7 min read
Microtransactions and Subscriptions in Vehicles
Would you pay $18 a month for heated seats in your vehicle? Do you believe a feature such as heated seats should be a standard issue in new vehicles, without a monthly payment? The automotive world is torn on microtransactions and subscriptions. Read on to find out why.
More Automakers Exploring Microtransactions And Subscriptions In Vehicles
The newest trend being implemented this year by auto manufacturers is a subscription model for select features. Following the example of tech companies that sell software services as a source of recurring revenue, auto manufacturers are now starting to put some of their vehicle features behind a paywall that requires a monthly subscription to access. Today’s new cars are built with software that makes it possible to patch issues and add features with over-the-air software updates, making it easy for carmakers to turn features on and off for individual cars at will. But the question remains... will car buyers be happy with having to pay monthly for things like heated seats and acceleration?
Previously, having to pay a monthly fee to access additional features on a vehicle was limited to luxury car brands. As more car brands add more computers and software to their new models, the ability to customize the car features to each customer becomes more of a possibility. The ultimate goal is to make cars that are easily customizable for the owner and that will remain up-to-date for years after the initial purchase. However, there is a stark contrast between car manufacturers. BMW, for example, has introduced a program called "Functions on Demand" that offers premium subscription options such as Remote Engine Start and BMW Drive Recorder through software updates. BMW recently has gone public with a statement regarding their subscription models, insisting these types of plans will not be introduced in the USA. Currently, they are only being rolled out in full force in South Korea.
While BMW tests this new business model, other manufacturers like GM say they don't ever plan on charging their customers to use heated seats. "We’re very in touch with our customers and where they find value. We know when it comes to features like safety or standard features, our customers expect it has to be included in the vehicle," said Alan Wexler, GM's senior vice president of strategy and innovation."
Many automakers already offer connected services and some of those services are attached to a subscription element. Tesla is considered by some to be a pioneer of the idea, being one of the first to offer a variety of car features for an additional fee after purchase. While features like Autopilot and a premium connectivity package being behind a paywall didn’t make many waves for the company, what the company did with its car's battery range created controversy.
The controversy began when Tesla began selling vehicles that had software-locked capabilities that were upgradable for an additional monthly feel. One of these capabilities was battery packs with a software-limited range, which could be boosted from 60 kWh to 75 kWh through software updates. Many users complained about having to pay an additional fee to unlock the full capacity of the battery.
The controversy became so pronounced that a third-party company developed a device that would unlock the battery capacity of these vehicles, allowing owners to access the full capacity of their battery for half of the price Tesla was charging. The automaker fought back, releasing a software update that detects whether the third-party device was exploiting the vulnerability on a particular vehicle and notifies the user of an “incompatible vehicle modification” in a message that cannot be removed from the screen
Toyota announced that its remote start functionality through the key fob will be bundled with the audio package in models 2018 or newer. The functionality, called Remote Connect, is part of the Audio Plus package as a three-year free trial or part of the Premium Audio package as a 10-year free trial. After the free trial has expired, the user will have to pay a monthly fee to continue using the full Remote Connect service.
BMW may be considered the king of in-car microtransactions. The automaker has become a master of the art of convincing users to pay to unlock additional features on their new cars, including an annual subscription for Apple Car Play on top of the additional fee paid to install the feature in the car. Reports about microtransactions highlight that this model allows owners to choose which features to pay for and gives them the ability to access features in the future that they didn’t choose during their initial purchase.
As cars become increasingly connected, more automakers are attempting to make in-car purchases and subscription models a consistent source of revenue. Porsche has added a Functions On-Demand system to their Taycan model that lets drivers purchase additional optional features for their vehicle. Access to Cadillac’s Super Cruise hands-free driving mode requires a monthly payment after the free trial has expired.
General Motors has been exploring in-car shopping as a revenue generator and previously stated that it was aiming for $25 billion in annual revenue from software and subscription services by 2030. Ford expects the number of connected Ford and Lincoln vehicles on the road to rise to 33 million by 2028. Mercedes is also getting into the game, making its Full Rear-Wheel Steering feature on its EQS available through an annual subscription.
It remains to be seen whether the majority of consumers will embrace or reject this rapidly progressing trend of microtransactions for car features. Tech companies and entertainment companies have been able to successfully convince millions of consumers to pay an additional fee for additional content or access to features like commercial-free programming. It is not surprising that other industries would look at their success and try to integrate a subscription model into their own products
The automakers’ success will depend largely on what features they put behind the paywalls and how much it will cost consumers to access those features. A small monthly fee may be more acceptable to a wider swath of the public than a larger annual fee, but the annual fee may save the user money in the long run if it is attached to a feature that will be used regularly. There are still many unknowns and it will be interesting to see which paths the car makers take and the public’s reaction to those moves.
What is your opinion on the paywalls, subscriptions, and microtransactions in the automotive industry? We would love to hear your feedback in the comments below. Or further the discussion on Facebook, Instagram, LinkedIn, and Twitter. Or get up close and personal with the HeyAuto staff on TikTok