Auto makers turn to subscription services
Illustration by Dominic BugattoCar and driver
Extract from the October 2021 issue of Car and driver.
In 2019, BMW announced that it would begin charging owners of its vehicles $ 80 per year for the privilege of using Apple CarPlay, which mirrors the screen and functionality of an iPhone on the infotainment screen. It’s not only standard in a $ 14,595 Chevrolet Spark, the cheapest car available in the United States, but it’s also a feature that Apple doesn’t charge BMW for. Consumers mutinied and the Bavarians withdrew. But not for long. BMW then decided to go back to a subscription model for features like a smartphone-based virtual key, remote start and even heated seats.
Porsche offers a range optimization function and lane keeping assistance on its Taycan electric models for a monthly charge. Cadillac does the same with its Super Cruise hands-free driver assistance and Audi with its Wi-Fi-enabled immersive navigation system. Of course, Tesla is now asking customers to shell out $ 200 a month for its full autonomous driving, always someday. Welcome to the digital automobile buffet, where you can choose what you want and then pay every month.
“It worked really well for Adobe, which went from selling copies of Photoshop for $ 700 to offering only a subscription license,” says Sam Abuelsamid, senior analyst at Guidehouse Insights, where he oversees technological research on vehicles. Now graphic designers pay $ 21 a month, forever.
Representatives of BMW, Audi and Porsche all point out the benefits to consumers. “American customers mainly select vehicles from dealer inventories,” said Jay Hanson, a technical spokesperson for BMW. “The on-demand feature has the potential to streamline the process for the customer to find the car they want. Hmm, including the good stuff as standard.
In fact, the concept streamlines the manufacturing process, saving builders money. Instead of building cars with many different option packs to specify, companies can produce a fully equipped model and charge consumers to activate the features they want. “You’re going to have more complexity in the car but less complexity in the manufacturing,” says Abuelsamid. “There can be enough economies of scale in reducing manufacturing costs to save the cost of adding material.”
Automakers could also see their residual value rebound. Consumers who buy their vehicle but lease their options will not accumulate equity in desirable features. So when it’s time to unload their car, years of paying for advanced navigation or remote starting won’t earn them a higher resale price. Rather, it becomes a component that the manufacturer can continue to lease to the next customer.
Automakers “talk about flexibility,” says Abuelsamid. “You don’t need heated seats in the summer. So if you can activate these subscriptions easily, you can only pay for them when you want to use them. Of course, you also have the responsibility to deactivate the subscription when you “are not using it. And people in the subscription industry rely on the idea that if the price is low enough, customers will forget to check out. Unsubscribe. Once you have it, you get just enough benefit from it that you don’t unsubscribe. Think about all your streaming services. “
We would rather not.
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