Product Launch

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E77: Paying For Features Your Car Already Has

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.

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?