Automakers Rev Up Subscription Services
Last updated January 4, 2022
Although automakers are making record profits, they continue to seek ways to increase revenue beyond sales, financing, and repairs. So when you next buy or lease a new car, you might have to regularly pay a subscription fee to keep some of its features activated.
Stellantis—formerly known as Fiat Chrysler, the world’s fourth largest automaker—announced last month that it plans to generate about $22.5 billion (20 billion euros) in new annual revenue by 2030 from software services and subscriptions.
Listen to audio highlights of the story below:
Automotive subscriptions aren’t new: General Motors launched its optional OnStar service in 1997; current packages cost $29.99 to $49.99 per month. Most automakers now offer subscription packages of some type, such as for SiriusXM satellite radio or connectivity to roadside assistance, concierge services, or automatic 911 notification when airbags deploy. In the past, these types of services were optional and didn’t relate to essential vehicle functions; many drivers viewed them as frivolous extras and, after free trial periods, let subscriptions lapse.
But Stellantis’ announcement indicates a new trend of requiring car buyers to pay subscription fees to activate their rides’ bells and whistles, which might have lured them into buying in the first place. For instance:
- If you don’t want to pay $10,000 to Tesla for its full self-driving option (which Consumer Reports cautions is not full self-driving), you can now enable it by instead leasing the software for $199 a month. And Tesla not only charges $10 a month for its premium internet connectivity service, but recently cut its free trial period for it from one year to one month.
- Cadillac’s Super Cruise hands-free driving assistance system is free during an initial trial period, but fine print on the company’s website says: “After initial three-year period, an eligible Connected Service plan must be purchased.” The cost is $25 per month, or an additional $15 per month for those who also subscribe to GM’s OnStar service.
- Audi’s new Function on Demand subscription, available on some 2021 models, allows owners to purchase navigation features, including satellite views and natural speech and handwriting recognition, via the myAudi app for vehicles without factory-installed navigation. Cost: $85/month or $850/year.
“This is absolutely the future, no doubt about it,” said Tom Voelk, an automotive journalist, contributor to The New York Times, and publisher of DRIVEN car reviews. “They’re in the business to make money, and those service fees can add up quickly.”
Paul Eisenstein, publisher and editor-in-chief of online automotive magazine TheDetroitBureau.com, agrees: “One of the advantages of a subscription—which so many other businesses, particularly in communications and entertainment know—is that you’ve got a customer hooked month after month, year after year. It’s a constant revenue stream.”
Manufacturers say the subscription model allows them to meet the diverse needs of their customers.
But consumer advocates worry that automakers will tie important safety devices and capabilities to monthly payments. What if an automaker installs on every vehicle emergency braking, forward collision warning, smart cruise control, blind-spot warnings, voice-recognition software, and other safety features but activates them only for customers willing to pay regular fees? Automakers already have developed these incredibly helpful features but often offer them only as expensive options. The worry is they’ll soon offer them as monthly extras.
“Manufacturers are struggling to make these subscription services more valuable, and one way to do that is to require a subscription for pretty basic services,” Eisenstein told Checkbook.
Jason Levine, former executive director of the Center for Auto Safety, said he believes all available vehicle safety features should be working full time to protect everyone on the road and should not be subject to “a monthly ransom” that should have been part of a vehicle’s initial cost.
“It is hard to believe that any responsible automaker would condition driver and passenger safety on the purchase of a subscription, given the inequitable safety outcomes that will inevitably result,” Levine told Checkbook. “No one should be put at risk of death or serious injury, or put others at risk, because they choose not to add $15.99 per month at the time of lease or purchase. Safety should never be optional.”
So far, most subscription services, especially those involving vehicle functions, have been offered by luxury brands or for high-end models equipped with advanced driving and safety systems requiring database updates. These vehicles are often leased, making it easier for dealers to tack on subscription fees by tucking them into monthly payments.
The auto experts at Consumer Reports agree, noting in a blog post:
“…companies should not be allowed to deactivate proven, effective, well-functioning safety systems—including due to an expiring subscription. Instead, these systems should come as standard equipment across the board. In fact, CR believes that automatic emergency braking (AEB), forward collision warning (FCW), and blind spot warning (BSW) should be standard on all trim levels of all models.”
But Stellantis’ tipoff that it sees subscription fees as an important future revenue stream indicates non-luxury brands and models will soon likely follow the practices of high-end manufacturers.
Eisenstein warns that “automakers are going to have to be very, very careful how they launch these subscription services. If they get too greedy, they could wind up chasing some customers away.”
Many Toyota owners were recently unpleasantly surprised to discover that when their complimentary subscription to the automaker’s Remote Connect service expires—after three years in some cases, 10 years in others—the remote start feature on their key fob will no longer work. Toyota charges $8 a month or $80 a year for its subscription plan.
“This is an absurd policy. It’s a clear attempt to gouge consumers and drive up the real cost of buying their vehicles,” said Checkbook executive editor Kevin Brasler.
Especially concerning is that automakers offer inadequate disclosure to prospective buyers about these extra costs. Are asterisks on window stickers enough to call attention to subscription-based features on that vehicle, or would a required disclosure form improve the notification process?
When Consumer Reports tested the Cadillac CT6, it reported that the window sticker indicated Super Cruise capabilities were available only as part of a three-year trial, although it didn’t specify what happens after it runs out.
“These subscription programs have become ubiquitous because the details are buried in the fine print,” said Jack Gillis, executive director of the Consumer Federation of America and author of The Car Book. “The federal government needs to step in and require that a list of conditions and costs for subscriptions, written in plain English, be disclosed at the time of purchase. Sunlight is a great disinfectant and full transparency levels the marketplace.”
Privacy adds another layer of concern to using these services. As Checkbook has previously reported, your recorded data is compiled and sold or traded by thousands of companies, usually with the help of data brokers that are largely unregulated and not required to tell you what they’ve collected or shared. Privacy advocates call this industry “commercial surveillance”—your private life is now a product for sale as part of a $227 billion-a-year industry. And automakers are key players in this business.
Gillis told Checkbook he was “shocked” to learn that Hyundai was tracking his driving behavior since he accepted the free trial of the onboard Blue Link service. He found out about it when he received an email from Hyundai offering a discount on his insurance.
“We collect driving data about your Vehicle such as speed, acceleration and braking data; direction of travel; trip data (mileage, date, length, conditions); ignition events; steering events; cruise control data; seatbelt status; information about Vehicle incidents or events; other information about how you drive a Vehicle; as well as associated date/time stamps for such information.”
In addition to poor disclosure, consumer advocates are concerned there are other unanswered questions about automakers’ policies for existing and future subscription programs. Among them:
- What happens when owners sell their cars? How do they make sure the new buyers are properly informed that certain systems on their vehicles won’t work without subscription fees?
- Should used car dealers provide their buyers with their own disclosure forms? Are they adequately informing consumers about subscription plan costs?
- Will active subscriptions and free trials transfer to subsequent owners of vehicles, or will the new owners need to activate them?
- What if a manufacturer stops supporting a feature? It’s one thing to discontinue an entertainment package but quite another issue if a defunct company’s braking assist feature goes kaput.
It would be helpful if the government enacted rules that all automakers must follow to offer subscription plans. At the very least, based on what we’ve seen so far from the industry, automakers must be more upfront about these added costs.
“Disclosure is going to be a huge deal, especially for the resale of a vehicle,” Voelk told Checkbook. “The seller can’t hide the fact that the semi-autonomous system that’s active at the time of sale will expire. The buyer needs to understand that.”
Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He is also the consumer reporter for NW Newsradio in Seattle. You can also find him on Facebook, Twitter, and at ConsumerMan.com.