News ID : 1743
Publish Date : 28 January 2018 - 17:20
It may be easier to pick and choose optional services, but at what cost?
Khodrocar - The idea of being able to update your car’s infotainment system may have sounded like a good one when it was first introduced nearly a decade ago. Automakers gradually introduced upgradable operating systems and cars with Wi-Fi, with some like Tesla going so far as to introduce over-the-air updates to add features and improve system response times without owners ever having to visit the service department.

But with all of the convenience that brought, connected cars may change the way we pay for features in cars. Whereas there was often a base price and a list of optional equipment you could add to a new car, owners may have to pay monthly or yearly fees for more than just telematic services or satellite radio if they want to keep certain features. And the boundaries for what is and isn’t always standard with a car may not be entirely set.

BMW told The Verge last week at the Detroit Auto Show the company would make Apple CarPlay available through a subscription service beginning on its 2019 models. It would be included on new cars for the first year and then be available to owners for $80 per year, rather than the $300 one-time-charge it is now.

"This allows the customer to switch devices,” Don Smith, BMW North America’s technology product manager, said to us last week. "A lot of people buy [CarPlay] and think it’s okay, but sometimes they stop using it or switch to Android.”

On the face of it, the idea sounds like it gives customers the choice to try out an option before committing to pay for it — something those who paid extra for features such as heated seats or self-parking technology may appreciate. But at what cost? Customers who decide not to renew telematic service subscriptions such as OnStar, or SiriusXM radio, may not think their car is lacking a crucial feature. But what if it extends to more essential equipment?

"DRM-enabled software is the next wave of in-vehicle monetization, like BMW enabling Apple CarPlay,” Colin Bird, senior analyst at IHS Markit, says in an email. "This is possible due to growing production enablement of over-the-air update reprogramming. "Software based services like this are very lucrative to automakers because the margins are much higher in software.”

There’s a $6 billion market for these subscription services in cars by 2023, IHS predicts, with gross margins predicted in the 20-30 percent range compared to the new vehicle sales that can have practically no margins. Basically, it’s a win-win for automakers, using a model phone companies have used to get us to sign up for phone and data plans with the proliferation of smartphones, for example.

Bird says IHS already predicts there are 7 million vehicles on the road with "infotainment capable updates,” which include everything from upgradable in-dash navigation systems to apps that can be added to order your coffee, for example. And as every brand from Audi to Volvo adds Wi-Fi hotspots to cars and apps for parking and streaming music, are we entering a point where every car can have features appear and disappear whether or not you’ve added them to your monthly plan?
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