What Connected-car Services Are Consumers Willing To Pay For?

Republished By Plato

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Car-shoppers are largely satisfied with
subscription-based infotainment services, but value and exposure
matter most. Data security and privacy remain issues.

Want to create a social-media firestorm? Announce that popular
in-car features will require a subscription – on top of what people
already are paying for the vehicle. General Motors and BMW have
recently sparked controversy by announcing efforts to grow
subscription-based products and services in future vehicles – which
reportedly weren’t
greeted well by consumers.

But here’s the rub: The perceived outrage doesn’t match reality.
Once consumers experience connected services, they are
overwhelmingly satisfied and likely to resubscribe, according to a
recent global consumer survey of nearly 8,000 consumers conducted by
S&P Global Mobility.

“Consumers are welcoming to the idea of subscriptions, because
it gives them exposure to features or technology that they may not
have had in the past,” said Yanina Mills, senior technical research
analyst at S&P Global Mobility.

In a subset of about 4,500 respondents who had experienced a
free trial or an existing subscription on a model year 2016 vehicle
or newer, 82% said they would definitely or probably consider purchasing
subscription-based services on a future new vehicle purchase.

Exposure sells subscriptions

Fumbled introductions are one thing. Selling subscriptions in the
here and now is another. More than one in four respondents – 28% to
be exact – either did not know that connected services were
available, and/or noted the dealer did not offer (or even mention)
them. Improving education at point-of-sale is essential for
category growth.

In-vehicle exposure is even better than education for growing
demand and fostering satisfaction and retention with these services
and brands. 45% of respondents had the service activated at the
dealership, typically as part of a free trial period. That improves
the odds of growing subscribers. “It’s all a matter of exposure,”
Mills said.

That’s because,
once exposed, consumers are pretty happy with their connected
services subscriptions. The vast majority of previous-subscriber
respondents said they were likely to renew. Satisfaction is high as
well, as 85% of respondents would recommend their service to a
friend. Among individual brands, Audi Connect and BMW
ConnectedDrive consistently perform well, scoring high in most
global markets for the third survey year in a row.

So, how could OEMs do better in rolling out new connected ideas?
When it comes to subscription-based connected services, Mills says, “Marketing is everything. Implementation is everything.”

In GM’s case, they touted the benefits of their new infotainment
system, to be found in its next generation of EVs. According to the
automaker, GM wishes to “manage the overall in-vehicle experience
in a more holistic way.” A major goal is to “reduce complexity and
feature duplication,” eliminating the redundancy between native
onboard infotainment and the customer’s smartphone.

But that came with a big tradeoff: Getting rid of the Apple
CarPlay and Android Auto user interfaces. The media focused on that
detail, in terms of erasing any of the new infotainment system’s
advantages. After
all, these very popular smartphone mirroring apps come standard on
almost every new
vehicle today.

Fanni Li, connected car services research lead at S&P Global
Mobility, says that GM is quite aggressive in this area, but warns
that making the change could risk GM customer satisfaction. Also at
stake: GM’s desire to generate $20 to $25 billion yearly through subscription
services by 2030.

Subscriptions need to add value

So, how to get it right? Paid functional upgrades have been
available in the market for only about three years. Despite that
short timeframe,
more than half of respondents already want such an upgrade in their
next vehicle.

But not all subscription-based upgrades are created equal.
Enhanced navigation and advanced driver-assist system (ADAS)
functionality top the desirability list. “For a lot of those
features, when you buy them in full at the dealership, the initial
investment is overwhelming,” according to Mills. A subscription
brings their cost into reach.

As seen in previous S&P Global Mobility consumer surveys,
safety features prove very popular – although there are differences
in appeal by region. For instance, at a country level, Brazil
respondents have the lowest threshold for price points for paid
updates in all subscription schemes, while Japan respondents
reported the highest threshold for pricing they’d be willing to pay for the
same updates, closely followed by the UK.

But there are some pan-global trends worthy of note. Paid
upgrade safety features, such as high-beam assist and driving-video
recorder, earned the highest satisfaction – 89% – of all connected
services. Likewise, navigation and safety/security features were
the ones most desired in respondents’ next vehicles.

Less expensive comfort features, such as heated seats and a
heated steering wheel, prove less popular for subscriptions.
Compared to more novel and higher-priced technology features, these
less-expensive options have less perceived value when structured as
a subscription – especially when they have long been available as
standard on upper-trim models. As Mills notes, “When everything
becomes a subscription, it becomes overkill.”

Getting heated over seats

BMW may have crossed that line with their expansion of connected
services. Many observers boiled down the complex model- and
market-specific program to one common theme – surprisingly charging
owners to use heated seats that were already installed in their
cars.

S&P Global Mobility survey data suggests, however, that this
furor was a tempest in a teapot. Fewer than 30% of survey
respondents are willing to pay for heated seats or a heated
steering wheel by monthly subscription, anyway. Value-wise, these
features are relatively affordable to buy in a single
payment, reducing the need to spread out payments over a
subscription.

“The frequency of usage is an important factor,” Mills observed. “If you have a feature that you only use once or twice, you’re not
going to renew that feature.” Using heated seats or a heated
steering wheel is very climate-dependent, so usage can vary by
season.

Smartphone vs Native

While ADAS functionality or heated seats can’t be provided by
smartphones, many infotainment services are. And consumers are
accustomed to using their smartphone for navigation and
entertainment features – from maps to music to hands-free
texting.

As consumers pare down their subscriptions, features that are
redundant between the vehicle and the phone likely are the first to go – and the
smartphone almost
always wins. S&P Mobility found that Gen Z and Millennial
respondents are most likely to drop connected-services
subscriptions because of similar services on their smartphones.

GM’s elimination of Apple CarPlay and Android Auto takes the
smartphone out of the equation. This could improve their odds of gaining and
retaining subscriptions. But given that 89% of current
connected-services subscribers resubscribe anyway, the potential
modest increase in subscriptions isn’t the primary reason for GM
going native. GM sees an opportunity in consumer usage data.

“GM cannot get consumers’ usage data from the infotainment
system if users only connect via third party apps like Apple
CarPlay and Android Auto,” Li said. “Having this data on their own
will become one of the competitive advantages for OEMs.”

Privacy and Trust

But when it comes to vehicle data usage, Mills says, “It’s a
delicate balance for automakers.” While accessing consumer data
also improves features like EV-specific routing and range
estimates, consumers are concerned about data privacy. 37% of
respondents worry about security issues, while 32% fail to
understand the value that a connected service would provide from
the shared data.

Turns out the best way to win over consumers is to give them
something for free. 74% of respondents are willing to share data in
exchange for free services, with Gen Z and Millennials being the
most (80%) likely. Again, there are regional differences: Consumers
living in Japan are the most reluctant, with just 58% being willing
to share data for free services, whereas 90% of consumers in India
are willing to make that exchange.

But who do consumers trust with their data? OEMs are the most
trusted, with 31% of consumers feeling comfortable with them.
That’s higher than the trust level associated with technology
companies (23%). The difference in trust likely stems from how much data is
available to each respective entity. As Mills notes, for
automakers, “That amount of data is limited. It doesn’t go to the
depth of where your personal devices go.”

In other words, your smartphone apps already know far more about
you than your SUV likely ever will.

Subscription-based connected services provide great potential
for OEMs. High consumer satisfaction and renewal rates show that
buyers are willing to subscribe. But proper marketing and
implementation are essential for success, especially regarding
concerns of value and data privacy.

(Disclosure: The survey was in the field in March – well after BMW
had been involved in the heated-seat issue, but before GM had
announced its plans for a new native architecture designed around
offering connected car services)

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.