Netflix, Hello Fresh and ... heated seats? Automakers want in on your monthly subscription costs
Subscriptions to streaming services, newspapers and meal delivery kits may be costing you each month. Get ready to add vehicle features to that list.
Automakers are taking note from Netflix and turning toward subscription payment models as an additional revenue stream. That could mean features typically included in the upfront sales price – adaptive cruise control, automatic braking, even heated seats – will require monthly payments.
While many subscription models are being tested in markets outside the U.S., experts say it won’t be long before they become status quo in the states. However, research from an automotive organization shows most drivers are against added fees.
“We all kind of know it’s coming,” said J.D. Power’s Vice President of Data and Analytics Tyson Jominy. “As much as I don’t like it, I view it as inevitable.”
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The shift is already evident in markets outside the U.S.
BMW last month said it would charge a monthly subscription for heated front seats in select countries outside the U.S. Other add-ons include automatic high beams ($13 per month), steering wheel heating ($12 per month) and driving assistance that regulates speed and distance from other vehicles ($42 per month), according to the BMW UK website.
But “it’s not just BMW. It’s GM. It’s all of them,” said Jefferies auto analyst Philippe Houchois. “Carmakers have been talking for a while about getting recurring revenue streams."
Tesla has long been charging a monthly fee for autopilot and other features, and General Motors executives last year said the company aims to generate up to $25 billion in subscription-related revenue by 2030.
“We can see a little bit of growth on the horizon as we look at OnStar and some of the connected services, which is really the baseline today going forward,” GM Chief Financial Officer Paul Jacobson said in an October earnings call.
A statement from BMW of North America said some U.S. models are able to access two "premium features" through software uploads: remote engine start and the dash cam function BMW Drive Recorder.
Customers already have grown accustomed to some microtransactions in the auto industry, according to Cox Automotive’s senior manager of research and market intelligence Vanessa Ton Kayali. She pointed to SiriusXM radio and the safety and security feature OnStar.
It's "not a huge, mainstream thing," she said. "I think that it eventually will be."
What's offered through subscriptions?
Jominy said the subscription models will focus on software that can be updated over the air.
That could include features like autopilot, in-vehicle Wi-Fi, stolen vehicle tracking systems, emergency braking and adaptive cruise control. For electric vehicle drivers, it could even boost driving range or horsepower.
“It's really just lines of code" that can be adjusted, Jominy said. "Turning things on and off is really quite easy."
Houchois said automakers today are experimenting with the subscription payment model, but both Jominy and Ton Kayali expect to see the payment model become widespread by the end of the decade.
“A lot of the technology is there,” Ton Kayali said. “They're just trying to figure out what people are willing to pay for.”
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Are drivers willing to pay?
Research from Cox Automotive in Atlanta shows drivers are adamantly against monthly fees.
Three-fourths of more than 200 consumers surveyed by Cox Automotive said they were not willing to pay an annual or monthly subscription fee for most items on their next vehicle and expected features like heated and cooling seats, remote start and safety features to be included in the upfront sales price.
“I think it's going to be very much an uphill battle for (car manufacturers) to try to sell consumers on certain features for a subscription,” Ton Kayali said. “They're going to test out different features to see what people are willing to pay for.”
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