Automakers look to pay-as-you-go options to increase revenue amid sluggish car sales

American consumers have become accustomed to paying a monthly fee for all kinds of services, from movies to dog treats. Today, automakers are the latest to join the list of companies looking for ways to increase revenue using subscriptions.

Many drivers are willing to pay for safety, security and entertainment features such as satellite radio and in-vehicle technology. The question is how far the manufacturer will go and how much the car buyer is willing to pay continuously rather than in advance.

BMW recently considered the idea of ​​imposing a monthly fee on heated seats. Mercedes may also charge for the “Soundscape” of the new EQS electric vehicle. Ford’s Blue Cruise Semi-Autonomous System has already added $ 3,200 to the sticker price, but drivers still have to pay $ 600 for a three-year subscription to activate the technology.

“This isn’t entirely new,” said Stephanie Brinley, chief automotive analyst at IHS Markit. “Some people are already paying for connected services (such as GM’s OnStar), but that’s now beyond safety and security. According to Brinley, technology allows automakers to pay monthly or annually. It is now possible to consider many other areas that may impose fees.

Since the early days of the car, automakers have offered many ways to upgrade, from larger engines to leather seats and custom paints. However, today’s vehicles have become wheeled computers, some using more than 100 microprocessors to operate everything from powertrains to infotainment systems. And the two-way communication feature has opened the door to endless possibilities.

Introduced in 1996, OnStar allowed subscribers to remotely unlock vehicle doors and honk if they couldn’t find a vehicle in a crowded parking lot. The system can also alert authorities in the event of a serious crash.

The next step is the ability to remotely upgrade onboard software or send new features using smartphone-style wireless (OTA) updates.

By 2025, 350 million vehicles will be equipped with OTA capabilities, according to a new IHS Markit survey. By 2030, we predict that one-third of all vehicles will have such capabilities.

This is important for semi-autonomous systems that require regular software upgrades and frequent map updates. Continuous improvement is claimed by the manufacturer and justifies subscription and prepaid fees.

Satellite radio provider Sirius / XM has the potential to compete a lot quickly as other services aim to stream audio and video to vehicles. This is expected to grow in popularity as fully autonomous vehicles become more commonplace. At the 2020 Consumer Electronics Show in Las Vegas, Daniel Kirchert, then CEO of troubled EV startup Byton, told NBC News the same as streaming audio and video to an M-Byte electric car. He said he was hoping to make a lot of money. Sell ​​the vehicle itself.

Adding new features to an existing vehicle can prove a huge opportunity. GM’s new Maps + is aimed at vehicle owners who don’t have built-in navigation. For $ 15 per month, owners of approximately 900,000 vehicles manufactured after the 2018 model can now add navigation to their existing services with an in-vehicle touch screen.

Santiago Chamorro, vice president of global connected services at GM, said: A highly personalized experience that repeats throughout the life of the vehicle. “

Tesla has frequently used OTA technology to fine-tune its onboard software. It was also one of the first manufacturers to sell remote digital upgrades. Initially, Model S buyers could choose a low-range version that actually shared the same battery pack as the long-range package. The owner can pay to “unlock” the added battery capacity.

When the new Mercedes-Benz electric vehicle hits the market later this year, it will feature some “soundscapes”, or digitally generated sounds instead of the engine and exhaust “notes” of vehicles that use internal combustion engines.

Thomas Kuppers, an engineer who oversees the development of soundscapes, told NBC News that he was “considering creating a future soundscape” that would allow automakers to charge a download fee.

Some automakers are looking at ways to turn familiar features into a continuous source of revenue. BMW is exploring the idea of ​​enabling customers to use things like heated seats and adaptive cruise control. According to BMW, buyers may not want to prepay for these features, but may decide to activate them later.

Some automakers now allow customers to subscribe to the vehicle itself. Care by Volvo gives shoppers a comprehensive package that covers everything but gas. PorschePassport allows drivers to change different vehicles at any time.

What is clear is that the automotive industry is monitoring how pay-as-you-go is transforming the retail industry. Automakers are looking for ways to use these models to transform their car ownership experience.

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