The Rise – And Hopefully Fall – Of Subscription Options

Tesla has announced that it will be offering its “Full Self-Driving” software for a $199 per month subscription (Read this blog to find out why that is a waste of your money). BMW, Mercedes, and Cadillac have also explored subscription options. So what are they, and why are they bad? Let me explain.

Last year, BMW launched a software update that included features that could be digitally personalized through subscription/on-demand add-ons. These features ranged from heated seats to some driver assistant features. However, the German company quickly changed course when customers became irate at paying extra for services whose hardware was already included in the vehicle.

Similarly, Mercedes and Cadillac are also dabbling in subscription options. Mercedes is planning to charge over $500 a year for EQS’s rear-wheel steering. Cadillac started charging $25 per month for its Super Cruise technology.

As a business-minded person, I can understand why car manufacturers want to charge a monthly subscription fee. They see dollar signs. Instead of making a one-time, set profit, now they are making a steady income off something that costs virtually no additional capital to operate. Think about how profitable Netflix is. It is no wonder manufacturers want a slice of that pie. But, that is where my acceptance of this practice ends, and my hatred begins.

Imagine buying something. It doesn’t matter what it is. It could be a toaster, lamp, shoes, watch, TV, or whatever. But, for simplicity’s sake, let us talk about a toaster. This toaster you bought has the hardware to toast, air fry, and convection bake your food. Unfortunately, only the toast feature is unlocked by default. Therefore, you will have to pay $9.99 per month for the air fry or convection oven option and $14.99 for both. You can also pay $1.00 for a one-time use of either feature. Intellectually, does that make a lot of sense?

You bought the toaster, it has the features you desire, but to use those features, you have to pay the manufacturer additional money to access them. It doesn’t make much sense to me, and I bet it doesn’t to you either.

I hope this does not catch on.

If this catches on, you will end up with a homogenized vehicle that comes standard with every option included but locked. Theoretically, it should improve upfront cost in exchange for a much much higher month-to-month cost. Options would be relocked if the original owner decided to sell, and the new owner would have to decide which options they, in turn, want to pay to unlock. That makes sense on paper until you realize that you own the vehicle. You are responsible if something breaks. How do these manufacturers handle depreciation? Are you going to be paying the same monthly fees for options that are now ten years old and may not work as well as they used to?

There are many problems with asking consumers to pay subscription fees to unlock options. I hope this practice goes the way of the Dodo bird.

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