BMW offering Heated Seats, Adaptive Cruise Control as Monthly Subscription in S.Korea

[murderspice]

Originally Posted by Coi

If the vehicle is off warranty you'd have no way of knowing if any of these features are even functional until you purchase them or start paying the subscription. They could all be broken and you wouldn't even know.

Oh, im sure there will be 50 dashboard lights to “remind” you that this and that arent working; meaning, if you are like me and hate having cel’s, you will have to pay not to have a dash rife with warning lights.

[zx10guy]

Originally Posted by P1

Just wait until they start charging a monthly fee for performance.

Nice M5 Competition. Oh, you want more than 100 hp? That'll be $500 per extra 200 hp.

You mean the good ol' Cisco subscription model?

[wtwo3]

Originally Posted by Coi

You seriously wouldn't be surprised if a car company could make every single car fully loaded and have it cost them less money? Surely if this was the case one of them would have discovered this secret to success excepting a subscription model.

Looking at examples, for the last few years Porsche has the highest margins of any major automotive brand with the most customizability and no trim levels. Every model has literally millions of possible configurations. They make most of their profit from SUVs that are only slightly more expensive than those from other German luxury brands. If shipping, logistics, and supply chain mattered more than material and parts costs then they should be loosing tons of money. Clearly that's not the case. Maybe Porsche also saves money by not installing costly equipment on every vehicle. I personally dislike their pricing model too, but it clearly works.

Genesis has only a few trim levels and almost no a la carte options on any of their models. Being part of Hyundai, they're also extremely vertically and horizontally integrated even doing their own shipping and in some cases their own raw materials. Their pricing is nearly in line with Audi and BMW now and even with new cars currently having barely any manufacturer incentives Genesis is barely turning a profit. We don't need insider to data to see that there's more to profitability in the automotive industry than sourcing, transportation, distribution, and production line simplicity.



BMW made 433,810 vehicles in 2021. They're already operating at a scale where things like LTL and parcel are not even considered. Nearly every part they make is produced in the tens of thousands, hundreds of thousands, or even millions. The following numbers are examples, but if they go from ordering 100,000 adaptive cruise radars to 400,000 adaptive cruise radars they're not going to suddenly see a dramatic decrease in cost simply from volume. Increases in efficiency for a company of that size that come from improvements in engineering, technology, and logistics rather than scale.

A basic principle of an economies of scale graph is that it doesn't just keep going down forever. Eventually you reach constant returns where the price levels out. After that it's diseconomies of scale where supply is overwhelmed and the cost per unit starts to go up again. This is true for everything. We've seen countless times in the last couple years that big supply chains can clearly get overwhelmed at which point it makes sense to cut features and reprioritize. There's no way every single part BMW manufacturers or orders is still in economies of scale in terms of manufacturing and installation.



You also have to consider that outside of enthusiasts the idea of paying $5000 for a different color car is insane. I am personally quite willing to compromise on color so I don't really get it either. Even if individual colors are hugely profitable it doesn't make sense for them to spend money advertising something that barely anyone is going to get. Also my local dealership has a huge wall display for BMW individual so it's not that much of a secret.

I really don't see how it could be justified that BMW equipping cars with every feature then blocking them behind a subscription could possibly reduce prices for consumers. I also can't think of any industry at all where the most profitable company only sells a single variant of their product, so for that to be true for something as complex and expensive as cars seems farfetched. This is clearly a cash grab and not some amazing achievement in efficiency that no other automaker in the history of mass production has ever thought of. I think this unbecoming and anti-consumer behavior from a so-called luxury brand should be called out, not defended.

On a side note, I really don't want to come across as rude or anything because I'm enjoying this discussion! You bring up a lot of points I didn't fully consider.

Correct I wouldn't be surprised, only because I've seen it before in other industries. But again I'm not saying it WILL be cheaper, just saying I wouldn't be surprised. I think you're getting hung up on the "cheaper" part, so let's also add to that statement I wouldn't be surprised if it was similar cost, or only a slight increase in cost. Where I would be surprised is if it was a significant cost increase.

In terms of other car companies having already offered something like this if it was actually lower cost - the novelty here isn't adding every option to every car - the novelty here is subscription based services which justify offering every option on every car. Otherwise there's no point if you're going to be offering customers pricing tiers based on various packages (like what most companies do today). You have to consider the output side as well. In regards to Porsche - I have to disagree with them only being "slightly" more expensive I cross shopped a Cayenne with my X5 - and similarly equipped, the Porsche was over $20k more. That doesn't fit my definition of "slight" lol. And I'd argue my loaded X5 has a much nicer interior with nicer quality materials than the comparable Cayenne (but that's a discussion for another time). Perhaps in their base, bare-bones models they don't cost significantly more than the other Germans, but a base X5 will have more standard equipment than a base Cayenne. If there was only a "slight" difference in price, you wouldn't see BMW selling 3 times as many X5s as Porsche sells Cayennes.

Also keep in mind - BMW is the top automaker in the world when it comes to supply chain based on Gartners top 25 best supply chain companies. BMW is the only automaker on that top 25 list. So if anyone figures something like this out first, it would probably be BMW - so perhaps this is them figuring it out first?

You see this often in supply chain... the business comes with the novelty and the supply chain is asked to cash the check which the business wrote. The problem is if supply chain determines there's a significant cost increase to offering something, it then puts the ball back in the business's court to offer up a counter break-even analysis. So when I say insider data - I'm talking about those discussions BMW's having. I can envision it - supply chain at BMW coming back with various scenarios - fully optimized supply chain with optimal sourcing, transportation, distribution - taking advantage of a steady stream of product - and a sub-optimal supply chain where the cost rises because they continue operating based on their current model, but add more product to it.

The other thing I think is important to consider is not just the added demand, but that the forecast of individual skus is now tied to the forecast of their main product at a 1:1 basis. Rather than have a separate forecast for each category of part - which comes with its own set of forecast biases and errors - you're now tied to the main product which is the car itself. So it's not just that adding more product means you can better utilize your transportation and distribution network - you can better utilize it because your flow of product is now much more predictable with less error. This also has positive impacts on inventory planning. You're eliminating layers of forecasting which simplifies your entire planning process.

As for the volume they do - I don't think you can make a broad generalization to say because they sell 400k cars they're already operating at an efficient scale for all parts. There's a few issues here:

First - truck utilization is measured in two ways - volume (cubic inches or centimeters), or weight (lbs or kg) - based on whether they believe the truck will "cube out" or "weigh out". This determination is based on the attributes of what's being shipped - if it's just one part then we can say, is it a large part or a heavy part? If it's a large part then we can say it'll cube out before it weighs out for example. But without knowing the attributes of all parts being shipped, and in what volumes they're being shipped, we can't make the blanket statement that they're probably already maximizing usage of their distribution/transportation network.

Second - with multiple vendors shipping to multiple production plants around the world, likely with multiple touchpoints across the upstream network, it's a complicated web, so your volumes may not be as concentrated and as simple as saying, "we already sell so many cars, we're already maximizing use of all our transportation methods". I'm sure BMW has a state of the art TMS system which helps them enhance their network, but TMS systems can only go so far.


I do agree this is a cash-grab from BMW - but I don't believe they would have approved this decision if it blew up their supply chain costs, especially for a company with a world-class supply chain like BMW. And I say that because I've seen these internal struggles play out. Contrary to what us consumers believe - high volume companies don't like to increase their pricing - because that puts them at a competitive disadvantage (typically - you'd have to get into price elasticity of demand for various industries). They typically increase their pricing out of necessity, not because of a self-inflicted decision. Companies also don't love decreasing their pricing (promotional pricing is separate). Ideally they prefer to keep their pricing as static as possible, adjusted for inflation. And you see this in the automotive industry - car pricing adjusted for inflation has stayed relatively stable over the decades, barring some exceptions. So the vast majority of the margin improvements happen due to internal efficiency gains.

In this case - I think BMW is directly targeting, and trying to convert, customers who are on the fence about certain products. This enables them to "try it out" for a month rather than pay full price for it. They're banking on that conversion rate generating additional revenue.

From my own perspective? I typically order my cars nearly fully loaded anyway, but I do see application where I only access heated seats/steering wheel in the winter months. I'd have to do my own break-even analysis to determine how many seasons of doing that could I do before it costs the same as just paying full price for the option outright, but I see some potential there if I don't keep my car longer than say, 5 years for example. Another - radar based cruise control - I don't have a daily commute since I work remote, but it's a godsend for long road trips. So perhaps I only purchase a monthly subscription for a month where I know I'm going on a trip. That's just me trying to see how I can benefit from the system. I'm always looking for ways it benefits me.

[wtwo3]

Originally Posted by Coi

On a side note, I really don't want to come across as rude or anything because I'm enjoying this discussion! You bring up a lot of points I didn't fully consider.

Absolutely - for whatever reason many of these discussions devolve into name calling Most people aren't looking to learn from a healthy discussion, they're just trying to win an argument. So always refreshing when views are respected.

[tracer bullet]

They tried this before, stopped, and are of course trying again. They aren't / won't be the only company. It's the dumbest thing I've ever heard of but I'm going to predict that it's the future whether we like it or not.

[themnmd]

https://www.reddit.com/r/nottheonion...m_source=share

Just read this. I will not pay for heated seats

[heavyD^2]

You bought a car with seat heaters and it feels criminal that the auto manufacturer could enable/disable them via remote software based on paying a monthly or annual fee. This isn't a service like satellite radio where you are paying for continuous new content or software revisions. This is hardware that's already installed in your car that does not require any sort of software upkeep. I feel this is going way too far.

[dutchm2]

Originally Posted by its55

A really dumb idea that only serves to hurt the brand image.

I've to agree with your statement

[shawnhayes]

Originally Posted by wtwo3

Absolutely - for whatever reason many of these discussions devolve into name calling Most people aren't looking to learn from a healthy discussion, they're just trying to win an argument. So always refreshing when views are respected.

It's what these should be about. Learning stuff. Otherwise why waste your time?

That being said, BOO BMW. BOOO, hiss. Shaame on you.

Shawn

[pikkagtr]

Originally Posted by heavyD^2

You bought a car with seat heaters and it feels criminal that the auto manufacturer could enable/disable them via remote software based on paying a monthly or annual fee. This isn't a service like satellite radio where you are paying for continuous new content or software revisions. This is hardware that's already installed in your car that does not require any sort of software upkeep. I feel this is going way too far.

Let me introduce you to Tesla autopilot and extended range

[TheMidnightNarwhal]

Originally Posted by heavyD^2

You bought a car with seat heaters and it feels criminal that the auto manufacturer could enable/disable them via remote software based on paying a monthly or annual fee. This isn't a service like satellite radio where you are paying for continuous new content or software revisions. This is hardware that's already installed in your car that does not require any sort of software upkeep. I feel this is going way too far.

Exactly. It's just capitalistic tendencies. Like, they find the way to make the most money out of things and this is the most profitable way so they will push for it. If it racks them more money than out then it's what they will do.

I hope it doesn't goes to this but for me anyways, all the cars I want are already out and will only be affordable for me in 10 years.

[shawnhayes]

Originally Posted by heavyD^2

You bought a car with seat heaters and it feels criminal that the auto manufacturer could enable/disable them via remote software based on paying a monthly or annual fee. This isn't a service like satellite radio where you are paying for continuous new content or software revisions. This is hardware that's already installed in your car that does not require any sort of software upkeep. I feel this is going way too far.

If they do this, there WILL be an aftermarket of hackers who will enable the features for a fee, and block BMW from being able to disable them.

Betcha.

But let's hope they don't try to pull it here, and Korea gives them the middle finger on it.

Shawn

[tubingchamp]

I guess the cars that don't have "subscription locked" options will hold better resale values...............

[Pauldunlop13]

this is a terrible idea
BUT
this way you could just pay for them from Oct-March and not all the other months

still a terrible idea...

[heavyD^2]

Originally Posted by pikkagtr

Let me introduce you to Tesla autopilot and extended range

Autopilot is that rare, unexplained phenomena where people are willing to fork over thousands of dollars for vaporware. There's no logical explanation as to why masses of people would do that but they do because enough people can't see through Elon's smoke and mirrors act. I don't think that is repeatable for any other automaker.

[tracer bullet]

Yeah, auto-pilot is sort of crowdfunding a thing that might come out and work someday, maybe. OK, it's obviously farther and better than that, but for autopilot I see the additional fee making sense. It's a big-deal feature, something very difficult and cost-worthy to work out, not everyone wants this thing that's big and expensive, and so on.

Heated seats are - damned things are already there, everything is there. You are paying to use something that's currently on the car which you (thought that) you already purchased. Or leased, as the case may be.

[Equilibrandt]

Anyone making any assumption on the price to 'have cruise control radar standard' vs the price of a factory doing 'one car configuration' is purely guessing.

How much does each radar cost? How much does each plant's supply line, techs, and robots cost? How many robots or assembly lines would be simplified or completely omitted because there's only one 3 series configuration, with radar?

Pure guessing on where the price balance lies. In my head, if the cheapest Honda can come with factory adaptive cruise control, it's probably cheaper to make all 3 series with ACC and get rid of a few million (billion?) dollar robots at every BMW plant in the world.

But that's pure conjecture.

[Capt Canuck]

It beggars belied that anyone can think this is a good thing.

Recurring revenue is a huge huge plus for companies and for car manufacturers this is a great (for them) untapped revenue source.

For consumers it's s h i t on a stick, but we can already see here the 'yeah more small payments - they never add up to anything really do they' crowd actually warming to it
This is only bad for car owners.

[Brigitte]

Originally Posted by Coi

A lot will change. The cost for BMW will go up since they will be paying to put cruise control radars, heating coils, and cameras in every car. They'll have to make more money to cover this cost as well as make a profit. The money to cover the increased manufacturing cost will have to come from consumers. This could mean hundreds if not thousands more per car. It's simply impossible for either prices or ownership cost to not go up under the subscription model.

Yeah, people will readjust how used cars are appraised in that values will go down. Right now my X3 M40i with a bunch of options is worth more on the used market because when the next owner gets it they know they'll have adaptive cruise, heated seats, heated steering wheel, auto parking, heads-up display, premium sound system etc. Under the subscription model not only would I have paid for those features but my trade-in or resale value will be the same as a base model car with no options whatsoever. BMW is making more money by charging the next owner to unlock stuff already on the car and I'd be loosing out.

A loaded car that should be worth $50k with all the features enabled will now be priced as $45k base-model used car. Lower resale will also hurt lease residuals. That's money straight out of the pockets of people buying new BMWs and into the pockets of BMW corporate.

Exactly...it's like buying an expensive loaded model...but sell it later at the price of a used base-model. That's a huge loss for the consumer!

[dutchm2]

Originally Posted by themnmd

https://www.reddit.com/r/nottheonion...m_source=share

Just read this. I will not pay for heated seats

It just sound weird right

[dutchm2]

Originally Posted by pikkagtr

Let me introduce you to Tesla autopilot and extended range

It's absolutely crazy! Can maybe we also share our own seat heats with others?

BMW is now selling subscriptions for heated seats in a number of countries — the latest example of the company’s adoption of microtransactions for high-end car features.

A monthly subscription to heat your BMW’s front seats costs roughly $18, with options to subscribe for a year ($180), three years ($300), or pay for “unlimited” access for $415.

[G30M]

https://www.bmw.co.nz/en/shop/ls/cp/connected-drive

https://www.bmwblog.com/2022/07/12/b...-more-options/

Bye bye BMW