Automakers want to charge you for subscriptions and aren’t giving up

Automakers want to charge you for subscriptions and aren’t giving up

Automakers have been experimenting with subscription fees for a range of vehicle amenities and services as a way to generate additional revenue streams.Mike Blake/Reuters

When you think of the car of the future, you probably envision an electric-powered vehicle that can parallel park itself or perhaps even drive you to the office. But there’s another, less high-tech shift in the industry that’s already hitting the mass market: subscriptions for your car.

In Canada, for example, some General Motors GM-N and Toyota TM-N new models now come with free trials of digital services that include the ability to lock and unlock a vehicle, or start and stop the engine using a smartphone, even from a faraway location. After the introductory period is over, drivers will have to pony up a monthly fee to keep using those features.

Automakers around the world have been experimenting with subscriptions for years with mixed results. But as the industry emerges from the pandemic’s supply chain logjams only to find high interest rates weighing on sales, it’s expanding efforts to nudge consumers toward monthly charges.

The sector is “doubling-down on the nurturing and monetizing of direct customer relationships,” Amy Konary, founder of the Subscribed Institute at Zuora, which provides businesses with subscription management technology, said in an e-mail.

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Such endeavours have so far also proven a mixed bag for consumers, some analysts and consumer advocates say.

Vehicle makers have many reasons to like subscriptions. The industry has long been loath to bid goodbye to customers after they’ve purchased a vehicle, then see them again only several years later when they’re ready to trade up. Subscriptions keep automakers in drivers’ everyday lives and provide a steady stream of revenue that can help cushion the impact of economic cycles in an industry that is particularly sensitive to them, said George Iny, executive director of the Automobile Protection Association, a consumer advocacy organization.

And subscriptions could also allow car companies to charge used-vehicle buyers, turning that group of consumers into another source of revenue, he said.

The sector is also eyeing subscriptions as a way to simplify manufacturing processes, according to Sam Abuelsamid, principal analyst at E-Mobility.

Many automakers offer hundreds of thousands – and in some cases millions – of variations of a vehicle, with buyers allowed to choose everything from cab configurations to powertrain combinations. But if drivers could activate and pay for the features they want through a digital subscription, manufacturers might be able to start making only a handful of buildable combinations of each of their models, Mr. Abuelsamid said.

Imagine, for example, that you’d like a car with heated seats, he said. Traditionally, you’d have to order a model with the required hardware. But car markers would rather build a vehicle that comes preloaded with seat warmers as well as all manners of other gadgets by default. You’d then use an app to turn on the seat-heating function and pay a regular fee to keep your bottom toasty, Mr. Abuelsamid said.

The upside of this model is you get to pay for the features you want, when you want them, automakers argue. For example, you pause the seat-warmer charge when the weather turns nice.

In reality, though, the value of car subscriptions for consumers remains far from obvious in many cases, Mr. Abuelsamid argued.

Subscriptions could be a good deal for consumers if automakers were lowering the initial cost of buying a vehicle, Mr. Abuelsamid said. But so far drivers are paying more upfront for hardware that supports features they may not want while also facing additional monthly fees for the capabilities they do want, he added.

“That’s where consumers start to push back,” he said.

Front-seat warming, for example, recently landed BMW BAMXF in the hot seat after the automaker started charging consumers in some countries for activating the feature. (The company says it has no plans to start a heated-seats subscription in Canada.)

GM, for its part, said that for its 2023 models that come with its premium digital services plan, customers cannot opt out for a reduced manufacturer’s suggested retail price.

As Mr. Iny of the Automobile Protection Association sees it, the issue is whether consumers will still be able to buy a “complete car.” Being able to lock your car and warm your engine from your phone feels like an optional add-on for which some consumers may be ready to pay a subscription. But Canadians may expect to be able to have seat warmers and a heated steering wheel without paying continuing fees, he said.

GM and Toyota said drivers will still be able to open and lock their vehicles and start and stop their engines using their key fobs (albeit from a shorter distance) even if they opt out of the smartphone feature. And once any trial period their vehicle is eligible for is over, consumers will be charged only if they opt into a subscription plan.

GM’s OnStar Premium Plan, which includes a slew of emergency assistance services and a two gigabyte-a-month data plan, in addition to the remote access functionalities and other features, costs $49.99 a month before tax.

Toyota’s Remote Connect subscription, which includes the ability to remotely locate a parked vehicle and check whether windows and sunroof are closed, costs $9.95 a month before tax. That’s what the company also charges for another subscription that provides emergency and enhanced roadside assistance. Another program that includes the ability to use voice commands and get real-time traffic updates costs $19.95 a month before tax.

Another flavour of the monthly fee model has also yielded mixed results so far: subscriptions to the whole vehicle. Usually offered on higher-end rides, the plans work somewhat like a lease that often includes some insurance, maintenance and repair costs as well as perks like 24/7 roadside assistance and concierge services. Users can generally unsubscribe without penalty after only a few months, avoiding the two- to four-year commitment typical of a traditional lease.

When Mr. Iny looked into Porsche’s Drive program in the United States a few years ago, he found that it offered “a tremendous amount of value for an enthusiast,” he said.

For a monthly fee starting at $2,650 plus taxes, subscribers get to drive a model of their choosing for 30 days with the option to change vehicles at the start of their next term. For $4,500 a month plus tax, you can switch up your ride as many times as you want, subject to availability.

Care by Volvo, which has been hailed as a success in Britain, allows subscribers to drive a vehicle of their choice, including electric vehicles, starting at £859 ($1,438) a month and change cars or cancel the plan with three months’ notice. However, the program has been sunsetted in Canada, the Swedish automaker said.

Similar programs at GM-owned Cadillac, BMW and Mercedes-Benz MBGYY failed to take off.

The whole-car subscription model could be a way for drivers to test EVs before committing to a purchase, Mr. Iny said.

When it comes to everyday use, though, these programs remain a perk for a small group of well-heeled drivers, he said.

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