Paying monthly fees for car features is likely to become the new normal, whether consumers like it or not.
At this point, American consumers have gotten used to the death-by-a-thousand charges that is today’s Age of Streaming. Now carmakers are testing the waters to see if customers be as willing to click okay for monthly fees attached to common car features like heated seats and navigation as they have been for early access to the latest Marvel movie.
Indeed, carmakers see the subscription model as a lucrative new space emerging from the ever-increasing digitization of cars. Tesla has been the forerunner of this approach with their over-the-air (OTA) updates for features ranging from infotainment tweaks to battery performance to driver assistance tech. While Tesla is currently only charging a monthly fee for their (spuriously titled) “Full Self-Driving” system, other automakers have begun instituting fees for all sorts of common features, as Toyota recently did with its remote start function.
Players like Honda and GM have been explicit in their hopes to shift their businesses from merely that of manufacturing companies to that of software companies, with all the continuous revenue such a transformation implies. Stellantis’ CTO Yves Bonnefont says this approach would initially focus on “customer experience” features like “a car’s performance or increasing the range of your electric vehicle.”
And it’s not just subscription car features that will mean create new profits either. The digitization of cars has manufacturers already profiting from data collection, with more certain to come as we further integrate our smartphones, and our lives, with our cars. Just imagine the cornucopia of data your on-board digital concierge will be collecting about you….
It’s easy to see the appeal of subscription services to carmakers, who stand to reap tens of billions over the next decade by their own projections. For consumers, the story, at least initially, appears different. Recent surveys indicate that car buyers are at best lukewarm on the idea of shelling out additional money on a monthly basis for features they’re used to buying with the vehicle. Respondents were more receptive to additional charges for features like “find my car” functionality or performance upgrades, but much less amped about being charged continually for items like Wi-Fi or heated seats.
Manufacturers are currently laying the groundwork for expanding their car-based subscription services by limiting them to specific desirable functionalities. The incrementalism is a smart approach. Whether you call it testing the waters or boiling the frog, getting consumers used to nominal additional fees will likely make the more receptive to an expansion of subscription fees down the line. In the interest of knowing where we’re headed, here’s a quick survey of current feature subscription fees from various manufacturers.
Tesla, who has pioneered in this space, currently does lots of OTA updates for altering all manner of functions, from battery capacity to infotainment features, but currently only charge a recurring additional fee for their Full Self-Driving feature at $200 per month.
Audi, and parent company Volkswagen, hope to implement OTA updates for future autonomous driving features. Current subscription features include navigation, speech recognition, and internet radio. Other German brands are also implementing subscriptions. Mercedes-Benz offers one for their “Mercedes me” that includes remote start, vehicle locator, and remote lock-unlock features on some vehicles. You can opt for an additional 5.5 degrees of rear steering in the new all-electric EQS for a fee. BMW has instituted fees for their remote start and drive recorder functions.
GM’s OnStar system is currently a subscription, but the company hopes to fold their Super Cruise driver assist system into the model, using OTA updates to add functionality on the fly. Ford has plans for the same with their own autonomous driving system, Blue Cruise, but is limiting these plans for their new EVs, the Mustang Mach E and Ford Lightning, at least for the near future.
In addition to their remote start, Toyota has instituted subscription fees for their versions of OnStar, Toyota’s Safety Connect. Kia offers a tiered subscription system for the Carnival mini-van that adds road-side assistance, a “find my car” feature, and Amazon Alexa.
It’s easy to look at this trend toward subscription car features as wholly negative for consumers, and in large part it is. But there are corner cases where a subscription service makes sense. Take the new Vietnamese EV maker, VinFast. Part of their business plan is to lease battery packs to customers, rather than selling them as part of the vehicle. The upside for buyers is extended warranty protection for the battery pack and a free battery swap for old packs performing under 70% of its original capacity. Given the flux in battery prices and the challenges of raw materials procurement, it’s unclear how the math on this might play out for consumers over the life of the vehicle.
It was automakers that first gave us the concept of planned obsolescence. Subscription-based features portent a planned obsolescence 2.0. Not only will cars lose functionalities due to the age of unsupported software, as they do today, it’s possible that such wholesale digitization could render the vehicles themselves obsolete like today’s smartphones.
Such a scenario raises questions about what car ownership will look like in the coming decades. Some manufacturers are already offering subscription service for entire cars. Volvo, Porsche, Nissan, and Jaguar all offer car subscriptions. Additionally, there are car subscription services from Hertz and, for EVs, Borrow, to name a few. And looking further on, toward more sophisticated versions of autonomous driving, will the desire to own a vehicle wane as our relation to said vehicle becomes largely a passive one?
We’ll have to wait for definitive answers, but the days of having a car for keeps, with all its features intact, may be on the way out.