ADAS & Autonomous Vehicle Engineering - July 2023 - 3

The Navigator
The subscriptions are coming for your wallet
It's probable that the global market for new
vehicles is becoming saturated and is unlikely to
grow much past 100 million sales annually. Despite
that, the automotive market remains one of the
most competitive in the world and the transition
to EVs has brought more new players to the field
in the past decade than in much of the industry's
history. With more entries fighting for a slice of
the pie, automakers need to find new opportunities
for growth. Getting customers to pay for
subscriptions long after they purchase a vehicle
is seen as a key pathway.
The problem for automakers is finding things
that customers actually will be willing to pay for
in perpetuity. As with many things
in the past decade, Tesla has been
at the bleeding edge of enticing
customers to pay for subscriptions.
One of the key examples is
its $200-per-month subscription
option for " Full Self-Driving. " It's
unknown how many of the several
hundred thousand FSD customers
have opted for the subscription
rather than FSD's $15,000 one-time
fee. Given that FSD doesn't provide
actual full automation, it would
make much more sense to go for
the subscription than the purchase.
At an October 2021 investor
GM currently
generates
for several years with the concept, first trying to
get vehicle owners to pay $80 per year for Apple
Carplay and more recently experimenting in some
markets with monthly subscriptions for heated
seats and steering wheels. The problem is that over
the past several years, we've all been bombarded
with more and more subscription demands for
streaming music and TV, our mobile connectivity
and anything else entrepreneurs can conjure.
But recently, even some of the most popular TV
services such as Netflix and Disney+ have strugabout
$2 billion
annually from
connected
vehicles and
hopes its new
Ultifi software
platform will
enable at least
10X more.
presentation, GM targeted $20-25
billion in new annual revenues from software
and services derived from 30 million connected
vehicles; that's about $833 annually per vehicle.
Most other automakers have recently made similar
pronouncements. GM currently generates about
$2 billion annually from connected vehicles and
hopes its new Ultifi software platform will enable
at least 10X more.
For what, exactly, are consumers going to
be willing to pay? BMW has been experimenting
gled to hang on to subscribers. Is it the start of
" subscription fatigue? "
Automakers will have to offer something with a
substantially compelling value proposition
in order to pad the bottom line
as they have proclaimed to investors.
A key part of that will be showing a
willingness to reduce sticker prices in
exchange for getting payments for
on-demand features.
Following Tesla's lead with
enhanced Autopilot and FSD, Ford
recently reduced the price of all
trims of the Mustang Mach-E. In
exchange, the previously standard
BlueCruise hardware for hands-off
assisted driving now is included on all
vehicles for a three-month trial. After
that, customers can get three years
of service for $2100 or pay $800 per
year, equating to nearly the incremental revenue for
which GM is aiming. After shuttering Argo AI, Ford
hired more than 550 of its engineers for Latitude
AI to develop an eyes-off SAE Level 3 ADAS that it
hopes will generate even more revenue.
The days are drawing to a close of ticking
items on the options list when buying a new
vehicle and paying just once for those features.
Will consumers come along for the ride? We'll
soon know. ■
Sam Abuelsamid
Principal Analyst,
eMobility
Guidehouse Insights
sam.abuelsamid@
guidehouse.com
ADAS & AUTONOMOUS VEHICLE ENGINEERING
July 2023 3
ADAS & Autonomous Vehicle Engineering - July 2023

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