The traditional way of buying a car is changing
Daydreaming about your dream car, a new BMW, you can’t wait to hit the road and enjoy the ride. But, as the temperature drops, you reach for the seat warmer button and suddenly your dream turns into a nightmare. The display screen flashes a message saying you have not subscribed to the seat warming package and you will be charged per minute to access this feature.
This is not just a future-world nightmare, this is a reality that is happening right now as carmakers are charging monthly subscriptions for certain features in their cars.
This year, BMW and Mercedes have introduced subscription-only features in some of their cars and this trend is expected to continue. The traditional way of buying a car is to make a one-time payment for additional features, such as tinted windows or leather seats, but now carmakers are embracing the software business model and looking to generate monthly revenues.
Tesla pioneered this model with their over-the-air software updates, and now other carmakers like BMW, Mercedes, Volkswagen, Toyota, Audi, Cadillac, Porsche, and Tesla have all dabbled in the subscription model.
Why are carmakers charging monthly subscriptions?
The first reason is the technology in the cars. In the past few years, the amount of silicon in a car has greatly increased and they are now all internet-connected and software-enabled, which means a business model like this is technically feasible.
The second reason is the financial one. The lifetime value of a car sold is higher if Mercedes or BMW can get the upfront car payment and then collect ten years of monthly subscriptions for seat warmers, this means more revenue in the door each year.
The future of buying a car looks like it will be subscription-based, with carmakers offering a variety of monthly subscriptions such as the “BMW Heated Seats Subscription” or the “Mercedes Faster Acceleration Subscription.” This way, car owners can have access to the latest and greatest features without having to commit to purchasing a brand new vehicle and easily upgrade or downgrade their subscription as their needs change.
As more and more people turn to car subscriptions, it will be interesting to see how other companies in the industry respond and adapt to this new trend.
If you want to discover more on the topic of the changing world of car subscriptions, then check out our recent episode of the Dive!