Auto industry eyes subscription fees as future multi-billion-dollar revenue stream
Los Angeles — Jason Luu’s 2020 Volvo XC90 has state-of-the-art remote features, such as the ability to start and stop the engine and unlock and lock the car from an app on his smart phone.
But if he wants to keep using those features after a free trial, it will cost $200 a year.
“It’s a little disheartening,” Luu told CBS News.
Subscriptions are shifting into overdrive in the auto industry. For certain Toyota vehicles, the remote start option comes at a price of $8 per month after the expiration of a free trial, while BMW charges $20 a month for enhanced cruise control on certain vehicles.
While Ford offers its hands-free driving “BlueCruise” assisted cruise control option for some of its vehicles, including the all-electric F-150 Lightning, are drivers willing to pay $75 per month for it?
Alistair Weaver, editor-in-chief at Edmunds, says automakers are counting on the new revenue stream to pay for the expensive transition to electric cars.
“So if your car payment is 600 bucks a month, it’s now $675,” Weaver said.
General Motors projects subscription fees to bring in as much as $25 billion a year by 2030. For context, Netflix’s entire revenue for fiscal year 2023 was $32.74 billion.
“Part of me says, ‘Well, you’ve already bought the hardware…so just let me use it,'” Weaver said.
Alix Partners, a global consulting firm, found that more than 60% of consumers are willing to consider subscribing for enhanced safety and convenience features as long they don’t feel like they are being charged for something they already paid for.
“A lot of people in the auto industry certainly use Apple as a shining light on the hill,” said Mark Wakefield, Alix Partners CEO.
“The car has to be cheaper, plus this option of subscribing,” Wakefield added.
Weaver proposes another idea for car owners.
“Subscribe to the system, 75 bucks,” Weaver said. “Do your road trip, unsubscribe, and then you’re no longer paying for something that you’re not really going to use.”
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