Is subscription based Services/Features the next major trend in Automotive Industry??

BACKGROUND : THE RISE OF SUBSCRIPTION

 We are currently living the life of subscriptions. They are not just the monthly amounts you pay, they define your lifestyle and the way you live. Subscriptions also reflect the current new generation lifestyle who don't really commit to anything long term.

Currently these subscriptions are mostly popular in the Entertainment Industry. With Covid restricting the people mostly to their homes, these subscription based services hit the roof top in terms of Growth. Many players like Amazon, Netflix, Hotstar etc. have seen huge rise in the demand in the past 1.5 years. I have seen many consumers shifting entirely towards subscription services by taking off their cable/Dish services. 

To further accelerate this behavior, Telecom giants like Airtel , Jio etc. started rolling out their Prepaid plans along with these subscriptions 

WHAT IS IT TO DO WITH AUTOMOTIVE INDUSTRY

Car subscription is not an alien topic for us. We have many players like Zoomcar, Revv, Myles and also OEM based subscription plans. Through these companies, we can subscribe the car for limited timeline say 1 month, 3 months, 6 months, 1 year etc. But this is all about subscribing the car instead of owning it. 

But what if you own a car, but still have to pay some subscription for the usage of some features???

CURRENT SCENARIO 

Currently, Connected car service which is available in some of the cars has this subscription structure. In the cars which have this connected car tech, there will an in-built SIM card that helps us to virtually connect our car with our mobile app. You have to pay some subscription cost to your Service (SIM) provider for using this connected car service

OEMs like Hyundai, Kia, MG are majorly providing connected car services. Hyundai comes with BlueLink, Kia comes with UVO tech, MG provides iSmart tech etc. Other OEMs also provide some basic connected car features but are not very comprehensive.

Hyundai and Kia are providing 3 years free subscription cost for connected car after which owner has to pay some certain amount. MG is also giving iSmart free of subscription as of now.

So as of now, the subscriptions are limited to only connected car tech which may not be very important for many of the customers.

WHAT LIES IN THE FUTURE???

Latest cars are coming with more electronics than ever, Almost 40-50% of your future cars have electronic components that can be controlled via software OTA updates. So OEMs are trying to integrate and control several features of their cars with these software updates. 

Tesla is charging a monthly subscription of $9.99 for Premium connectivity which include live traffic updates, satellite navigation etc. Standard users get only normal navigation

BMW recently announced that they will charge you a subscription for their Heated seats feature in the new 5-series. 

Mercedes EQS sedan comes standard with a 4.5-degree range rear-wheel steering system and customers have to pay subscription fee of $575 per year for optional 10-degree upgrade

Key Benefits of subscription services in car

These subscription plans helps the manufacturer to reduce the number of trims/variants they need to produce for a single car. All these electronically controlled features can be given in single trim and can be unlocked based on customer subscription

OEMs will have all the data about the usage of features and they can map customer behaviours based on that. You know Data is the new gold these days

Initial cost of vehicle might become less

Customers can subscribe to the feature only when they really need them. For example, people in India might need ventilated seats only during summers and they might need AWD only at a particular time. 

Challenges

After spending so much and buying the car, many customers will be annoyed if they cannot use certain features and they have to pay subscription. Typical example is when BMW charged $80 per year for Apple carplay several users complained of it, which was later given for free

Data privacy issues might rise among buyers

Customers might feel that they have less control over their car even after owning it

Indian customers are already worried about the rising fuel prices that burn their pocket on daily basis, so whether they will accept these subscription based feature offering (or) not?, only time will tell....