Car Companies Want You to Keep Paying For Features You Already Have

Back in the day, car companies made money by selling cars and financing those car purchases. Now, automakers plan to make even more money by selling subscriptions and software updates to cars that have already been sold, perhaps even for features people expect cars to have. Brace yourselves now for this nickel-and-diming future.

Automakers have been fairly explicit that they see “Software as a Service,” as it is known in business speak, as a significant earner to make back some of the billions of dollars they invest in electric and autonomous vehicle development. Stellantis, the parent company of Jeep, Dodge, and Chrysler, said last week during its “Software Day” presentation it expects to generate $22.5 billion from software and subscription sales alone. Volkswagen, General Motors, and Ford have made similar projections. 

The automakers frame this as an exciting new revenue stream to get investors excited while giving customers greater choice about what features they pay for. But it is a lot of dressed up marketing verbiage that means they’re going to charge you more than once for the same product.

This approach is not entirely new to the car world. Many automakers have been charging extra to use app-based functions through phones for years, features that most people can and do ignore. But, recently, automakers have been testing the waters on expanding these subscription-based features. For example, Toyota is now charging $80 a year for people who bought their cars years ago to keep using the remote start function on their key fobs, claiming the first several years were merely a “free trial period.” 

But the big play here is not going to be the $80-a-year stuff for marginal features like remote start. Instead, it will be performance, range, and perhaps even safety upgrades to electric vehicles that make the actual car better at being a car. These were upgrades that were difficult or impossible to engineer with gas cars, but are relatively trivial for electric ones. The goal, from the automakers’ perspective, will be getting people to pay for the same thing multiple times as often as possible. 

This strategy is taking its cue from Tesla, which calls over-the-air upgrades “an essential part of the Tesla ownership experience.” Tesla has offered all kinds of over-the-air upgrades, both free software updates and paid ones. For example, Tesla charges thousands of dollars extra for its Autopilot and FSD Beta driver assist systems. This makes some sense, as developing these systems costs a lot of extra money that is a separate line of business from making electric cars. For people who don’t want Autopilot, they don’t have to pay for it.

But there is another type of over-the-air upgrade that makes a lot less sense for the consumer. These are upgrades that make the car better at being a car. For example, a long range Model 3 with dual motors is capable of accelerating from 0-60 mph in 3.9 seconds. But when you buy the car, it has a 0-60 time of 4.4 seconds. Owners must pay another $2,000 to unlock that extra half a second. (Some enterprising folks hacked their way around that paywall, but then Tesla blocked and reversed the hack.) And for years Tesla sold Model S and X vehicles with the same 75 kWh battery but software-locked them to 60 and 70 kWh unless the owners paid an additional $3,000 for the extra 30 or 40 miles of range. In at least one instance, Tesla temporarily unlocked that range during evacuation emergencies like hurricanes. 

Another way of putting this is Tesla builds cars to meet certain specifications but paywalls the top end of that performance. This is fundamentally different from developing a separate line of business around a software package, because the cost of delivering this performance is in the physical characteristics of the car, something the customer has already purchased. It is a subtle but important difference, akin to buying a house with the extra bathroom and bedroom padlocked until you pony up.

Naturally, other car companies like the idea of making customers pay twice for things. Polestar, an electric vehicle company spun off from Volvo, is going to charge an extra $1,000 or so for a slight increase in horsepower and torque just like Tesla does. 

For the paywalled EV performance features sold via software update, car companies are simply double-dipping. If you buy a car with a 75 kWh battery pack, you’re paying for a 75 kWh battery pack. And then, should an owner choose to unlock that extra range, they pay for it again.

Perhaps the most worrying aspect of this future is the implications for what it means to actually own a car. It is strange to think about having a car with 15 kWh of battery underneath your feet that you simply cannot use because it’s behind a paywall. If that’s the case, then what features of the car does someone truly own? What aspects of a car can never go behind a paywall? These are questions that we—or, more likely, federal regulators—will probably have to ask sooner rather than later.