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Cars Are Becoming Subscription Products

 ·  1 min read

Several manufacturers have shipped vehicles with hardware installed and disabled, activated by subscription. Heated seats were the example that generated the most anger, and it was not the only one.

The manufacturer logic

Building one hardware configuration is cheaper than several. Installing everything and enabling by software simplifies manufacturing enormously.

And a car sold once generates revenue once. A recurring payment generates it forever, which is worth far more to a company valued on future earnings.

Why buyers object

Because the hardware is in the car they bought. Paying monthly for a physical component already installed and paid for feels like being charged for something withheld, and that intuition is difficult to argue with.

The distinction manufacturers draw – that you bought the vehicle, not every feature in it – is legally coherent and does not persuade anyone.

Where it has been accepted

Services with ongoing cost. Connectivity, live traffic, remote diagnostics, over-the-air updates. Those involve continuing expense to the manufacturer, and subscribing to them is not controversial.

The line buyers appear to draw is whether the manufacturer incurs a cost by providing it.

The resale problem

A subscription tied to an account does not transfer with the vehicle. A used car with features disabled is worth less, and the buyer must re-subscribe to something the original owner already paid for repeatedly.

That has begun affecting residual values, which manufacturers care about because it affects lease pricing.

Where it lands

Retreat on hardware unlocks after sustained backlash and, in some jurisdictions, regulatory attention. Continued growth in service subscriptions, which nobody objects to. And considerably more careful language about what a purchase includes.