American consumers have grown accustomed to paying on a monthly basis for all sorts of services, from movies to dog treats. Now, automakers are the latest to join a growing list of companies finding ways to use subscriptions to plump up their revenues.
Plenty of motorists are willing to pay for safety, security and entertainment features, such as satellite radio and onboard technology. The question is how far manufacturers will go, and how much car buyers will be willing to pay on an ongoing basis, rather than up front.
BMW recently mulled the idea of levying a monthly charge for heated seats. And Mercedes may charge for “soundscapes” for its new EQS electric car. Ford’s Blue Cruise semi-autonomous system already adds as much as $3,200 to the sticker price, but drivers will also have to pay $600 for a three-year subscription to activate the technology.
“This is not entirely new,” said Stephanie Brinley, principal auto analyst for IHS Markit. “You already have people paying for connected services (like GM’s OnStar). But it’s now going beyond safety and security. Technology has made it possible to look at a lot of other areas” where automakers could levy monthly or annual fees, Brinley said.
Since the earliest days of the automobile, automakers have offered plenty of ways to upgrade — from bigger engines to leather seats and custom paints. But today’s vehicles have become computers on wheels, some using 100 or more microprocessors to operate everything from their powertrains to infotainment systems. And two-way communications capabilities have opened the door to endlessly possibilities.
Introduced in 1996, OnStar allowed subscribers to remotely unlock a vehicle’s door or sound its horn if they couldn’t find it in a crowded parking lot. The system also could alert authorities in the event of a serious crash.
The next step comes with the ability to remotely upgrade onboard software or send new features using smartphone-style over-the-air, or OTA, updates.
By 2025, a new IHS Markit study estimates, 350 million vehicles will have OTA abilities. By 2030, it forecasts, fully one-third of all vehicles will have such capabilities.
That’s critical for semi-autonomous systems, which require regular upgrades to their software, along with frequent map updates. The continuous improvements, the manufacturers contend, justify subscription fees, as well as any charges up front.
Satellite radio provider Sirius/XM soon could have plenty of competition as other services look to stream audio and video to your vehicle — something expected to grow in popularity when fully autonomous automobiles become commonplace. At the 2020 Consumer Electronics Show in Las Vegas, Daniel Kirchert, then-CEO of troubled EV start-up Byton, told NBC News that the company expected to make as much money streaming audio and video into its M-Byte electric car as it did selling the vehicle itself.
Adding new features to an existing vehicle could prove a big opportunity. GM’s new Maps+ targets owners of vehicles that weren’t equipped with built-in navigation. For $15 a month, owners of about 900,000 vehicles built from the 2018 model year forward now can add navigation to existing services on their in-car touchscreens.
Customers want “an easy and convenient in-vehicle experience that improves over time,” said Santiago Chamorro, GM’s vice president of Global Connected Services. “We listened to customer feedback and developed a product that works seamlessly with our current infotainment systems and provides a highly personalized experience that will iterate throughout the lifetime of the vehicle.”
Tesla has frequently used OTA technology to tweak onboard software. It also was one of the first manufacturers to market remote digital upgrades. Initially, it let Model S buyers opt for a low-range version that actually shared the same battery pack as a longer-range package. Owners could then pay to have the added battery capacity “unlocked.”
When the new Mercedes-Benz electric car comes to market later this year, it will feature several “soundscapes,” or digitally generated sounds substituting for the engine and exhaust “notes” of a vehicle using an internal combustion engine.
“We are considering the creation of future soundscapes” for which the automaker could charge to download, Thomas Kuppers, the engineer overseeing the development of soundscapes, told NBC News.
Some automakers are even looking at ways to turn familiar features into ongoing revenue generators. BMW is exploring the idea of letting customers “subscribe” to use things like heated seats and adaptive cruise control. Buyers might not want to pay up front for these features but could decide to activate them later on, BMW said.
Some automakers now let customers subscribe to the vehicle itself. With Care by Volvo, a shopper gets an all-inclusive package that covers everything but gas. PorschePassport lets motorists swap in and out of different vehicles whenever they want.
What seems clear is that the auto industry is watching the way pay-as-you-go plans have transformed the retail world — and automakers are looking for ways to use those models to transform the car ownership experience.