Car manufacturers are turning to subscription services

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Illustration by Dominic BugattoCar and driver

From the October 2021 edition of Car and driver.

In 2019, BMW announced that it would charge owners of its vehicles $ 80 a year for the privilege of using Apple CarPlay, which mirrors the screen and functions of an iPhone on the infotainment display. Not only is it standard on a $ 14,595 Chevrolet Spark, the cheapest car available in the U.S., it’s a feature Apple won’t make BMW pay for. The consumers mutinied, the Bavarians withdrew. But not for long. Next, BMW decided to revert to a subscription model for features like a smartphone-based virtual key, remote start and even heated seats.

Porsche offers range optimization and a lane departure warning system for its Taycan electric models for a monthly fee. Cadillac does the same with its hands-free Super Cruise driver assistance and Audi with its immersive Wi-Fi enabled navigation system. Of course, Tesla is now asking its customers to pay $ 200 per month for its mislabeled full self-driving, which is always a day on the road. Welcome to the digital automobile buffet, where you can choose what you want – and then pay for it every month.

“It worked great for Adobe, from selling Photoshop copies for $ 700 to offering just a subscription license,” said Sam Abuelsamid, senior analyst at Guidehouse Insights, where he oversees vehicle technology research. Now graphic designers are forever paying $ 21 a month.

Representatives from BMW, Audi and Porsche point to advantages for consumers. “US customers usually choose vehicles from the dealer inventory,” says Jay Hanson, a BMW technology spokesman. “Function-on-demand has the potential to streamline the customer’s search for the car they want.” Hmm, good stuff is standard.

In reality, the concept streamlines the manufacturing process and saves automakers money. Instead of building cars with lots of different option packages, companies can produce a full-featured model and ask consumers to turn on the features they want. “The car is becoming more complex, but the manufacturing process is becoming less,” says Abuelsamid. “There may be enough economies of scale in reducing manufacturing costs to save the cost of adding hardware.”

Automakers could also see the residual value bounce back to them. Consumers who buy their vehicle but lease their options are not building desirable features. So when it’s time to unload your car, years of payments for advanced navigation or remote start won’t bring you a higher resale price. Rather, it becomes a component that the manufacturer can sublet to the next customer.

Automakers “talk about flexibility,” says Abuelsamid. “You don’t need heated seats in the summer. So if you can easily activate these subscriptions, you can only pay for them when you want to use them. Of course, you are also responsible for deactivating the subscription when you are not using it. And the folks in the subscription business rely on customers to forget to unsubscribe when the price is low enough. Once you have it, you get just enough not to unsubscribe. Think about all of your streaming services. “

We’d rather not.

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