Back To Top

In-car subscription service could be more profitable than selling new cars

Tesla’s Premium Connectivity offers navigation, live traffic visualization, video and music streaming and an internet browser together at a monthly cost of $9.99. (Tesla)
Tesla’s Premium Connectivity offers navigation, live traffic visualization, video and music streaming and an internet browser together at a monthly cost of $9.99. (Tesla)

The market for in-car subscription services such as high-end functions like autonomous driving and entertainment systems could be more profitable than selling new cars for carmakers, market data showed Monday, illustrating reason why major carmakers are moving to develop their own software and in-car programs.

According to the Korea Automotive Technology Institute (KATECH) report, the world’s top 11 finished carmakers and EV maker Tesla have garnered an average of $109 billion of their annual sales from 2019 to 2021 by selling new models. 

But compared with figures calculated by KATECH on their profit coming from selling in-car subscription service to customers such as autonomous driving and connected car features, they could make $118 billion each year, even only when just 30 percent of them choose to run in-car subscription services.

KATECH said they have calculated based on some 1.5 billion cars run globally as of 2019 and Tesla’s prices of full self-driving subscription at $199 and its connectivity program at $10.

“Global carmakers have been searching for the so-called sweet spot in the subscription service to boost both customers and the company’s usefulness in terms of connectivity programs,” said Chang Dae-seok, a researcher at KATECH.

“While drivers can reduce the economic burden of using high-end connectivity functionalities, they can flexibly opt for customized preferences, while the carmakers can also prevent customers jumping ship at relatively low cost,” said Chang.

Global carmakers have recently announced their penetration into the in-car subscription service market, following market pioneer Tesla.

Tesla drivers can receive advanced driver assistance features at $199 per month. The carmaker also offers navigation, live traffic visualization, video and music streaming and internet browser package program called Premium Connectivity at a monthly subscription of $9.99 or in an annual subscription of $99. 

General Motors also announced in October that it would penetrate the subscription and connectivity service-based business to create new profit, unveiling Ultra Cruise, an advanced driver-assistance technology which will be available based on subscription from 2023.

Hyundai Motor offers a subscription program called Bluelink for up to three years at no charge. (Hyundai Motor Group)
Hyundai Motor offers a subscription program called Bluelink for up to three years at no charge. (Hyundai Motor Group)

Hyundai Motor currently runs connected car service application called Bluelink, a complimentary option for up to three years. Bluelink offers navigation, music streaming, remote control and vehicle management. 

While the Korean carmaker’s service is quite limited to in-car infotainment programs which can be updated wireless via Over The Air (OTA) software updates, German carmaker Mercedes-Benz has been test-operating its functionality subscription service which offers option to unlock rear-wheel steering as a subscription service in EQS models for an annual fee of 489 euros since July. 

“While the in-car subscription is largely restricted to digital contents options, such as music streaming, the market will expand to embrace larger contents markets such as games and video streaming, along with the advancement of autonomous driving and connectivity technology to nurture their own knowhow on OTA and integrated OS development,” said Chang. 

But he added that such market’s future expansion and success really relies on customer acceptance.

“As customers see a wide variety of subscriptions available to them, their level of expectation for their in-car subscription will be high, and if carmakers include vehicle’s safety features as part of subscription program, it may be perceived negatively,” he said.

By Kim Da-sol (ddd@heraldcorp.com)
MOST POPULAR
LATEST NEWS
leadersclub
Korea Herald daum
subscribe