How the subscription economy has impacted the auto industry

Yahoo Finance’s Pras Subramanian details the ways in which automakers are incorporating subscription packages to their cars, including customers paying additional fees for bonus features in vehicles.

Video Transcript

SEANA SMITH: Auto makers taking a page out of Netflix’s playbook looking to charge buyers monthly subscription fees– you heard that right– for add-ons like navigation for hands free driving. But drivers, they’re not necessarily having it. Pras Subramanian is here with the latest on that, Pras?

PRAS SUBRAMANIAN: Hey Seana, good to see you. So yeah, big auto here trying to go big tech, right? Wanting to get those juicy subscription services– those fees. You know, we’re seeing that with some options like full self-driving on Teslas and Super Cruise on GM. You know and that makes sense because not everyone is using those features all the time.

But CarPlay, infotainment options, even seat heating– those are where consumers are, sort of, drawing the line. We saw some new data from Cox Automotive about how a whopping 75% of consumers don’t want to pay for these add-ons or these items they think that they actually bought with their car.

In most cases, the car actually has these physical items in the car but automakers are making you pay money to actually turn them on. So a couple of instances BMW famously tried to get people pay a yearly fee for CarPlay– something a lot of automakers actually offer for free. So many people– so many people were so upset about that BMW backed down, they took away that fee. But this hasn’t stopped them from thinking about actually adding fees for seat heating where– perhaps in the South where you wouldn’t necessarily need that.

And if you actually drove to North, maybe you’d want to activate that feature. But I think a lot of people think that’s, sort of, not exactly kind of what they had in mind when they bought a car or cars these days. New cars cost $46,000– around that level. So, you know, you’re paying for a new car plus maintenance. And then, maybe some options here.

So, you know, GM is betting some like $20 billion and $25 billion on these additional subscription revenues and fees. It’s a lot of money. It’s not nothing. So this battle, I guess, will take place between car buyers and car manufacturers on the showroom floors coming up this fall.

All right, indeed it. Will Senior autos reporter, Pras Subramanian. Thank you, my friend. Good to see you.