BMW Group recently announced a subscription to heated seats subscriptions. The offering is available in several markets, including the UK, Germany, New Zealand, and South Africa although not the US, yet. According to the Verge, other subscription offerings on offer will include Driving Assistant ($35/month), Map Updates ($79/month) and High Beam Assistant ($10/month).
Automotive manufacturers are diving into the world of recurring revenue.
A few examples include Porsche AG‘s “Drive” subscription which provides access to a fleet of models for a fixed price, and Volvo Group’s “Care” subscription which offers maintenance, protection for tires, wheels, and excessive wear, and insurance for a specific car. General Motors reported over $2Billion in subscription revenue for 2021 and wants to have a “Netflix-sized” subscription business by 2030. And of course Tesla launched its “Full Self Driving” subscription in 2021 although Elon Musk himself said it was “debatable” whether it’s worth paying for.
BMW’s heated seat subscription and other subscriptions are digital aftermarket offerings, where the car is already designed to support the feature but has a software block. Many consumers consider BMW’S move a “money grab.” In fact, there were over 800 comments in response to this article in the BBC, nearly all negative. Consumers are complaining that some of these features don’t merit subscription pricing, because the manufacturer has no variable costs. (I would point out that this may be a weak argument, as many successful subscriptions have low or no variable costs–digital content distributors and subscription software, for example.)
Another issue is the “nickel and dime” effect of being charged for many micro transactions which add up. When you buy an expensive car, you want all the features that you’re going to need. Part of the value of a luxury brand is having the manufacturer anticipate what’s going to deliver a great experience and then bundle it together. BMW has already tried (and failed) to charge $80 a month for Apple CarPlay and Android Auto — even though other automakers offer these benefits for free.
As much as I love my car’s seat warmers, they don’t keep me safe. But high beams do. What if a driver has an accident that could have been averted with this feature, a feature that is already built into the car, but not enabled because the manufacturer is trying to make an extra buck? Charging extra to unlock a safety feature that is already built into a car is ethically iffy, and this could put them at risk for a potential class action.
BMW was quick to issue a statement in the face of all the negative feedback about what they call their “Functions on Demand” in-vehicle subscriptions, claiming these features were not “core functions” ordered from the factory—and that the subscriptions allow aftermarket access to features not originally desired. Apparently 90% of vehicles sold in the US come with heated seats fully-enabled.
So what does this mean for consumers? And what does it mean for automotive manufacturers?
Subscriptions can be a powerful pricing tactic that, when used correctly, benefiting both the company and the subscriber. But for it to work, there needs to be ongoing value to justify the ongoing payment. And when the consumer is accustomed to owning the feature outright for a fixed price, subscribing needs to provide additional benefits to justify the change in payment structure.
And importantly, subscription arrangements require a high level of trust between the organization and the subscriber.
There’s a chance that other car manufacturers follow suit with aftermarket app stores offering key features for incremental recurring fees, and this becomes the new normal. That’s clearly what BMW is hoping for. In the age of connected EVs, cars are increasingly expensive to design, build and maintain, and manufacturers are trying to find a pricing structure to support these additional costs.
However, consumers are loudly voicing their displeasure and their suspicion about aftermarket subscriptions. BMW risks sacrificing the trust they have built with their customers over decades for short-term incremental revenue.
