Revving Into A Saasy Future

Carmakers stare at a tussle between their SaaS-based subscription business model for additional revenue and a reluctant customer. Who will win this round?

Published 5 months ago on Sep 01, 2022 9 minutes Read

Imagine you live in a cold place. You are on your way back home after a long day at work and it is 5° Celsius outside. The frost on the ground and cold winds make you want to snuggle into your BMW and you reach out to switch on the heated car seat feature to feel warm again. Shockingly, you discover that you must pay a monthly subscription to activate the already installed heated seats in your vehicle. Now, is that not a bummer?

Most car owners were stunned just like that when BMW recently announced that it would charge $18 a month, $180 annually or $450 for the car’s lifetime to activate the heated car seat functionality in Japan, Malaysia, South Africa and several European countries. They felt that this move was unwarranted because they had bought the car with all the necessary components. However, the automobile company placed a software block on their functionality, and buyers had to pay to remove this restriction.

Those not convinced by the subscription model have the option of buying this and other features outright individually. For instance, in the UK, the electronically controlled adaptive M suspension feature can be added retrospectively for £399 through BMW’s website. Similarly, a heated steering wheel will cost customers £200 in the UK and NZ$350 in New Zealand or they can opt for a subscription—for three years (£150, NZ$250), annually (£100, NZ$250) or monthly (£10, NZ$20).

This is not the first time BMW has ventured into the software-as-a-service (SaaS) domain. It first steered into this sector in 2019 when it decided to charge $80 per year or $300 for a 240-month subscription to use Apple CarPlay, a feature many owners consider essential and one that even the cheapest cars provide for free.

Mumbai-based Jaya Khanna, a Mercedes-Benz car owner, however, is reluctant to pay for features like live traffic information, remote engine start through an app or online voice control if such services came to India. “I can always use Google Maps for route planning or predictive navigation. Why would I pay additional fees for this or other services?” she questions. “I have already paid a premium for a high-end car. So, the hardware and the software under the bonnet and within the car should belong to me,” Khanna asserts.

SaaS Pioneers of Auto

BMW is far from being the first auto company to offer paid subscription services. OnStar Corporation, a subsidiary of General Motors (GM), has been providing subscription-based communications, in-vehicle security, emergency services, hands-free calling, turn-by-turn navigation and remote diagnostics systems for over two decades in the US, Canada, China, Mexico, Europe, Brazil and Argentina.