As cars become more expensive to make and profit margins shrink, automakers are coming up with new and disgusting ways to squeeze more money out of their customers. Subscription-based access to vehicle features, such as heated seats or remote start remotes, are the latest effort to make people pay for things their cars already come with. The question is whether customers will lie down and take it.
Earlier this week, some media reported that BMW was selling heated seats for $18 a month in a number of countries, including South Korea. The German automaker had previously attempted to charge customers $80 a month to access Apple CarPlay and Android Auto — features otherwise free in other companies’ vehicles. But even after BMW reversed its decision to force people to pay for something that used to be free, it was clear it wouldn’t stop there.
More than ever, cars are loaded with computers and software, which has made it possible for car manufacturers to add new features or fix problems with over-the-air software updates. This has also given these automakers new ways to make money. BMW isn’t alone – Volkswagen, Toyota, Audi, Cadillac, Porsche and Tesla have all dived into subscription models for certain options, such as driver assistance features or speech recognition. It’s a disturbing trend when you consider how many people hate it.
Earlier this year, Cox Automotive conducted a survey of 217 people who want to buy a new car in the next two years. Only 25 percent said they were willing to pay a monthly or annual fee to unlock a feature in their vehicle. The other 75 percent said fuck off.
Of those 25 percent who don’t mind a subscription, the features they were willing to pay an annual or monthly fee generally fell into three categories: safety features like lane-keeping assistant or automatic emergency braking (although automakers have agreed to make the latter standard in new vehicles). as of this year); vehicle performance characteristics, such as extra torque or horsepower; and comfort, such as heated or cooling seats or steering wheels.
“In order for automakers to realize their revenue ambitions by charging consumers extra for features and services, they have work to do,” said Michelle Krebs of Cox.
Most subscriptions seem to come primarily from luxury car manufacturers, which makes sense since their customers are usually wealthy and can more easily take out an annual or monthly fee. But industry analysts have said subscriptions to mass-market vehicles are coming as mainstream automakers look for new revenue streams to help fund their hugely expensive plans to build vehicles that are electric, connected and autonomous.
Last year, General Motors said it earned more than $2 billion in in-car subscription revenue, a number the company expects to grow to $25 billion by the end of the decade. That would essentially put GM in the same league as Netflix, Spotify and Peloton.
GM has approximately 16 million vehicles on the road in the US, about a quarter of which have features for which customers pay subscriptions. “Our research indicates that with the right mix of compelling offers, customers are willing to spend an average of $135 per month on products and services,” said Alan Wexler, SVP of Innovation and Growth at GM, during a presentation at the investor event of GM. the company in December 2021.
This would represent a huge shift in the way vehicles are marketed and sold. Typically, a car’s factory-equipped options are permanent, whether it’s 10 years old or sold two or three times.
That has changed in recent years, thanks in part to the popularity of Tesla and the advent of wireless software updates. Elon Musk’s company pioneered microtransactions and currently sells access to several features after purchase. It even carried cars with battery packs whose range was limited by software, and owners could pay a fee to unlock the full capacity. Some experts predict this could encourage automakers to provide more software updates to help vehicles evolve after purchase. But the idea that automakers will curb their worst impulses seems naive at first glance.
For a moment it seemed that the car itself would become a subscription. A number of automakers thought they could charge people a monthly fee to access different models as an alternative to owning or leasing a car. Turns out people weren’t interested: Ford, BMW, Cadillac, and Mercedes-Benz have all pulled the plug on their vehicle subscription services. Other companies are still shutting down, but the ideal price remains elusive.
This may all seem predestined, but it’s no guarantee, especially if automakers ignore the sales pitch. In the case of heated seats or limited-range battery packs, customers are essentially paying companies to remove a software block on some pre-existing functionality. Some customers may be persuaded to pay an additional fee for something that requires constant software updates, such as automated traffic alerts. Other things, like heated steering wheels or Apple CarPlay, just seem like car manufacturers trying to scam their customers for things they only have to pay once.
“Automakers certainly want customers to get used to this, but frankly I’m skeptical that this will fly,” said Sam Abuelsamid, principal analyst at Guidehouse Insights, an industry consulting firm.
Abuelsamid noted that cars are more expensive than ever, with an average car price of $48,000 this month for the first time ever. And as the industry shifts toward producing more electric vehicles, those average costs are expected to rise even more. People already feel pressured by dealers, so they’re not likely to embrace the idea of paying even more money on a recurring basis to access certain comfort features.
Unless automakers lower the purchase price of new vehicles to offset the subscriptions, customers probably won’t be able to afford all the nickel and dime, Abuelsamid said. “I think automakers have to fall back on prices or how much stuff they want to convert into subscriptions,” he said.