Automakers Want Customers to Keep Paying for Features Their Cars Already Have – Technology News, Firstpost


Owning a car used to be simple – you make a down payment and finance part of the car or make the full purchase of the car. Once you buy the car, you pay for the fuel, the annual insurance premiums, and, at regular intervals, you pay for the maintenance of your car. You really own your car. But will this situation continue in the future?

Subscription pricing—Automakers want users to keep paying for features that are already in their cars

If the auto industry has its way, users must pay an annual or monthly fee to use their cars, even if they buy them. That’s why subscription pricing or Hardware and Features as a Service or HaaS & FaaS are becoming increasingly popular in the automotive industry. Image credit: Daimler

If the auto industry has their way, they don’t want you to own your car, at least not outright. Automakers want you to pay more for the car you “have” and keep paying until the car is in your possession. And how do they do it? By charging you for features your car already has.

Scary scenario
Picture this – you’re out driving your brand new car after a hard week at the office. The car you drive is the best version, with all the bells and whistles a car company has to offer. You love to drive and have a good time. You’re trying to tune the infotainment system to your favorite podcast, but you get a popup saying you need to pay a small fee to change what the infotainment system plays for you. You ignore the message and try to adjust the climate control. You again get a pop-up saying that in order to change the temperature of your car’s air conditioner, you need to purchase a subscription. Want to power up your ventilated seats? There is this popup notification again.

Annoyed by all this, you keep driving, until you find an empty road, and you think you’ll love experiencing the blistering acceleration of your new car that your sales consultant kept harping on. You hit the pedal to the floor, and you expect the car to take off like a stabbed bunny, but instead, you see your car rolling like it normally would – there’s a message that pops up again, saying that in order to experience the super fast acceleration your car is capable of, you need to subscribe In the Ultimate Performance package from your dealer or manufacturer.

All of the things we asked you to imagine happen in real life, today, as you read this article. Welcome to the dystopian world of devices and features as services.

Insidious trap
Most automakers have shareholders accountable to them. More than anything, shareholders want continued, explosive growth, and a sustainable source of increased revenue. So how do automakers ensure their shareholders are happy? By devising a system that allows them to charge their customers more than they pay for their cars, in the form of a recurring fee.

Subscription pricing—automakers want users to keep paying for features that are already in their cars (3)

In North America, Mercedes booked “advanced” acceleration behind a paywall of $1,200 annually. Image credit: Daimler

Now, one way to do that is to make sure that users service their cars at authorized service stations, which is where the nominations are ridiculous. However, implementing this proved to be a nightmare. Enter the price for the subscription or Device/Feature as a Service.

The automakers have made it clear that they view “software as a service,” as it’s called in business parlance, as a great revenue stream that will help them recoup some of the billions of dollars they’ve invested in R&D vehicles. Stellantis, the parent company of Jeep, Dodge, and Chrysler in the US, once stated that it expects to generate $22.5 billion annually in software and subscription revenue alone. Ford, Volkswagen, Daimler, BMW and General Motors have all made similar predictions.

What auto manufacturers are already doing
Car manufacturers like BMW, Mercedes, and Tesla have already implemented a paywall model where they charge for features that their cars are actually capable of. For example, in a number of European and North American countries, BMW has features such as heated seats and heated steering locked behind the thrust wall. Likewise, some advanced Tesla features, such as higher levels of ADAS or “autopilot” driving, are locked behind a paywall.

Subscription pricing—automakers want users to keep paying for features their cars already have (1)

Tesla secures part of its battery pack behind a paywall. Customers have the option of paying a hefty one-time fee or an annual fee to unlock and expand their Tesla EV. Image credit: Tesla

However, one of the most insidious examples of this is Mercedes and what they’ve done with their electric cars in North America. One of the distinguishing features of the electric vehicle is the fast and instantaneous acceleration provided by the drive system. However, Mercedes has locked “increased” acceleration and other performance features behind a $1,200-a-year paywall.

The point of buying an electric car or any Mercedes or any other luxury brand like that instead of a Ford or a Jeep, is the performance and speed that comes with it. What Mercedes has done here, is the core of their car, behind the annual paywall. Think of it this way – as a Mercedes customer in North America, you’re not paying for more acceleration or better acceleration. You are denied the regular acceleration that your luxury new Mercedes EV is capable of unless you pay an annual ransom.

And remember, Mercedes isn’t the only one doing this, other electric car makers including Tesla, have similar practices when it comes to acceleration and performance.

For years Tesla has sold the Model S and Model X with the same 75-kWh battery, but the drivetrain is locked by software to 60 and 70 kWh. The customer had the option of paying an additional one-time fee of $3,000 for an additional 30 or 40 miles of range, or paying an annual fee to unlock the range.

What car manufacturers plan to do
Car manufacturers in Europe, North America and at least some Asian countries hope that going forward they will have as few variants of the model as possible – if possible, then only one. This variant will have the required hardware for all the high-end features that they have to offer. This would allow auto manufacturers to not only save cost in production and warehousing by simplifying manufacturing and having to create fewer SKUs or SKUs but also, to ship more to customers – base variants have very little profit margins for automakers, so the idea is to get rid of Quite an essential variable.

Subscription pricing—automakers want users to keep paying for features that are already in their cars (2)

BMW and many European automakers have locked amenities such as ventilated seats, a heated steering wheel, and advanced infotainment options behind a paywall.

The vehicle you purchase will have the necessary hardware to support all the features that you may desire. If you want to get a certain feature, you pay an annual fee. If you do not want the feature while purchasing the vehicle, you do not need to pay the fee. However, if you want to activate the feature after a few months, you will need to pay a much higher fee annually.

And yes, packages will likely be charged annually in most cases. In certain use cases, subscriptions may be offered on a monthly basis, but after that, they will be relatively more expensive. We’ve already seen a similar pricing principle adopted for other subscription services.

Users do not own the vehicle they own
This brings us back to our original question. In the not-too-distant future, will you really own the car that you own, that pays premiums and insurance premiums for? Improbable. This becomes even worse when you consider how quickly we’re moving towards a world full of electric vehicles, and where the internal combustion engine is taking the way of the dinosaurs. In any case, electric vehicles will rely heavily on software, even for the simplest functions, all of which can be killed with a keystroke performed remotely.

Think of it this way – do you really own something if you need to pay an annual or even monthly fee to use it to its fullest potential, or do you, at that point, simply rent it out?

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