Will ‘connected cars’ persuade drivers to pay for a premium ride?

OWhen a customer said he drove through three US states, from Texas to North Carolina, to get his car repaired, Tesla repairman Jason Hughes knew something had to happen. It turned out to be an unusual problem: the Model S had lost a third of its range in an instant while parked in a driveway.

One of the US electric carmaker’s main selling points is that it is constantly connected to its vehicles via mobile networks, offering software updates and entertainment downloads “over the air”, or OTA. This remote connection could be revolutionary for the industry, opening the door to downloading self-driving features and live streaming of high-definition TV shows. But the connected car has starting problems.

It was the second time Tesla engineers had called one of Hughes’ customers after the interview to say they had corrected an “error” in the car’s setup. This time he had reset the vehicle to its original range of 60kWh (about 215 miles), a big drop from the 90kWh (over 300 miles) its battery was able to keep up with warranty repairs a few years back. previously. Tesla wanted $4,500 to bring the car back to longer range, in what was dubbed a battery ransom.

Tesla on a spectacular road
A new Tesla has a battery range of over 300 miles – or may have. Photography: AP

“They were rightfully outraged,” said Hughes, owner of auto service company 057 Technology, 60 miles from Charlotte, North Carolina. “If it’s sitting in your driveway, I don’t think anyone should be allowed to mess with it.”

The automaker, who didn’t respond to a request for comment, finally brought the car back to the longer range after Hughes posted his experience on social media, but that’s just the latest example of the unnerving control that consumers now have to give in to tech companies. . What is given OTA can be withdrawn OTA.

Tesla is by no means the only automaker to antagonize potential buyers with features (the kind available at no upfront cost on a smartphone) that can be taken away if you don’t pay your dues. Mercedes-Benz charges £19 a year to be able to access a to-do list and calendar via the dashboard. Volkswagen is charging £590 for the late model navigation upgrade.

These are software downloads, but a subscription-like “microtransaction” model is also creeping into the hardware of cars. BMW has started offering heated seats for £15 a month in the UK: the technology is installed but only usable if paid for in advance or monthly. This month’s reveal drew a barrage of incredulous reporting.

“Heated seats make everyone laugh, but there’s a logic to it,” said Philippe Houchois, automotive analyst at investment bank Jefferies. It’s a way for automakers to “try to get more recurring revenue and options from customers.”

For Tesla, this model – similar to the Razor and Razor Blade subscription systems – promises to be lucrative: in late June it claimed to have $2.7 billion in “deferred revenue” from software upgrades in his books. Analysts expect that to rise as its self-driving software improves. By 2023, half of the top 10 automakers will offer unlocks and capability upgrades through software updates that drivers purchase after vehicle purchase, according to research firm Gartner.

Apple iPhone 7
Apple was fined for software that deliberately slowed down older iPhones. Photography: Régis Duvignau/Reuters

Car owners aren’t the only consumers learning that software can be tricky unlike hardware, either. In 2017, Apple admitted that its software slowed the performance of older iPhones. He said the design was aimed at saving battery life, but critics said it was an example of “planned obsolescence” – artificially shortening a device’s lifespan to entice buyers to upgrade sooner. In 2009, Amazon provided a perfect metaphor for the potentially dystopian implications of the subscription economy when, without warning, it revoked copies of George Orwell’s novel. One thousand nine hundred and eighty four of all its Kindle e-readers.

Marketing information on BMW’s online store suggests users also have to pay for potentially life-saving features such as automatic braking if a pedestrian enters the road. In response to the Observerthe automaker hastily stated that the online description was incorrect and that safety features were standard on all vehicles.

But with more and more automakers starting to charge for self-driving capabilities – which may or may not already be safer than human driving – the scenario for paid safety features isn’t entirely far-fetched. Insurers could then refuse to cover drivers who choose not to pay for technology that reduces accidents.

BMW, which also tried in 2019 to persuade users to pay $80 a year for the privilege of connecting iPhones via Apple CarPlay, says remote upgrades are a benefit to consumers. “It provides the ability to add select features that they didn’t order when building the vehicle,” a spokesperson said. “This is especially useful for secondary owners, as they have the ability to add features that the original owner didn’t choose.”

Then there is the manufacturing logic. Automakers are very good at building tens or hundreds of thousands of identical, high-performance products, but every spec change for different models costs money. Installing technology like heating elements in every car seat and recharging to activate them later might end up costing less for a high-end manufacturer, even though many have gone unused.

“It works as long as what they offer is unique, which is rare in automotive,” Houchois said. If rival Mercedes-Benz were to make the option standard, BMW would have to follow suit.

Wasi Rizvi of equity research firm Redburn said it would be “interesting to see how consumers react to charging for a service where the hardware has already been installed and there is no obvious additional cost. for automakers.

Iain Litchfield, owner of Litchfield Motors, a Gloucestershire-based company that offers performance upgrades, said manufacturers have long had secretly limited capabilities, such as faster engine performance. Under the new business model, automakers will have the power to turn off upgrades again instantly.

There would be a “game of cat and mouse,” Litchfield said, as automakers tried to push the boundaries of what owners would be willing to pay. “If they’re constantly checking your car…it’s not really yours,” he added. “Nobody wants Big Brother watching you all the time.”

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