The true price of automotive subscription fees

Imagine buying a fancy new car that costs as much as your parents’ first house and being told by the dealer that you’ll have to pay the automaker $18 a month if you want to use the seat heaters that are already installed in the car.

Preposterous? BMW didn’t think so last year, when it began such a subscription service in markets outside the U.S. But American pundits savaged the idea, and BMW followed up with a statement promising that heated seats would be subscription-free in the States—for now.

Such schemes are possible because today’s cars can send and receive data over the internet to manipulate the cars’ software. A few bucks in subscription fees for the car owner can add up to real money for the automaker. Mercedes-Benz earned more than $1 billion in software-based subscription fees in 2022. General Motors expects software services to generate up to $25 billion annually for the company by 2030.

In the late 1990s, GM launched OnStar, a subscription service offering motorists such nifty features as summoning help after a crash and remotely unlocking a car. According to OnStar's website, for example, California resident Kim Pugh was able to confirm that family members were safe when they were detained by bad weather while driving home from a ski trip.

Since those early days, automakers have devised plenty of other ways to monetize data generated by so-called connected cars. Some current examples: Toyota offers buyers a menu of services such as Safety Connect (emergency assistance, stolen-vehicle tracking) and Remote Connect (remote engine starting, last-parked location). Subscribing to all of Toyota’s packages costs more than $300 a year.

Mercedes-Benz offers buyers of its EQ electric vehicles an acceleration boost via software for $1,200 a year. GM offers Super Cruise hands-free driving technology on several of its vehicles for $25 a month after a trial period. Honda and Sony have teamed up to eventually sell an electric vehicle capable of connecting to cloud-based entertainment for subscription fees.

Unsurprisingly, motorists are less enamored with software subscriptions than are automakers. According to a 2022 Cox Automotive survey, 75% of respondents were unwilling to pay ongoing fees for most of these kinds of items on their next vehicle.

But the connected car has ramifications beyond posterior warmers or performance upgrades. Automakers collect a wealth of data, for instance, that can remotely determine a vehicle’s well-being. An automaker also could sell maintenance or repair services to a car’s owner through the car’s infotainment system.

Ford could make life hard for those who miss car payments. The automaker applied for a patent on a data-connection system that could disable the engine or, for self-driving cars, move the vehicle from the owner’s driveway to a repossession agency.

Then there’s insurance. Tesla and GM offer auto insurance policies in some states. Connected-car data can inform an insurer about a driver’s habits—miles driven, speeding, hard braking, or perhaps, via an in-car camera, inattentiveness—and safer drivers could qualify for lower premiums.

Governments, too, conceivably could use connected-car technology to collect mileage-based road taxes. Gasoline taxes pay for road construction and maintenance. Electric vehicles don’t use gasoline, and as they proliferate, governments will need to find other ways to pay for roads. California, Oregon, and Washington are considering programs for taxing a vehicle’s mileage.

For motorists used to traditional disconnected cars, connected cars portend a brave new automotive world.