doors to the general public until early next year.
In the meantime, Model E will fine tune its plans in test subscriptions with "invited" customers in the Silicon Valley. Later, Model E will branch out in California before expanding to other cities.
Dalton Chandler, an analyst for Needham & Co. in New York, believes Model E will inspire a host of imitators if its strategy is successful.
"The auto manufacturers have the infrastructure to do the same thing," Needham said.
Model E is joining a crowded field of traditional automobile dealers, manufacturers and technology entrepreneurs trying to use the Internet to develop a better way to buy vehicles.
It's a huge market -- in 1999, about $700 billion was spent nationwide on new and used vehicles, according to a research report by Robertson Stephens.
No automobile Web sites have struck gold yet, partly because of stringent laws in most states that prevent newcomers from infringing on the turf of licensed local automobile dealers. These restrictions have largely prevented auto manufacturers and other businesses from making a big splash on the Internet.
Model E got around these limitations by arranging for fleet management firm PHH to buy and own the cars ordered by the company's customers.
More consumers shopping for cars are turning to the Internet to research, if not buy a car.
About 55 percent of new-car buyers in 1999 used the Internet as they shopped, according to J.D. Power & Associates, a Agoura Hills research group.
General Motors, the world's largest automaker, said all its surveys show that people overwhelmingly prefer to buy their cars from dealers.
"The e-world is going to happen, but dealers are not going to become extinct," said GM spokeswoman Gwen Knapp.
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