Automakers Could Face Backlash With Subscription Services

Offbeat / 17 Comments

A new study says customers are interested in subscriptions but OEMs may have a hard time making money.

Automakers are constantly researching ways to make money and subscription services are already one source, but there may not be as much profit as they think due to customers being unaware. A newly released study from Cox Automotive has some interesting findings regarding customer awareness of automakers offering these so-called features on demand.

Premium brands like BMW and Mercedes have already tried to begin offering customers these features with varying degrees of success. Even Toyota said the 2020 Supra will only offer free Apple CarPlay for the first four years before deciding whether to charge a subscription fee. So, what can automakers and customers alike learn from the study? Quite a few things.

A total of 2,000 in-market new-vehicle shoppers were surveyed last December and January to get a better understanding of their interest in subscription services. The study also aimed to uncover "consumer benefits and barriers" for Features on Demand (FoD). The results are, shall we say, interesting.

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"Our initial research indicates that the transition to Features on Demand will be an uphill battle for many automakers," said Vanessa Ton, senior manager of market and customer research at Cox Automotive. "In the market right now, there is low consumer awareness and some skepticism on the part of shoppers. To gain consumer acceptance, automakers must ensure consumers perceive subscription-based features as a good value and not just a money-grab." The data speaks for itself: just 21% of new vehicle shoppers are aware of FoD, and 41% said they're interested.

The plus side is that customers see some benefits to this model because it'll allow them to try out certain features before deciding whether to keep them or not. Think of it as a sort of try-before-you-buy approach. Customers also see FoD as a way to upgrade their existing vehicles with new tech without necessarily having to buy a new car. But the most important takeaway automakers must note is that this group of consumers view FoD as a way for new vehicles to have lower starting prices.

On the flip side, 58% think the FoD method is too expensive and there are data security and privacy issues.

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Sixty-nine percent said that if some features are only offered via subscription, they'll shop the competition. There could be a middle-ground solution, however. Sixty-five percent indicated that a free trial period would make them happy. Still, this is new ground for automakers who must approach it carefully.

"As consumer familiarity is low, automakers will have to be careful in how they present an FoD strategy and make sure not to turn off shoppers from the start," added Ton. "Our research suggests that free trial periods might be one way to approach the issue. Automakers, however, still have a big task ahead of them: convincing consumers of the value proposition FoD offers. Companies will need to steer away from mandates and instead ease consumers into features they can access by offering free trials on safety and convenience options."

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