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Some automakers are betting big on customers wanting to pay monthly and yearly fees in addition to the cost of their vehicle, insurance, parking and fuel. It may be the future of the auto industry, but customers don't want it.
Three-quarters of car buyers are not willing to pay annually or monthly for a feature subscription after the purchase of the vehicle according to an April study conducted by Cox Automotive. The questionnaire wasn't asking about options like OnStar or Wi-Fi, but for physical features like heated seats, high beams, safety options and even more power from the electric motor.
Mercedes-Benz, Polestar and others are disregarding the results of that survey, both with recent options to "unlock" more power from their respective electric vehicles. They're not the first. BMW talked about making Apple CarPlay a subscription service in 2020, and then changed its mind.
Earlier this year it asked Korean owners to pay for heated seats and received enough backlash that it had to put out a statement for US buyers.
"If a vehicle is initially ordered with heated seats, that option will remain fully operational for the life of the vehicle. BMW of North America does not expect factory option purchase levels to change significantly going forward," BMW said. "BMW Functions on Demand on the other hand is designed to offer premium features through software upload that use data and sensors from factory option hardware already built into BMW vehicles."
BMW lists turning the already-installed front-facing camera into a drive recorder, as an example of this type of premium feature. And that could be a value add for some buyers.
"Allowing over-the-air updates and additional features accomplishes multiple things at once. First, cars can be built to a more common specification. Changing tooling and building vehicles with and without features takes time and money in the manufacturing process. It's one of the reasons we no longer see manual window cranks," Brian Moody, executive editor of Kelley Blue Book told Newsweek.
"For the few people that want that, it just doesn't make financial sense to interrupt a highly streamlined process (manufacturing) just so an automaker can sell a handful of cars at a slightly lower price. However, with the subscription model, the lower cost of including certain features could be passed on to the buyer who opts not to get a few extras."
Moody noted that some customers do like the idea of paying only for features they use, citing a buyer in Florida who has no need for heated seats and doesn't want it as part of an equipment group.
"Finally, subscriptions for features are a way an automaker can continue to make money on a used car well after the car is sold as new. In short, it's an additional revenue stream. It's also possible that dealers can share in that subscription profit the same way they do with financial products and services," said Moody.
Ford Motor Company CEO Jim Farley, speaking in September at the Bernstein Conference, an international scientific exchange, talked about continuing revenue in a more connected digital age. He explained how Ford wants to include everything a car needs now, and in the future, whether advanced driver assist systems or features not even created yet.
"We used to use our phones to make a call, and then the embedded systems got put in place, and the sensor set, and all that software allowed those devices to not just be used for calls," Farley said. "We're about to change the ride just like Apple and all the smartphone companies changed the call. And I believe when that happens, when you can ship a lot of software to the car, and you have great sensors, and really change that experience and be a lot more productive, there will be a large revenue expansion."
In November an option turned up on the Mercedes consumer website (first reported by The Drive) for an "Acceleration Increase" subscription service for $1,200 per year. For electric EQ models like the EQE and EQS cars and SUVs, that means that they gain between 60 and 90 horsepower, allowing them to get from zero to 60 mph a second faster.
"The ability to retrofit special vehicle functions after the initial purchase is a useful way for customers to flexibly adapt their car and individually use certain functions only when they are really needed or desired. Connected cars and the electric drivetrain make OTA updates possible and allow for an ever-evolving car. The future of MB is software driven and electric," a Mercedes spokesperson told Newsweek.
"We expect this feature to be most attractive for the first years of the vehicle, we will describe details within the terms and conditions. We are just about to finalize the last technical details and tests and will launch the feature at the beginning of 2023," the spokesperson said.
At Swedish electric brand Polestar, it now offers a permanent upgrade for the Long Range version of its, dual-motor Polestar 2. The over-the-air update, available now, adds 68 horsepower (hp) and 15 pound-feet (lb-ft) of torque, moving the dial to 476 hp and 502 lb-ft total.
Instead of being used to get quicker off the line, Polestar has adjusted its power allocation algorithms to make the car use more power in the midrange of the tachometer (44 to 80 miles per hour), when torque traditionally tends to start lessening in intensity.
"Polestar has roots in performance tuning accessories and software, which we produced for Volvo cars before we launched our own vehicles. There is nothing new in our approach, other than the convenience in being able to download the software directly to the car, as opposed to having to go into the workshop for a chip tune," a Polestar spokesperson told Newsweek.
As of now there are no plans to offer this for the upcoming Polestar 3, but the rep noted that if you buy a 2023 Polestar 2 with Performance Pack option the upgrade is included already with the car as a part of that package. Moving forward, it is an option for those who want the power, but not full Performance Pack brakes, suspension and wheels, etc.
If we think in terms of variants, the 2023 Kia EV6 with all-wheel drive and 320 hp has a starting price of $52,400; the new-for-2023 576-hp EV6 GT model starts at $62,695. That's a $10,295 change for an extra 256 hp that, like the Polestar upgrade, is permanent.
In the case of the Mercedes EQ brand, the EQE 350+ 4Matic Sedan comes with 288 hp, upgraded to 349 hp for $1,200 per year above the $77,900 base price. The EQE 500 4Matic Sedan starts at $85,900 and delivers 402 hp. The price difference between the variants here is $8,000. Alternately a buyer could pay $1,200 for about 6.5 years for 53 less hp.
To get to this point, it has taken a combination of electric powertrains and fast wireless connections working in unison.
"In the physical world, there's no way for an automaker to magically add more tread to your tires or 'virtually' change your car's motor oil. The more electronic or electric a vehicle is, the more control an outside entity can have – heated seats, battery range, information and entertainment software, maps, electric car power and performance can all be controlled remotely," Moody said.
About the writer
Jake Lingeman is a Newsweek Autos managing editor based in Detroit. His focus is reporting on the auto industry. He has covered ... Read more