With Subscriptions, Automakers Mimic Netflix’s Playbook

In 2021, credit card statements are fraught with routine monthly fees: Netflix for video, Spotify for music, XBox Game Pass for games, Peloton for fitness and so on with meal sets, wine boxes and high protein, low carb. The financial services company UBS estimates that the “subscription economy”, driven by pandemic changes in buying habits, will grow 18 percent annually for the next four years and reach $ 1.5 trillion by 2025.

Now car manufacturers want to join the party.

The idea is simple: We sell you a car with a dashcam, or which can be driven hands-free, or which can coach you with telematics data to become a better driver. But if you actually want to use some of the new toys, you have to pay extra. Thank you Tesla for popularizing the notion that cars could be updated with software, even after being driven out of the lot.

General Motors told investors this month that subscription services could bring in an additional $ 20 billion to $ 25 billion annually by 2030. The company says 4.2 million customers are already paying for its OnStar security services, which include a $ 15 app on the month. Electric Vehicle Startup Rivian said in recent financial applications that it could bring in an additional $ 15,500 over the life of each car with software-enabled services, including an autonomous driving feature and infotainment, internet connection and diagnostics subscriptions. Last summer, BMW created buzz – and dismay – with plans to charge subscription fees for features such as heated seats. In the US, the carmaker offers subscriptions for a built-in dashcam and a remote starter for a car.

Over the past few years, car companies have been planning to transform from “being an industry that sells products to an industry that sells services and products,” says Brian Irwin, who heads automotive and mobility practices at consulting firm Accenture. Today’s cars come with several computer chips, cameras and sensors – and thus the exciting opportunity to use detailed data to both create and sell new products.

The industry’s move towards electrification can make the idea more attractive. “Consumers see EV as a new technology that enables new things,” says Alan Wexler, who oversees connected services and data insights at General Motors. This means that they are also willing to think about paying for cars in a new way. In fact, carmakers would love it if you started thinking of your wheels as a “platform,” a smartphone-like device that requires a few extra app purchases to fit nicely into your lifestyle.

In 2019, BMW went back with plans to charge drivers an annual fee for using Apple CarPlay, shown in the image above.

Photo: BMW

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