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E77: Paying For Features Your Car Already Has

by Sean Boyce

The latest trend to hit the car industry is subscriptions, but not always for new features. Sometimes for what you car already has built-in.

Car manufacturers like BMW and Mercedes are getting aggressive in charging customers subscriptions for features that are already built into the car itself.

I want to talk about the outrage this has caused and where the line actually should be from a product pricing perspective.  We’ll also talk about the history of where it came from.

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Episode Transcript
Hey, folks, Sean here.

And today what I want to talk to you

about is a developing trend in pricing in the

automotive industry, where car manufacturers are charging you for

features that your car already has via subscription and

the outrage that that’s causing.

So if you’re unfamiliar with what’s going on here, automotive

manufacturers like BMW are charging people for heated seats to

the tune of $18 a month, an extra $10 a

month to access the heated seats steering wheel.

Again, both of those features already in the car.

And car manufacturers like Mercedes are charging well over

$1,000 in order to make the car faster.

Now, these transactions are relatively

new for the automotive industry.

Previously, especially when it comes to features

and hardware your car already had, you

would be charged extra for that.

I mean, they might be in the base

price, so the pricing might be handled differently.

But car prices also haven’t gone down.

What they’re doing is they’re still increasing

the prices of the base vehicle itself,

plus all the features, and then they’re

adding subscription fees on top of that.

And that’s really adding some serious insult to

industry, especially given the current economic conditions.

So I want to talk about how this is

a strategy has led to pretty significant backlash from

consumers thus far, but at the same time, people

still appear to be paying it.

I want to talk about the history in terms of

where this came from, what this means for the future

of the industry and what we can learn from it

from a product pricing perspective, in terms of what’s fair.

Like, where would we draw the line

when it comes to something like this.

Because in certain instances, I might be able to

see it, but in others it seems pretty outrageous.

Like charging you for features your car already has.

Plus we can talk about the history

in terms of where it came from.

I know I’ve been beating them up a lot in a

number of my videos, but Tesla in the early 2010s created

an infrastructure and network for Ota, which is an acronym that

stands for over the Air updates, which actually add quite a

bit of convenience to the consumer experience.

And a lot of people rave about this.

It’s where they have the ability to

essentially kind of update your vehicle.

But over the air, as in receiving an update

like your phone or your computer might, doesn’t require

you have to take the car to the dealership,

which I would argue improves the consumer ownership experience.

Now, I might be willing to pay

more for that, but in reality, that’s

something they’re doing to upgrade their fleet.

So perhaps that should just

be built into the experience.

Now, in addition to that, and around that time frame,

tesla was also providing people with the opportunity to purchase

extended range for several of their models, which meant that

you’d be able to drive further in a tesla model

because you’ve unlocked some additional range.

Now, similarly so to what I’ve already described about what

BMW and Mercedes and other companies like that are doing,

the car already had that functionality, but you needed to

unlock it in order to access it.

So this has been going on for a while,

and I should say Tesla somewhat kind of popularized

this model, or tested it, if you will, and

other manufacturers have taken note of that.

Plus, add to that the advantage from a

financial perspective in terms of setting up and

establishing recurring revenue has been very attractive and

made popular by SaaS applications and a number

of other largely successful businesses well tooth.

And these manufacturers have taken note of that, tried

to figure out how they can leverage it into

their model and add it to their world.

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This is where this stuff has come

from, and that’s the history on it.

Now, despite the fact that

it works for certain businesses.

The question here for me is really, does

it apply in this industry or should it?

Because there’s been a lot of backlash from consumers

talking about, I’ll never buy BMW, I’ll never buy

a Mercedes, because they are doing these things.

Unfortunately for them at the moment, people are paying

a number of these different fees to these manufacturers,

which is likely to mean that they’re going to

continue with them, at least to a certain extent.

But what I want to talk about is what the future

of that might look like and how they may be able

to modify it to a certain extent and figure out a

better line in terms of what’s fair and what isn’t.

I’m also curious to get feedback

from you on it as well.

So I want to talk a little bit about where the line

is here in terms of what might be fair and what isn’t.

Now, when it comes to certain research and development

that these automotive manufacturers have had to incorporate in

terms of improving the ownership experience and giving your

car advanced functionality, I could understand in certain instances

what that might look like.

And I’ll give you an example from mine.

So I own a Jeep, and there’s two ways in which

you can actually start the Jeep, some Jeep vehicles remotely.

There is the ability to do so from your

key fob as, and you’ve just pressed the mechanical

button on your key fob that will start it.

But you need to be in physical proximity

of the vehicle, probably like up to 100ft

away, probably no more than that.

And in addition to that, they have a you connect

application that I can operate from my smartphone, which sends

a signal over the telecom network, which ultimately will go

to my vehicle as well, too, meaning that I can

start it from much further away.

So if I was a mile away from my

car, I can start it via that technology.

Now, in the case of Jeep, they’re charging

you for the latter, not the former.

So my key fob will work.

I can use the remote start, but I need to be

in certain proximity with my vehicle if I want to use

that You Connect app, I have to pay for that.

That comes as an annual subscription.

And remote start is not the only thing that it offers.

Now, in this case, I had

it when I purchased my vehicle.

It came with it as an incentive, but it expired and

I haven’t renewed it because I haven’t really needed it.

It’s not something that I use all that regularly.

As such, I didn’t see a

need to spend that additional fee.

And also because if I need remote start,

I’m probably in close enough proximity to the

extent where I can just use the Fob.

I think in instances like that,

it may make sense, right?

To me, that seems fair.

I’m getting more by paying more.

As in previously, I didn’t have the ability to do that.

That’s relatively new, somewhat innovative, and if I

want that convenience, then I’ll pay for it.

But on the other hand, these car manufacturers that

are charging you for like heated seats that the

car already has and they’re just kind of unlocking

said feature in the car, I think that’s borderline

ridiculous and it’s something that really should stop.

Unfortunately, if they continue to be

successful with it, it probably won’t.

So this is where it really depends on the

consumers, as in what are they going to do?

Are they going to find this outrageous and as such

not purchase the vehicles or decide to purchase other vehicles

that aren’t doing kind of these shady tactics?

Or are they going to continue to be loyal to

these brands despite the fact that they’re charging them now

more for something that they used to be able to

get which was included in the price?