With the phasing out of internal combustion-powered cars and direct sales to consumers predicting the future of car buying, certain sources of revenue that were once transparent between both consumers and manufacturers are disappearing. That presents OEMs with the challenge of finding new ways to make money, and today that means a shift to subscription services.
As a result, automakers are becoming more and more like big technology. By looking at subscription models, OEMs may be able to attract stable, predictable revenue in the form of customers paying for features already present in the vehicle but locked by software. And as indicated by axiosGeneral Motors expects consumers to pay as much as $135 per month on top of their car bill in the coming years to pay for subscription features.
Cars change whether we like it or not. Much of that change relates to connectivity, meaning vehicles will necessarily be able to use an always-on internet connection to call home. While this has some benefits, such as over-the-air updates and real-time telematics, the more complex software also allows an automaker to enable or disable features with full automation, as opposed to a visit to the dealership. This means that subscriptions are now easier than ever to implement.
It’s no secret that new cars are also a huge expense in the average consumer’s budget. In fact, the average new car price rose above $45,000 in 2021, bringing the average cost of a 60-month car loan to nearly $820 per month.
Previously, General Motors’ Senior Vice President of Innovation and Growth, Alan Wexler, said that the company’s research found that consumers were willing to pay up to $135 per month for services for their vehicles. By 2030, GM expects 30 million of its vehicles on U.S. roads will be equipped with some form of connected technology, and that will allow the automaker to generate additional revenues — between $20 billion and $25 billion — of which a large part of either time purchases or subscriptions.
Therein lies the problem: most consumers do not want a subscription.
A recent survey found that 75 percent of car buyers said they didn’t want features to be locked behind in-car subscriptions, which contradicts GM’s research on the matter. Most consumers who responded to the survey said that safety and comfort features (such as lane-keeping, remote start, and heated and cooled seats) should be included in the cost of the vehicle and not later acquired through a subscription model.
Subscriptions can also inadvertently cause GM’s pricing model to compete with other household items such as Netflix, Hulu, Spotify, Peloton, or other monthly costs for a consumer that are simply identified as a subscription in one’s overall budget.
i know we all say that we don’t want anything to do with subscription fees – and trust me, I agree – but it seems OEMs are trying their best to force the subscription model on customers. From a revenue point of view, it makes sense. Big companies like recurring revenue streams, but for many consumers this feels like a double dip. I mean, charging for features already built into vehicles like heated seats, Apple CarPlay, or even key fob functionality (ahem, Toyota) has not gone well in the past. Why should it now?