The Right Way to Sell Software Subscriptions in Cars

Car upgrades used to be settled at the dealership. But Tesla opened all automakers’ eyes to the recurring revenue that can be made by turning the car into an ever-growing piece of software, with à la carte subscriptions for every feature.

Stellantis (formerly Fiat Chrysler), Ford, and GM each aim to generate at least $20 billion in annual revenue from software services by 2030.

In some BMWs, you can pay to unlock automatic high-beam headlights, which dim for oncoming traffic. In 2020, BMW floated the idea of pay-as-you-go heated seats and steering wheels. General Motors and Ford both offer subscription plans for their hands-free highway driving systems.

Automakers run the risk of making customers feel like they're paying twice – once for a function to be built into a vehicle and again to activate it. – Insider

It’s a mixed bag. On one hand, à la carte add-ons can be good in avoiding bundled features you don’t care about. But it can also quickly feel like you’re paying for something that should come standard. Like when BMW was chastised for charging $80 per year to access Apple CarPlay, when Toyota was charging customers a monthly fee to use the remote key fob feature, or again when BMW charged $18 per month to keep the heated seat feature unlocked.

I recently bought a Toyota Crown Hybrid EV. And it’s the first car I’ve owned where the subscription add-ons are noticeably front-and-center.

Most of the pricing wasn’t upfront, but you pay for the features on the backend. The digital keys, for instance, are a great convenience. I can now send a digital key to Ryan or anyone that may need to borrow the car. The uncool part is that I’m going to pay a monthly fee to keep it working.

I haven’t explored all of the features, but I know that some require mobile data. This means that my car now needs a cell plan. Let me say that again. MY CAR NEEDS A CELLULAR PACKAGE!

The convincing argument that automakers make is that your car can keep improving even if it's not a brand-new car. If I bought my car in 2020, but they just released a new (and compatible) safety feature, then I can download it today and feel like I have a brand new 2023 model.

How to Do Software Add-Ons Right

Overall, it may be hard for consumers to cope with the idea of subscribing to existing features. However, offering add-ons that aren’t expected or familiar to car owners seems like a better path for software subscriptions.

Take the new Mercedes EQS SUV, for example.

The first SUV in Mercedes' growing EV lineup includes features you're not likely to encounter in your next vehicle:

Scents and sounds that relax or stimulate you.
AI-enabled birthday reminders and to-do lists – plus a prompt to call a friend at the usual time.
A "power nap" mode that reclines the seat, darkens the cabin and plays sleep-inducing music while you're parked at a charging station or rest area.
The car's intelligent navigation system plans the fastest and most convenient route – including charging stops – by predicting the energy demand and adapting to traffic jams or a change in driving style.
A $2,000 augmented reality head-up display and an advanced display called an MBUX Hyperscreen, for $7,230.
Faster acceleration through an optional software upgrade that adds 80 horsepower (to 435 hp), for $90 a month (or a one-time fee of $2,950). – Axios

All of these are net-new features. And thus, a little less painful for the consumer to pay monthly for.

Equally interesting with over-the-air upgrades is the idea of pay-per-use features. Want a super fast car for a day? Then pay to increase your horsepower. Want to make your car super cozy and relaxing for a long road trip? Then pay for the deluxe recline and sound functions. Maybe your teenager is taking the car for a spin, so you buy the safety upgrade which throttles the acceleration and has increased driver assist functions.

Eventually, the whole car will be a subscription. And this means we may have the option to pay to change our car’s performance from day-to-day. Efficient on Monday through Thursday. Sporty on the weekends.

Of course, wherever there’s software with an annoying price tag, there’s always a hacker willing to help you find a way around it. In particular, the BMW modding community is dense, and they offer remote services to work around a lot of the software in BMWs.

The features that coders then offer to activate is dizzying. They include turning on an alarm sound when unlocking or locking the vehicle which is off by default in some regions; enabling video functions while driving; removing the legal notice on the iDrive BMW entertainment and communications system on startup; automatically unlocking the doors after pressing the Stop Button; closing the car’s windows via the key fob; setting the windows to open with the key fob but keeping the sunroof open; automatic headlamp cleaning, and many, many more. – Vice

Cars are becoming computers. That’s unavoidable. This will bring many new features that can be turned on and off remotely, and guarded by a paywall. That’s inevitable.

But for automakers, I see it as a marketing problem more than anything. How do you get people to pay monthly for things that aren’t easily quantified by a price tag and have no comparables to go off of?

We’re venturing into an entirely new way to experience vehicles. And automakers are speeding down a side street riddled with speed bumps. Go too fast, and they’re going to wreck their chassis.