Study: Automakers may face tough sell with subscriptions for heated seats, remote start

Automakers that expect to make big bucks by charging consumers for features on demand, such as heated seats or hands-free driving, will face an uphill battle, a new study said.

Cox Automotive released the study — “Software Monetization: The Emergence of Vehicle Features on Demand” — Tuesday that showed most in-market car shoppers were not familiar with the idea of paying for features on demand and most expect it will be too costly to subscribe to such features.

"Our initial research indicates that the transition to Features on Demand will be an uphill battle for many automakers,” Vanessa Ton, Cox Automotive senior industry intelligence manager who helped lead the research project, said in a statement. “In the market right now, there is low consumer awareness and some skepticism on the part of shoppers. To gain consumer acceptance, automakers must ensure consumers perceive subscription-based features as a good value and not just a money-grab."

The research showed shoppers of Tesla, Jeep, Dodge and Ford Motor vehicles are more likely than those shopping for other brands to consider vehicles with Features on Demand.

GM's drive toward Features on Demand

That could mean General Motors has a challenge. The automaker said last year that software-as-a-service will generate $20 billion to $25 billion annually in revenue by 2030. In fact, GM is counting on vehicle software, and the microtransactions it will allow, such as paying for cloud-based services, to be the bigger business in the future compared with the sale of the hardware — the car — now. GM has so far stopped short of saying it will charge for such perks as heated seats as some luxury automakers do.

For example, last year BMW started selling some new eye-popping subscription-based services in various countries, included charging drivers $18 a month for heated seats and $10 per month for a heated steering wheel. Similarly, Mercedes Benz drivers who want extra performance from their EV can pay $1,200 a year for a plan that delivers 0 to 60 mph in less time. Part of the reason behind the subscriptions is because EVs cost a lot to make because of the lithium ion batteries in them, making them unprofitable at the moment. So automakers need to get revenue by other means.

In March, GM announced it will phase out Apple CarPlay and Android Auto on its future EVs, starting with the Chevrolet Blazer EV due out this summer. Instead, GM's built-in system will offer drivers more than CarPlay and Android Auto, GM said, including helping drivers know when the battery needs charging and where to charge it fastest. But the reaction to GM's decision across social media was harsh, with some people saying they will not buy a vehicle that doesn't offer CarPlay or Android Auto.

GM has remained undeterred. It wants to create new revenue streams by selling subscriptions to certain features on the GM-built infotainment systems, plus gather data on how consumers use their EVs.

"GM is looking to monetize more software and services within its vehicles and is taking a page out of Tesla’s playbook," Dan Ives, managing director and senior equity research analyst at Wedbush Securities, told the Free Press.

Results suggest carmakers give free trial periods

According to the Cox study, which was conducted in late December and early January with more than 2,000 in-market vehicle shoppers questioned by the Cox Automotive team, awareness of features on demand is very low among shoppers, with only 21% of in-market shoppers familiar with the concept, although 41% indicated an interest in it. Ton said most shoppers see some benefit, noting that features on demand would allow them to try new features without the long-term commitment of a purchase. Also, some shoppers saw it as a chance to upgrade their vehicles and try new technology.

The biggest benefit most shoppers saw to it was a lower starting price for the vehicle, but the research also showed that 58% of the shoppers expect a features on demand approach to ultimately be too expensive. They had concerns about data security and privacy, too. Finally, 69% of respondents indicated that if certain features were available only via subscription, they would likely shop elsewhere.

The top five features shoppers would pay a monthly fee for now are: remote start, vehicle locator, heated seats, dashcams and a digital key, the study found.

But 65% of survey respondents said a free on-demand subscription, or a free-trial period, would be a selling point and make them more likely to consider a brand.

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Contact Jamie L. LaReau: jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.

This article originally appeared on Detroit Free Press: Study: Ford, Tesla buyers open to paying for in-car features on demand