Once upon a time, car buyers knew exactly what they were getting when they drove off the lot. Today, the auto industry is taking a page from the tech world, introducing subscription-based features, including heated seats, advanced driving aids, and infotainment systems. But what works in SaaS doesn’t necessarily translate to steering wheels and gear shifts.
For many consumers, these subscription models feel like a cash grab—turning features that were once standard into recurring expenses. Worse, they’re eroding trust, alienating customers, and threatening long-term loyalty.
The rise of subscription-based features
Automakers see subscription models as the future of revenue growth, especially as the industry transitions to EVs, where profit margins are tighter than traditional internal combustion engine (ICE) vehicles.
A lucrative revenue stream
Subscriptions enable automakers to monetize features long after the vehicle has been sold.
- Example: BMW offers heated seats in some markets as a subscription for $18 per month, instead of including them as a standard feature.
- Revenue potential: McKinsey projects that vehicle software and subscription services could generate $20 billion annually by 2030.
The tech influence
Inspired by SaaS models, automakers are bundling software updates, driver-assistance systems, and even performance boosts into subscriptions.
- Tesla's model: Tesla offers features like Full Self-Driving (FSD) on a subscription basis, allowing customers to access advanced functionality without a one-time purchase.
The backlash: why consumers feel betrayed
Although automakers see subscriptions as innovative, many consumers view them as exploitative.
Paying twice for the same features
Most subscription-based features rely on hardware already installed in the car. Customers feel like they’re being charged twice: once for the vehicle itself and again for the features that hardware enables.
- Consumer sentiment: A Cox Automotive survey found that safety features had the highest satisfaction among subscribers and comfort features, such as heated seats and steering wheels, had the lowest.
Eroding brand trust
Subscriptions undermine the perception of value, especially for premium brands.
- Example: When Mercedes introduced a $1,200 annual subscription to unlock faster acceleration in its EVs, social media backlash was swift, with many accusing the company of greed.
Alienating traditional buyers
For older or less tech-savvy buyers, subscriptions create unnecessary complexity and recurring financial burdens.
- Impact: These buyers may look to brands that offer more transparent and straightforward pricing.
Why subscription models could hurt automakers in the long term
Short-term revenue gains from subscriptions may come at the expense of customer loyalty and brand equity.
Churn in the automotive world
Unlike SaaS, where churn is an accepted cost of business, automakers rely on long-term relationships with customers who return for future purchases.
- Insight: Alienating buyers with subscription fatigue risks pushing them toward competitors or alternative mobility solutions, such as rideshare and car-sharing services.
A barrier to EV adoption
With many automakers introducing subscription-based features exclusively for EVs, they risk slowing adoption among skeptical consumers.
- Example: Buyers who feel nickel-and-dimed for EV features may stick with gas-powered cars longer than they otherwise would.
What automakers need to do to regain trust
The automotive industry must rethink its approach to subscriptions, focusing on transparency, value, and customer-centric innovation.
Offer true value, not forced fees
Subscriptions should enhance the ownership experience, not gatekeep essential features.
- Pro tip: Provide free trials or tiered pricing models to help consumers understand the value of optional features before committing.
Clearly differentiate standard and premium features
Avoid bundling features customers expect as standard into subscription models.
- Actionable step: Focus on offering truly optional add-ons, like advanced software upgrades, rather than seat heaters and other basic comforts.
Communicate honestly and transparently
Educate consumers about the cost structure and benefits of subscriptions to mitigate backlash.
- Example: Tesla’s approach of allowing buyers to pay upfront or subscribe monthly for FSD offers flexibility without forcing adoption.
A turning point for automakers
Subscription models are reshaping the automotive industry, but not necessarily for the better. If automakers continue to prioritize short-term revenue over customer satisfaction, they risk alienating buyers and damaging brand loyalty.
The challenge is clear: Create subscription offerings that genuinely enhance the driving experience without exploiting consumers’ wallets. The brands that get it right will drive trust and loyalty in an industry increasingly defined by change.
