As vehicle production costs escalate and profit margins shrink, car manufacturers are devising novel strategies to enhance revenue streams. Among these emerging approaches, the “Car Manufacturer Subscription Program” has gained considerable traction, albeit amidst considerable consumer skepticism. This model involves automakers charging recurring fees for access to features already embedded in vehicles, such as heated seats or remote start functionalities. The fundamental question is whether consumers will embrace this evolving paradigm or resist what many perceive as an unnecessary financial burden.
Earlier this year, BMW garnered attention when reports surfaced regarding its $18-per-month subscription for heated seats in several markets, notably South Korea. This initiative followed BMW’s earlier attempt to impose an annual $80 fee for Apple CarPlay and Android Auto, features typically offered without charge by other automakers. Although BMW eventually reversed its stance on charging for these smartphone integration systems, it signaled a broader industry trend towards subscription-based vehicle features.
The Rising Tide of Subscription-Based Car Features
Modern vehicles are increasingly sophisticated, relying heavily on computer systems and software. This technological evolution allows manufacturers to introduce new features and address technical issues via over-the-air (OTA) software updates. However, it has also paved the way for new monetization avenues, with car manufacturer subscription programs taking center stage. BMW is not an isolated case; brands like Volkswagen, Toyota, Audi, Cadillac, Porsche, and Tesla have all experimented with subscription models for various functionalities, including advanced driver-assistance systems and voice recognition. This trend, however, is generating significant controversy and consumer backlash.
A recent survey conducted by Cox Automotive, involving 217 prospective new car buyers, revealed that a mere 25 percent were willing to pay monthly or annual fees to unlock vehicle features. The overwhelming majority, 75 percent, expressed strong disapproval of the subscription model.
Of the minority open to subscriptions, the features they deemed potentially worth paying for fell into three primary categories:
- Safety Features: Lane-keeping assist and automatic emergency braking (the latter is becoming standard in new vehicles).
- Performance Enhancements: Increased torque or horsepower.
- Convenience and Comfort: Heated/cooled seats and steering wheels.
Michelle Krebs of Cox Automotive noted, “For automakers to achieve their revenue aspirations by charging consumers extra for features and services, they have work to do.” This highlights the significant gap between automaker ambitions and consumer acceptance of car manufacturer subscription programs.
Luxury Brands Leading the Charge, But Mass-Market Adoption Looms
Subscription models appear to be more prevalent among luxury car brands initially. This is partly attributed to their customer base, who are generally more affluent and potentially more amenable to recurring fees. However, industry analysts predict that car manufacturer subscription programs are poised to expand into the mass market. Mainstream automakers are actively seeking new revenue streams to offset the substantial investments required for developing electric, connected, and autonomous vehicles.
General Motors (GM) announced last year that it generated over $2 billion from in-car subscription services. The company projects this figure to surge to $25 billion by the decade’s end, aiming to rival the revenue scale of streaming giants like Netflix and Spotify.
Amelia Holowaty Krales / The Verge
GM estimates that approximately 25% of its 16 million vehicles on US roads have subscription-based features. Alan Wexler, SVP of innovation and growth at GM, stated that research indicates customers are potentially willing to spend an average of $135 per month on vehicle features and services, provided the offerings are compelling.
This shift represents a fundamental change in the automotive sales model. Traditionally, factory-installed car options were permanent, irrespective of vehicle age or ownership changes.
The Tesla Influence and Shifting Perceptions
Tesla’s rise and the proliferation of OTA software updates have partly fueled this transformation. Elon Musk’s company pioneered in-car microtransactions, offering post-purchase feature upgrades. Tesla even initially sold vehicles with software-limited battery ranges, allowing owners to unlock full capacity for a fee. Some experts suggest this could incentivize automakers to provide continuous software improvements, extending vehicle lifespan and functionality post-purchase. However, the notion that automakers will exercise restraint in implementing these programs remains questionable.
While vehicle subscription services, offering access to different car models for a monthly fee, have largely failed, feature-specific car manufacturer subscription programs persist. Ford, BMW, Cadillac, and Mercedes-Benz discontinued their vehicle subscription services, and the ideal pricing model for such services remains elusive.
Photo by James Bareham / The Verge
The success of car manufacturer subscription programs is far from guaranteed and hinges on automakers’ approach. Charging for features like heated seats, which essentially involves removing a software lock on existing hardware, is likely to face strong consumer resistance. Features requiring ongoing software support, such as real-time traffic updates, might be more palatable as subscription services. However, charging extra for basic comfort features like heated steering wheels or smartphone integration appears to consumers as exploitative.
Consumer Skepticism and the Road Ahead
Sam Abuelsamid, principal analyst at Guidehouse Insights, expresses skepticism about the long-term viability of car manufacturer subscription programs, stating, “Automakers sure want customers to get used to this, but frankly, I’m skeptical this will fly.”
He points out that average car prices are at record highs, exceeding $48,000, and are expected to increase further with the transition to electric vehicles. Consumers already feel financially strained by vehicle purchase costs and are unlikely to readily accept recurring fees for comfort features.
Abuelsamid concludes that unless automakers reduce vehicle purchase prices to compensate for subscriptions, consumer resistance will likely intensify. He suggests that automakers may need to reconsider either their pricing strategies or the extent to which they rely on subscription models.
Correction: It was initially stated that BMW’s CarPlay and Android Auto subscription was $80 per month. The correct figure is $80 per year.
