Automakers Rev Up Subscription Services
Last updated January 4, 2022
When you buy or lease your next car, you might be required to pay a monthly or yearly subscription fee to activate some of its features.
Although automakers are making record profits despite pandemic-induced production problems, they continue to look for ways to increase revenue beyond sales, financing, and repairs. Stellantis, the world’s fourth largest automaker (formerly known as Fiat Chrysler), 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:
“One of the great advantages of a subscription—which so many other businesses, particularly in communications and entertainment know—is that you’ve got a customer hooked for month after month, year after year,” explained Paul Eisenstein, publisher and editor-in-chief of TheDetroitBureau, an automotive web magazine. “It’s a constant revenue stream.”
The concept of in-car subscriptions started in 1997, when General Motors launched its optional OnStar safety and assistance service (current packages are priced between $29.99 and $49.99 a month).
Most car companies now offer a subscription package of some type, whether it’s satellite radio, enhancements to the entertainment system, or a connectivity package that provides roadside assistance, concierge services, and triggers 911 calls in an accident (such as OnStar).
But until recently, most of these subscriptions didn’t relate to the functioning of the vehicle. And because of that, after the free-trial period, many drivers cancel their subscriptions.
“Manufacturers are struggling to make these subscription services more valuable, and one way to do that is to require a subscription for some pretty basic services,” Eisenstein told Checkbook.
Manufacturers say the subscription model allows them to meet the diverse needs of their customers.
But what if you had to subscribe to driver assistance software, or voice-recognition technology? Would you pay a monthly fee to activate optional safety features, such as automatic emergency braking, forward-collision warning, or blind-spot warning?
Jason Levine, 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.”
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.”
Is This Where We’re Headed?
Right now, most subscription services, especially those involving vehicle functions, are offered by luxury brands or are for high-end models with advanced driving and safety systems that require database updates. These vehicles are also more likely to be leased, making it easier for the dealer to tuck that subscription fee into the monthly payment.
Many vehicles already have the equipment (cameras and radar) installed that could provide more advanced driver-assistance programs with a subscription that provides the required software. Manufacturers would most likely offer the feature with a free trial, hoping to convert it to a long-term paid subscription.
Here a look at where we’re headed:
- Cadillac’s Super Cruise hands-free driving assistance system is free during the initial trial period, but as the company’s website says in the fine print: “After initial three-year period, an eligible Connected Service plan must be purchased.”
- 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.
- Tesla, which charges $10,000 for its Full Self-Driving feature (which Consumer Reports cautions is not full self-driving) at the time of sale, is now leasing the software for a $199/month subscription. And Tesla charges $10/month for its premium internet connectivity service; it recently cut its free trial period for internet connectivity services from one year to a month.
For Tesla owners, CR’s auto editors suggest a subscription may be the smart move: “Although an up-front purchase may cost less than a subscription in the long run, Tesla owners also should consider that the one-time purchase won’t transfer to any new Tesla they buy. It probably won’t transfer to a new owner of their vehicle, either—so it might not benefit resale value.”
If the “pay-for-play” model turns out to be successful, manufacturers are sure to expand it to more features and more models.
“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.”
While some subscription fees are as little as $80 a year; others are more than $800 a year.
“Manufacturers are struggling to make these subscription services more valuable, and one way to do that is to require a subscription for some pretty basic services,” Eisenstein told Checkbook. “[But] 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.”
Toyota owners have been 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 no longer works.
“That’s absurd,” said Kevin Brasler, Checkbook’s executive editor. “It’s a clear attempt to gouge consumers and drive up the real cost of buying their vehicles.”
According to a blog post on The Drive, Toyota appears to be the first company to charge for full use of a physical key fob—either $8 a month or $80 a year at the Remote Connect plan's current price.
Last week, WebProNews reported that Toyota is reconsidering its controversial decision after the backlash from both owners and non-owners.
Preventing Customer Confusion and Deceptive Sales Tactics
Today’s cars and trucks have a smorgasbord of available options. Some come with certain trim levels. Others cost extra for those who want them.
As the market evolves, clear disclosure of subscription services—especially those that expire down the road—will be critically important to prevent customer confusion and deceptive sales practices.
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, 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 the trial runs out.
“One reason these subscription programs have become so ubiquitous is 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.”
There are so many unanswered questions and possible pitfalls related to automotive subscription services that would be resolved with rules everyone selling a vehicle would be required to follow. Here are just a few that come to mind:
- What happens when you sell the car? How do we make sure the new buyer is properly informed that certain systems on that vehicle won’t work unless they pay a subscription fee?
- Will used car dealers need to have you sign a separate disclosure form?
- Will an active subscription roll-over to the next owner until it expires, or will it be shut off by the manufacturer?
- What if the manufacturer stops supporting the feature? An internet browser is one thing, steering technology is quite another.
“Disclosure is going to be a huge deal, especially for the resale of a vehicle,” Driven’s 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 in a matter of time. 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 KOMO radio in Seattle. You can also find him on Facebook, Twitter, and at ConsumerMan.com.