BMW USA Talks Function on Demand Subscriptions (i.e. Heated Seats) - Updated

[TheBingoBalls]

Can anyone in the markets that have this model tell us if the price of the cars have changed? If a base car was $50,000, what is that car priced today? If it's the same or very close adjusting for price/inflation MY over MY, then I could care less. I'm still going to build a factory order the way I always do and if BMW throws all the hardware to be enabled later, could care less if the price remains in line.

[chrisk03]

"You'll own nothing and like it..." -Klaus Schwab (German and WEF scumbag...its ok, I'm half German). Perfect, as they've already been training the younger generations to get hooked on "subscriptions" like Amazon Prime, Apple whatever, Netflix, FitchStix, etc. Auto manufacturers have already hinted/tested car subscriptions and with electronics/batteries being forced, it will be a lot easier to control you once ownership goes bye-bye. Wait until BMW turns your car off because although you paid the subscription(s), your social credit score was below acceptable for the month...because you ate too much red meat. 😜 Let the 2030 fun begin!

Off to buy a 90's/00 BMW on BAT...and get off my lawn! Burp! 🍻

[Quadruple VANOS]

Personally I don't really buy used vehicles, but wouldn't the people who do love this?

[Coi]

I can explain why this is worse for customers, and it mostly comes down to leases.

A huge number of BMWs are leased, over 2/3 in fact. Most of those leases are for 36 months. BMW is carefully offering a 3 year subscription option for about 75% of the price of "unlimited". People leasing new cars will always go for the 3 year subscription instead of unlimited to "save money". However, a typical lease residual is about 50%, so people leasing are now paying more for options than should be. One-and-a-half times as much, in fact. This is first problem.

On top of this, now all the people buying these off-lease cars from the BMW dealership will have to pay full-price for these options all over again. The optional equipment should be depreciated with the rest of the car. (In fact, options usually depreciate faster than the rest of the car because loaded used cars loose value faster than basic ones.) Now though, second owners will now have to pay new-car prices for optional features on a used car. This is the second problem. Dealers should hate this because it will hurt resale values and residuals.

As an example:

Say you leased a 2021 BMW where heated seats were a £350 option. Over the term of your lease you're effectively paying £175 for that feature (50% residual).
For a subscription on a 2023+ BMW you're now paying £250 for a 3 year subscription to heated seats. On top of this, the person buying the car after your lease ends will have to pay £350 for an "unlimited" subscription to heated seats on a used car.

If you add in all the good features (heated seats, heated steering wheel, driving assistant plus, and high beam assistant) the total cost for the person leasing the car should be £750 (at 50% residual). Now they'll now have to pay £1100 for 3 year subscriptions to all of them, an extra £350 for the exact same functionality as before. If the next owner wants all these features they'll have to fork £1500 to BMW to enable them all on a used car. These options should be depreciated but they're not.

This change will likely hurt resale values of lightly-used BMWs because a huge number of them will have all their options disabled with the leases end. This will make residuals go down and lease rates go up. On top of this, the older the car gets the more disproportionate the cost of the "unlimited" features seem. Like once the car is 6+ years old it shouldn't cost £1500 to get the options you want.

This is why it is a big deal and why I will personally not be buying or leasing a new BMW. They're trying to make an extra 75% profit off options on leased cars while providing nothing of value at all to customers.

[bayarea328xit]

Originally Posted by MachinesWithSouls

What they propose here is, you can buy the car. You can own the hardware for those cooled seats. But no matter how much you pay us, you'll never own the software to make them work. If you ever stop paying for it, we won't let you use them.

From BMW: "With BMW Functions on Demand, customers will be able to explore new software-based features on a short-term basis by purchasing a trial, or buying that feature outright for a period of time or for the life of the vehicle."

They are providing you 3 options after the initial purchase is made: (1) trial, (2) rent - "period of time", or (3) own - "for the life of the vehicle."

You are simply wrong about the "if you ever stop paying for it" -- maybe if you did not option your car with the $300 heated seats, they will charge you $350 for the "own" option for the feature after you purchased the car. That's fair -- you made the mistake of not ordering it and changed your mind after the fact.

Now if the base price creeps up because they are passing on the cost of these "included" but not enabled features - that's a different story. Everyone should vote with their wallet - go buy something else. BMW will look at sales and decide how much pain the consumer is willing to take with this model. They are a business - their goal is to make money off of you. Nothing new there.

[bayarea328xit]

Originally Posted by Coi

I can explain why this is worse for customers, and it mostly comes down to leases.

A huge number of BMWs are leased, over 2/3 in fact. Most of those leases are for 36 months. BMW is carefully offering a 3 year subscription option for about 75% of the price of "unlimited". People leasing new cars will always go for the 3 year subscription instead of unlimited to "save money". However, a typical lease residual is about 50%, so people leasing are now paying more for options than should be. One-and-a-half times as much, in fact. This is first problem.

On top of this, now all the people buying these off-lease cars from the BMW dealership will have to pay full-price for these options all over again. The optional equipment should be depreciated with the rest of the car. (In fact, options usually depreciate faster than the rest of the car because loaded used cars loose value faster than basic ones.) Now though, second owners will now have to pay new-car prices for optional features on a used car. This is the second problem. Dealers should hate this because it will hurt resale values and residuals.

As an example:

Say you leased a 2021 BMW where heated seats were a £350 option. Over the term of your lease you're effectively paying £175 for that feature (50% residual).
For a subscription on a 2023+ BMW you're now paying £250 for a 3 year subscription to heated seats. On top of this, the person buying the car after your lease ends will have to pay £350 for an "unlimited" subscription to heated seats on a used car.

If you add in all the good features (heated seats, heated steering wheel, driving assistant plus, and high beam assistant) the total cost for the person leasing the car should be £750 (at 50% residual). Now they'll now have to pay £1100 for 3 year subscriptions to all of them, an extra £350 for the exact same functionality as before. If the next owner wants all these features they'll have to fork £1500 to BMW to enable them all on a used car. These options should be depreciated but they're not.

This change will likely hurt resale values of lightly-used BMWs because a huge number of them will have all their options disabled with the leases end. This will make residuals go down and lease rates go up. On top of this, the older the car gets the more disproportionate the cost of the "unlimited" features seem. Like once the car is 6+ years old it shouldn't cost £1500 to get the options you want.

This is why it is a big deal and why I will personally not be buying or leasing a new BMW. They're trying to make an extra 75% profit off options on leased cars while providing nothing of value at all to customers.

This is a big issue - lease residuals could get killed if they reset each model to the base configuration at the end of the lease. The purchaser of the end-of-lease model has to pay to enable these features - maybe at a discounted price (if they are lucky).

BMW leases a lot of vehicles; they have to see what they can get away with at the end of the lease. I suspect that buying off-lease vehicles will be more expensive. The lower residual will push up the leasing costs - not sure if the original leasing party will care if their lease cost goes up 5-10%. BMW is going to do the math to maximize their profits. Again, nothing wrong there.

[bayarea328xit]

Originally Posted by P1

Let me make it simpler to understand: imagine you're having a spec home built. You are paying for a 3/2 but the builder put in an additional third bathroom. But you can't use this bathroom. Only if someone decided to pay an additional monthly fee at some point in the future.

Somewhat silly, no?

Like I mentioned in another thread, a subscription makes sense if a service is actively being provided. But paying for a static option? Greedy.

In your example, assuming the builder is building many similar homes, the builder has to keep two lengths of lumber in stock for the build - one for bathroom present and one for the bathroom not present. By building the bathroom every time, the builder saves some cost. If they do not increase your price, why would you be upset? You didn't want the bathroom, right?

[88noodles]

This trend is basically what Tesla does with their autopilot. You can buy it out right for a set price or buy a subscription. All the cameras and functions to enable autopilot are standard. Software allows drivers to use the hardeare.

I do think starting with heated seat is distasteful and a bad PR move by BMW. Makes you wonder what else they're going nickel and dime. Come on... At least start with lane departure BMW.

[TimmyBHGM5]

Originally Posted by Tag

That's not how I read it. My understanding for the NA market was if you buy a car with an option there are no subscription fees. If the car isn't purchased with an option, you can purchase a trial (so long as it can be activated via software) of a feature and if you like it you can then buy it outright, without a subscription.

No, lifetime is just a different subscription option, eg. sub 1 month for $20, or 5years for $500, or lifetime for $1000

[NOGBMW]

Originally Posted by Fenerbahce

Damage is already done from PR perspective.

Exactly. It's tone deaf nickel and diming at best. I expected more class from BMW

[hotrod182]

Down load more HP for the i4 like Tesla offers for around $2000. Give me 70 more HP for the M50 and I will gladly pay $2000.

[mkizzo]

Originally Posted by MachinesWithSouls

But It's actually easier for them to build every BMW with heated seats (as an example), then turn the option on for a monthly fee. It makes total financial sense to do it this way, especially as cars become more and more like mobile computers with batteries. Pay to unlock more power, turn on heated seats, Safety features, etc. Phones work this way already.

Appreciate your insight but I don't believe it's possible to add in all the necessary components for "optional extras" into every vehicle without huge costs for BMW. Currently it's about 10-20k extra to load a BMW…in the hope that users will unlock some features in the future? That puts all the risk on BMW which will never happen. Plus they will need huge investments to prevent people from decoding features and bypassing their software locks. So expect huge price increases across the board, for both vehicles and subscription costs.

The irony is that it will also open them up to lawsuits for anti competitive behaviour. Just like phone manufacturers have seen when locking consumers into their services. EU should have a field day with this.

EDIT: It also raises the question if it was easier and more economical to build cars with all the features why the hell have BMW been stinging consumers for stuff like split folding rear seats!

[xmanpro]

Wish BMW would launch a proper vehicle subscription model for the actual cars instead of this.

[(K)]

I can understand a subscription for services such as satellite radio, real time traffic, concierge, emergency roadside assistance, etc. Those are all value-added, supplementary functions to an existing system. Heated seats are none of the above.*Maybe* heated seats with adjustable heat zones and temperatures I can see as a subscription enabled service, not the heat function itself.

They're trying to teeter the line of value-added service and absolutely faceplanted with this one.

[G30 B58]

With supply chain issues, they can hardly build cars now with elected / purchased features. Imagine trying to build every car w/ every option.

[Westside Guy]

MachinesWithSouls, Siri's XM is a separate company and if you want to listen to their stations after the first year teaser that is up to you. Otherwise the radio in the car still works and this is no different than paying for a premium channel like HBO, Showtime, etc. with your cable TV provider. If you don't want those premium channels you can still watch the basic channel lineup. All of the functionality of your TV is still there.

This is totally different than the subscription approach that BMW is trying to push on the car's features like heated seats, heated steering wheel, etc.

[MachinesWithSouls]

Originally Posted by Westside Guy

MachinesWithSouls, Siri's XM is a separate company and if you want to listen to their stations after the first year teaser that is up to you. Otherwise the radio in the car still works and this is no different than paying for a premium channel like HBO, Showtime, etc. with your cable TV provider. If you don't want those premium channels you can still watch the basic channel lineup. All of the functionality of your TV is still there.

This is totally different than the subscription approach that BMW is trying to push on the car's features like heated seats, heated steering wheel, etc.

Why is it any different? You paid for the satellite receiver in your car. But unless you keep your subscription, it's useless. Does it matter who's collecting the bill?

You purchase a TV with the understanding that you must pay for subscription services. But Samsung doesn't charge you to turn on the TV itself. That's what BMW is planning to do.

[MachinesWithSouls]

Originally Posted by mkizzo

Appreciate your insight but I don't believe it's possible to add in all the necessary components for "optional extras" into every vehicle without huge costs for BMW. Currently it's about 10-20k extra to load a BMW…in the hope that users will unlock some features in the future? That puts all the risk on BMW which will never happen. Plus they will need huge investments to prevent people from decoding features and bypassing their software locks. So expect huge price increases across the board, for both vehicles and subscription costs.

The irony is that it will also open them up to lawsuits for anti competitive behaviour. Just like phone manufacturers have seen when locking consumers into their services. EU should have a field day with this.

EDIT: It also raises the question if it was easier and more economical to build cars with all the features why the hell have BMW been stinging consumers for stuff like split folding rear seats!

You make a good point, but allow me to point out 3 things.

1 - BMW just raised the base price of every car, some by up to 4K. That's for zero added value in the car itself. So they have no issue with randomly changing pricing.

2 - Let's say it costs you $300 for heated seats, and it costs BMW $150 to put it in each car. If they purchased more seat heaters, the cost per unit goes down, I'm sure you know this. But they also gain a huge advantage on the production line. It's not just the seat itself, but different dash boards, wiring, etc. producing every car to the same spec would make things much more efficient and cost effective.

3- this forum does not represent the typical BMW buyer. If 10% of owners manage to crack iDrive, it would probably still work out for bmw. But grandma Tilly isn't going to the local tuner shop for heated seats. She'd rather pay.

I'm not saying they will go this way, but it's not hard to envision a future in which they do.

[rwemersonrw]

Yep we will definitely paying for air soon.

[Teutonic]

I never thought I will read something like this.
Cheap much?

Another nail in BMWs coffin?

[Quadruple VANOS]

Isn't this akin to airlines charging a fee to provide Internet or access while on their flight? The plane already has the hardware and we pay an additional fee to access it (or not).

[Westside Guy]

Originally Posted by Quadruple VANOS

Isn't this akin to airlines charging a fee to provide Internet or access while on their flight? The plane already has the hardware and we pay an additional fee to access it (or not).

You don't own the airplane, you are simply paying for the ticket.