According to the 2022 Automotive Software Survey, 44% of respondents would be willing to pay for additional vehicle functions and features after the point of sale. However, recent attempts to sell new features on existing vehicles are being met with mixed results. Tesla continues to successfully sell its full self-driving functionality for a whopping $15,000, while BMW has faced massive backlash at its plans to sell seat heating as a monthly subscription of $18.
In fact, the discussion has become so heated (pun intended) that legislators in New Jersey are considering a ban on automakers charging subscription fees for new features where the hardware is already installed in the vehicle.
The senators proposing the draft bill stated: “Car companies are increasingly seeking to charge consumers a subscription fee to access certain features on their vehicles, such as heated seats, even though the components necessary for the feature to function are already installed on the vehicle at the time of sale. During this time of rising consumer prices, it is important to guard against business practices that primarily serve to increase corporate profits.”
So, the question remains, why is Tesla successfully selling its self-driving features, even though the technology exists in every vehicle?
This discrepancy could be explained by the way the public views different automakers. Tesla and other software-defined EV manufacturers promote their vehicles as a platform for e-mobility services. For legacy car manufacturers such as BMW, many people see those vehicles as traditional mobility devices where subscriptions and extra add-ons are considered nothing more than a tactic to get more money from the customer.
New EV manufacturers haven’t ever been seen as traditional carmakers. Because of this, people expect them to act a little differently, with software at the core of what they do. On top of this, brands such as Tesla tend to attract a different market — one that’s no stranger to subscription-based pricing, as this is how much of the tech industry operates.
For car makers to successfully transition from hardware manufacturers to digital platform owners, they need to look at how they communicate and deliver what they offer. Instead of focusing on the driving experience, focus on the autonomous features. Instead of focusing on the engine power, clearly convey the value, safety, and convenience of their mobility platforms. Car makers that successfully do that will be able to charge a premium, either upfront or as part of an additional subscription.
User Experience is Everything
Another point to consider is the delivery mechanism for these upgrades. While over-the-air (OTA) updates can be more convenient than traditional update methods, there’s the chance they could impact the user experience if not delivered correctly. Currently, OTA updates replace a visit to a dealership for maintenance, and right now, updates that take an hour to execute are acceptable in place of a 4-6 hour visit to the mechanic.
Using the same technology to deliver vehicle features purchased via the car infotainment system, however, is not an acceptable user experience when it could render the vehicle unusable for an hour while the update downloads and installs. When asked how long they would be prepared to be without vehicle functionality during an OTA update, 70% of survey respondents replied: “not at all”, or “at most, 10 minutes”.
While an hour’s update time might be acceptable if it avoids dropping your car off at the dealership for the day, drivers will soon come to expect much shorter wait times in line with how we update our apps on our smartphones or computers.
Furthermore, 75% of respondents to the survey stated they want bug fixes and cybersecurity patches to install automatically without any user interaction at all. Automakers that can deliver on this experience across new features and updates will be able to better justify any additional costs. With a user experience that feels fast, high-tech, and seamless, legacy automakers can start to change public perception as they transition to digital platform providers.
Artificial Intelligence to the Rescue
To meet these goals, automakers need to adopt a new software update technology. The use of advanced AI-based tools will allow them to analyze changes in the code during the development process to make the software lifecycle agile from development to delivery. This, in turn, will enable them to update their software seamlessly anytime, anyplace, giving users mobility services that adapt to their needs and become continuously better.
To make the transition from hardware providers to a digital platform, legacy automakers must look to technology to solve their challenges while addressing the pain points of their customers. Once public perception changes and people understand how the automotive world is evolving, it’ll be possible for manufacturers to communicate their value as mobility experience providers in a way that supports recurring pricing models such as subscriptions.
Written by Roger Ordman, EVP Marketing & Business Development, Aurora Labs