Millions of American motorists now pay for in-car subscription services like Sirius/XM satellite radio and General Motors’ OnStar telematics package. And with the latest vehicles adding the ability to access even more digital features and services, that has the auto industry dreaming of vast new forms of revenue.
They’ve outlined a broad range of features that could be offered in tomorrow’s “connected” vehicles, including streaming video, online shopping, new safety and security technologies and even on-demand upgrades for a vehicle’s performance and, with EVs, their range. Some have also proposed charging on a monthly basis for otherwise familiar features like seat heaters and remote starting.
But are drivers willing to go along? Maybe not, at least according to new research by Cox Automotive.
“Three-quarters of the consumers we surveyed said they would not pay a subscription for the services and features in their next vehicle,” said Michelle Krebs, senior automotive analyst with Cox. “They want it all included in the up-front price.”
Automakers may need a rethink
That is likely to come as a big disappointment to automakers like General Motors and Stellantis, both of which have laid out substantial growth plans including billions in annual fees from software and related services.
During a presentation earlier this year, Stellantis CEO Carlos Tavares forecast his company would generate revenues of more than $22 billion annually by the end of the decade. GM Chairman and CEO Mary Barra said the company’s own research indicated motorists would be willing to spend an average $135 a month for such services — and the necessary supporting hardware — on top of what they might pay for a new vehicle.
According to the Cox study, the figure is more like $35 a month — if motorists felt they would have to pay for some of the software-related features they couldn’t purchase up front.
Technology leading to revenue
What’s enabling this debate is the increasing availability of two-way communications systems being built into new vehicles. And the expansion of the cellular 5G network is expected to make it even easier. Tesla was one of the first to start using smartphone-style over-the-air updates to tweak the software on vehicles like the Model S sedan. It has used this approach both to remotely fix recall issues and to add new features.
Some are offered for a fee, including a performance upgrade for products like the Model 3 sedan.
When Ford brings out its new F-150 Lightning battery-electric pickup this spring it will have the capability of using the automaker’s new semi-autonomous BlueCruise system. But the software won’t be ready until later this year. Motorists who pay for that hands-free technology will be able to have it downloaded remotely into the vehicle sometime later in 2022, Ford promises.
Stellantis — which operates brands like Ram, Jeep, Dodge and Peugeot — expects it will be able to offer a variety of software upgrades to improve the “customer experience,” said Yves Bonnefont, the carmaker’s chief technology officer. “You might choose a feature that will improve your car’s performance, or increase the range of your electric vehicle.”
But only about 25% of those surveyed by Cox Automotive said they’d consider spending for software related services and upgrades. And, according to analyst Krebs, they would fall into a narrow niche, primarily related to safety and security and, perhaps, upgrading performance.
Consumers not quick to jump
Automakers have already gotten pushback on some subscription fee proposals. BMW floated the idea of charging to activate the seat heaters in some of their vehicles. Toyota wanted to start charging to allow motorists to remotely start their cars — a feature that’s grown popular both in extremely cold and hot parts of the U.S. Both companies backed down in the face of bitter criticism from owners.
The study backs that up by noting that 92% of those who responded felt those basic features should be part of the vehicle’s up-front price.
Some of the pushback came as a surprise, said Krebs. She thought most motorists would be willing to pay for the onboard WiFi many vehicles already offer. But the study found few takers. One possible reason, she explained, is that cellphones have become fairly ubiquitous and already offer the ability to “tether,” or connect to WiFi-enabled devices like laptop computers and portable game devices. Why pay for a redundant service?
Attitudes could change, of course. And automakers are betting that buyers might warm up to subscription services as autonomous vehicles become more commonplace. With your car doing the driving, goes the theory, passengers will want to have something to do en route. The question is whether they’ll simply rely on what’s already available on their smartphones or pay to add more features to the vehicle.
Looking for more revenue
The idea of generating ongoing revenue clearly has its appeal for the auto industry. Traditionally, manufacturers generate most of their cash once they ship a new vehicle to the dealer. Later on, they pick up some cash for service and repair parts. But signing up owners for a feature like GM’s OnStar keeps the cash flowing indefinitely.
Automakers are getting creative in how they approach the idea of subscriptions. Vietnamese EV startup VinFast will introduce two new models later this year and while it will sell buyers the VF 8 and VF 9 models, the price won’t include their batteries. Customers will have a choice of several monthly lease packages for those packs. The sales pitch is that the leases will come with extended warranty protection, including a free swap-out if range drops below 70% of the original EPA-approved estimate.
That approach might have legs, not only easing concerns about battery performance but also lowering up-front costs. But if the new Cox study proves accurate, automakers could see their goal of raising billions in new subscription services vanish like last night’s dreams.