With Subscriptions, Automakers Mimic Netflix’s Playbook

In 2021, credit card statements are loaded with routine monthly charges: Netflix for video, Spotify for music, XBox Game Pass for gaming, Peloton for fitness—and so on, with meal kits, wine boxes, and high-protein, low-carb cereals. The financial services company UBS estimates that the “subscription economy,” powered by pandemic-induced changes in buying habits, will grow 18 percent annually for the next four years, hitting $1.5 trillion in 2025.

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Now automakers want to join the party.

The idea is simple: We’ll sell you a car with a dash cam, or that can be driven hands-free, or that can coach you with telematics data to be a better driver. But if you actually want to use any of the new toys, you’ll have to pay extra. Credit Tesla with popularizing the notion that cars could be updated with software even after they’re driven off 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 already pay for its OnStar security services, which include an app that costs $15 a month. Electric vehicle startup Rivian said in recent financial filings 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 subscriptions for infotainment, internet connectivity, and diagnostics. BMW last summer created buzz—and consternation—with plans to charge, through subscription fees, for features like heated seats. In the US, the automaker offers subscriptions for an onboard dash cam and a remote car starter.

Over the past few years, automotive companies have laid out plans to transform from “being an industry that sells products to an industry that sells services and products,” says Brian Irwin, who heads the automotive and mobility practice at the consultancy Accenture. Today’s vehicles come with multiple computer chips, cameras, and sensors—and thus, the tantalizing opportunity to use detailed data to both create and sell new products. 

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

In 2019, BMW walked back plans to charge drivers an annual fee to use Apple CarPlay, pictured above.

Photograph: BMW


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