BMW Bets the Fuss Over Its Heated-Seat Subscriptions Will Pass

[Tag]

The carmaker still has high hopes for selling digital services to drivers.

ByStefan Nicola and Wilfried Eckl-Dorna
August 4, 2022 at 7:35 AM CDT
From Hyperdrive

The auto industry is having its horse armor moment.

BMW has taken flak for weeks after beginning to sell owners in certain markets subscriptions to heat their seats. The backlash has been reminiscent of the initial recoiling in the gaming industry in the early 2000s, when Maryland-based developer Bethesda began squeezing more money out of customers who’d purchased the latest version of The Elder Scrolls, one if its most popular series. Gamers were nonplussed about paying $2.50 to put unprotective shields on their player’s equine. The phrase horse armor became shorthand for useless or overpriced downloadable content.

Controversial as this was, gamers bought and bought some more. Today, micro-transactions are a staple of the gaming industry, generating billions of dollars of extra revenue and profit.

BMW is betting the maelstrom over its heated-seat subscriptions shall pass. Some of the fuss had to do with a database mistake in South Korea, where seat-heating is standard in new BMWs and therefore wouldn’t need unlocking. Drivers there who got the offer to subscribe to the functionality anyway were understandably fuming. The company apologized, quickly fixed the issue and has clarified that customers in other markets who’ve paid for seat-heating when buying their BMWs won’t have to repay for it.

The automaker will, however, stick with its strategy to offer certain services reliant on hardware built into its vehicles for a fee, a spokesman said. In the UK, for example, owners can pay £15 ($18) to warm their bottoms for one month, £150 for a year or £250 for three years. Unlimited seat-heating costs £350.

BMW sees these sorts of services becoming serious revenue generators, eyeing some €5 billion in sales this decade from its digital offerings.

And it isn’t alone. Over-the-air software updates for cars that were pioneered by Tesla years ago hold the promise of a financial relationship with customers extending beyond the point of sale. Stellantis is targeting €20 billion of extra revenue from software-driven features in its vehicles by the end of the decade. Volkswagen has been on a software-talent hiring binge and has a pay-as-you-go model in mind.

BMW says its micro-transaction strategy offers greater flexibility. Customers can activate a feature like seat-heating only during the winter, or upgrade a used BMW that didn’t have the functionality when it was first purchased. Drivers can also test out offerings in its ConnectedDrive store before deciding to purchase them either temporarily or for good. In the future, the carmaker envisions allowing customers to unlock entertainment or higher drivetrain performance, even just for single trips.

“We know from our customers that their mobility demands are not as static as they used to be,” BMW spokesman Torsten Julich said.

That may be so, but the bad press BMW has gotten nevertheless shows the perils of presenting new digital services without careful explanation. The company has been through this before, getting grief for briefly offering Apple’s CarPlay on a subscription basis in 2019 before backing off. It was skewered last year merely for evaluating the heated seat as a service idea, then went ahead with it anyway.

Tesla hasn’t been perfect, having charged hefty amounts for driver-assistance features that haven’t lived up to their billing. But the electric-car maker has gotten a lot right in this domain. Owners routinely turn on their car to find it was updated for free since they last slipped into the driver’s seat. Some of these features have been silly — fart noises, for example — but others have seriously enhanced performance. When Amazon increases the price of a Prime membership, it largely doesn’t faze consumers because the company is constantly adding new movies, music, e-books and more.

It’s clear BMW and its peers have more to learn about what customers are willing to pay for, and what they should get for free after having made what is typically a consumer’s the second-most costly purchase, after a home.

Source: https://www.bloomberg.com/news/artic...ions-will-pass

[Blue87]

Oh wow! I have no problem going back to Audi or any other brand that isn't doing this. Last I read, this was in Korea or somewhere aside the US. I don't believe most people will be okay with this.

[allinon72]

Look around, everything is subscription based or moving in that direction. Pick the industry or product of your choice. It isn't going away, you can only hope to delay the inevitable. You'll own nothing and like it. It's just as much about control as it is profits.

[Westside Guy]

My wallet will dictate where my next purchase will be if BMW is foolish enough to push this approach in the US.

[Germanauto]

BMW is correct. A lot of people lash out online, yet when push comes to shove people still end up forking over their cash to BMW.

Poorly tuned EPS, heavy curb weights, brand dilution, M badges on everything, mom car CUVs, ugly grilles, now a subscription model. Yet BMW continues to sell more cars than ever. Just look at this forum, how many of the naysayers actually went and bought a car from a different manufacturer?

[Tag]

Originally Posted by Germanauto

BMW is correct. A lot of people lash out online, yet when push comes to shove people still end up forking over their cash to BMW.

Poorly tuned EPS, brand dilution, M badges on everything, mom car CUVs, ugly grilles, now a subscription model. Yet BMW continues to sell more cars than ever. Just look at this forum. How many of the naysayers actually went and bought a car from a different manufacturer?

I've seen a lot of members jump ship in the past several years, it's a real thing. I also wouldn't count on recent sales figures. Practically every car manufacturer has been having phenomenal sales due to lack of supply and high demand. Once the market stabilizes, you'll see BMW sales drop off a cliff.

You may be right about most people just putting up with it after lashing out, but I'm in the other camp. Push me too far and it's adiós muchacho!

[Germanauto]

Originally Posted by Tag

I've seen a lot of members jump ship in the past several years, it's a real thing. I also wouldn't count on recent sales figures. Practically every car manufacturer has been having phenomenal sales due to lack of supply and high demand. Once the market stabilizes, you'll see BMW sales drop off a cliff.

You may be right about most people just putting up with it after lashing out, but I'm in the other camp. Push me too far and it's adiós muchachos!

I don't think BMWs sales will suffer, at least not more than any other manufacturer. Everything I pointed out that a subset of enthusiasts dislike are actually positives for the general populace. Everybody I know who drives a BMW is not a car enthusiast but is actually a BMW brand enthusiast. BMW knows what it's doing with this subscription model. The more mass market they have gone and the more ///Marketing they do, the more they prosper.

[Blue87]

Originally Posted by allinon72

Look around, everything is subscription based or moving in that direction. Pick the industry or product of your choice. It isn't going away, you can only hope to delay the inevitable. You'll own nothing and like it. It's just as much about control as it is profits.

Paying a subscription fee to apply power to a feature that is internal and doesn't require any external input to operate is completely overboard. I understand satellite radio, traffic inputs for navigation etc, but can't ethically get behind with paying subscription to heat/ventilate seats, turn on head lights or whatever else they might have in store. I'm sure many will consider going elsewhere.

However, I do agree with the above statement regarding many BMW drivers being breand enthusiast or for the perceived prestige, which most likely why there are so many base model bimmers at dealerships. I imagine those drivers won't mind it since they will mostly likely not pay the fees.

[kyriian]

To be fair, most of the new BMW buyers today lease their cars just to have the prestige

15 GBP/month, for 6 months/year, spread over 4 years is 360 GBP, just 10 quid more than buying it for life.

[JustinHEMI]

Yeah, no, they're wrong.

[tracer bullet]

Originally Posted by Germanauto

Poorly tuned EPS, heavy curb weights, brand dilution, M badges on everything, mom car CUVs, ugly grilles, now a subscription model. Yet BMW continues to sell more cars than ever.

Yes, but - without these things they may have sold even more. We'll of course never know. I'd like it if they kept a car or two around without this baggage. It's not looking good.

[Westside Guy]

Originally Posted by Blue87

Paying a subscription fee to apply power to a feature that is internal and doesn't require any external input to operate is completely overboard. I understand satellite radio, traffic inputs for navigation etc, but can't ethically get behind with paying subscription to heat/ventilate seats, turn on head lights or whatever else they might have in store. I'm sure many will consider going elsewhere.

IMHO, the only thing worse than paying a subscription for heated seats would be an airline charging you to use the lavatory! 💩

[Darth One]

They might ultimately be betting right. Tough to say, but if this takes root, everyone who bought into it is part of the problem.

I find it interesting that the article references the gaming industry. That is absolutely the worst case scenario here. Going from a model where you pay $50 for the entire game, to spending in some cases tens of thousands of dollars to stay competitive while playing…

[zx10guy]

Originally Posted by Darth One

They might ultimately be betting right. Tough to say, but if this takes root, everyone who bought into it is part of the problem.

I find it interesting that the article references the gaming industry. That is absolutely the worst case scenario here. Going from a model where you pay $50 for the entire game, to spending in some cases tens of thousands of dollars to stay competitive while playing…

This whole thing started well before what I consider the ruining of the gaming industry with consoles and the pay for everything model. This all started with music and video. Look at how everyone has been conditioned to pay for content they don't really own nor have control over. iTunes has been a total scourge to the consumer that people mindless just jumped on the bandwagon.

People may piss and moan about this but I doubt anyone is going to really stand up to this. Toyota is looking into this subscription model.

[chad86tsi]

Looking at options lists, $350 for heated seats is a normal kind of option and price to pay to either buy or not buy said option.

Now, if you want, they are proposing that you can still buy "unlimited" heated seats, or you can skip it, get the car, and later pay $18 to "try it out" or $350 to "permanently upgrade", or even somewhere in between.

Seems to me this doesn't actually cost more, it's just adding flexibility to the product for the buyer.

I spent ~4 months finding my M760i, mostly because I had a specific options list that didn't get build on most cars, and you can't retrofit or "upgrade later" on most of these options.

Given the choice such as this, it may also improve resale value for sellers, and make buyers better able to get what they want.

[Darth One]

Originally Posted by zx10guy

This whole thing started well before what I consider the ruining of the gaming industry with consoles and the pay for everything model. This all started with music and video. Look at how everyone has been conditioned to pay for content they don't really own nor have control over. iTunes has been a total scourge to the consumer that people mindless just jumped on the bandwagon.

People may piss and moan about this but I doubt anyone is going to really stand up to this. Toyota is looking into this subscription model.

Yep. I responded to this by quitting video games entirely. So I guess I stood up to the industry, but who cares - I'm a pebble in a stream.

I don't think i can quit cars, but I'll try my best to resist somehow. If the rest of humanity submits to this model, then it will be futile. I'm already there with my smartphone, because there really is no choice.

[tracer bullet]

Originally Posted by chad86tsi

Seems to me this doesn't actually cost more, it's just adding flexibility to the product for the buyer.

I'm willing to bet the car is already a few hundred dollars more expensive off the lot simply because the heaters are in those seats. Their materials, construction, shipment to the seat factory, installation in those seats, and so on isn't free. Even without using them, you've paid for them.

I get updates to maps, things like that, that are ongoing work for a car company. Heated seats are already installed, already ready to go, you've already paid for them, you're just being charged extra to use them.

It is in no way at all a cool thing that makes sense.

[MSlv]

I have some questions about this system that I haven’t seen anywhere discussed.

What if I want to activate some subscriptions when the car is out of warranty and discover that something is not working? Like with heated seats, the backrest is not heating, or the whole seat even? Or let’s say I have option to activate 360 view, and left side camera is blank, no picture. Or wireless charging subscription feature is not working after activation, or high beam assist sensor not working properly, or radar for active cruise control failure, or whatever they will think of?

If I had the option from the beginning I would most likely have discovered during warranty that something is not working and have it repaired free of charge, but now is too late. Am I paying for the repair of said features? Will BMW just reimburse me and deactivate the features and we would each continue with our lives like nothing happened?

Will they rigorously check all hardware features during service and repair any defects even if said features don’t have active subscription?

Will BMW disclose to the owner any hardware replacement/repair that is not subject to active subscription and was not on the option list when car was ordered?

If I want to buy at the end of the lease, will BMW disclose any subscription features that won’t work due to hardware failure and reduce the price accordingly or just hide it and ask for the price based on options selected when ordered and leave it as a nice surprise later on when current or next owner tries to activate some feature?

On the flip side, let’s say some hardware for a non-optioned, non-subscribed feature is having a fault. Will I get a nagging notification on the dash or will it be hidden from the user? If hidden, when the car is in for service and they discover it, will it be scheduled for repair under warranty?

And if so, will they ask the owner to bring the car in for repair, of unwanted/unneeded hardware, on their own time and money? Or if the car is already in for oil service, will they potentially keep it an extra week or 2 at the service to wait for parts and/or available technicians? Mind you, in my country we don’t usually get a company car to use while ours is at the service center and have to pay ourselves for taxi home…

I don’t know, maybe it was made clear how the system works but at least I didn’t see any of the above questions addressed anywhere. And I believe they are relevant questions.

Bonus question: will BMW dealers be allowed to activate features not originally ordered when selling CPO cars to increase the asking price? And will they be permanent activations, per car, or only per owner, tied to connecteddrive account?

[zx10guy]

Originally Posted by tracer bullet

I'm willing to bet the car is already a few hundred dollars more expensive off the lot simply because the heaters are in those seats. Their materials, construction, shipment to the seat factory, installation in those seats, and so on isn't free. Even without using them, you've paid for them.

I get updates to maps, things like that, that are ongoing work for a car company. Heated seats are already installed, already ready to go, you've already paid for them, you're just being charged extra to use them.

It is in no way at all a cool thing that makes sense.

Bingo. And that's the strongest argument against this ridiculous model. Make no mistake about it, you're still paying for the added hardware that you may not want. Not only that, the environmental impact of producing hardware which in some cases not be used. Where is the outrage from the tree huggers?

Heat seats are a common enough thing where if you really wanted to "try" one out, it's called going for a test drive in a car on the lot which already has them. In many markets, it's probably harder to find a car without heated seats than with.

[wtwo3]

Originally Posted by tracer bullet

I'm willing to bet the car is already a few hundred dollars more expensive off the lot simply because the heaters are in those seats. Their materials, construction, shipment to the seat factory, installation in those seats, and so on isn't free. Even without using them, you've paid for them.

I get updates to maps, things like that, that are ongoing work for a car company. Heated seats are already installed, already ready to go, you've already paid for them, you're just being charged extra to use them.

It is in no way at all a cool thing that makes sense.

I'm willing to bet the opposite. I'm willing to bet the cars will be cheaper to manufacture. As someone who leads a supply chain optimization department, this is a dream come true from a manufacturing and distribution standpoint because of the cost savings associated with an optimized model, across ALL nodes of the supply chain.

This model benefits both parties - BMW and the consumer.

For BMW there's 2 main benefits here:

1) Optimized supply chain across all nodes of the network - from sourcing, distribution, inventory management, and even forecast accuracy - all brought on by minimizing production variation. It opens up a completely new realm of contract negotiations for the sourcing team, you're now better able to maximize truck utilization on the distribution side, inventory is much more predictable which enables better planning and lower cost, and your forecasts improve in accuracy due to the lower variation. ALL of this leads to minimizing cost and improved margins. So in reality, this shouldn't cost any extra for the consumer, and in some instances may even end up being cheaper.

2) BMW is banking on the "try before you buy" model to increase conversion rates of consumers that are on the fence for options. Consumers are more likely to fork over money for an option they can try out if they're unsure of its benefit prior to having tried out. In a static model as is today, most consumers in that situation are likely to skip out on the option and then that option remains outside of possibility for the life of the car (most options can't be retrofitted, at least not reasonably).

For consumers there's one BIG benefit which manifests itself in various ways: FLEXIBILITY
Certain options I can use seasonally (i.e. heated seats only in the winters). I'm free to do the break-even analysis to determine if paying for the lifetime subscription of that feature nets out cheaper or if paying for it seasonally over the course of however many years I plan to keep the car would be cheaper.

Then there's the try before you buy model which also benefits me as a consumer. Just look at any sub forum on here - there's usually a thread on if X feature is worth it or not. Well with this model that removes the ambiguity behind such a thing - I'll just simply try it out and if I don't like it or find it useful, I can rest easy knowing I didn't waste $X paying for that feature when ordering my car.

[wtwo3]

Originally Posted by Germanauto

Poorly tuned EPS, heavy curb weights, brand dilution, M badges on everything, mom car CUVs, ugly grilles

I'm with you on poorly tuned EPS... but I don't understand the other things.

Which of BMWs rivals are lower in curb weight? Take the M3 as an example... the RS5 and C63 are both heavier. The Giulia QV is similar in weight.

Which competitors don't have brand dilution and performance badging on everything? Audi has S line badging on everything and Mercedes has AMG badging on everything. Hell I can order a bargain basement A220 sedan with the amg line package...

Which competitor doesn't make mom car CUVs? Anywhere from a GLA 250 to Q3... Even Alfa's coming out with the Tonale

The ugly grilles is subjective so let's not even get into that lol

[///d]

Originally Posted by wtwo3

I'm willing to bet the opposite. I'm willing to bet the cars will be cheaper to manufacture. As someone who leads a supply chain optimization department, this is a dream come true from a manufacturing and distribution standpoint because of the cost savings associated with an optimized model, across ALL nodes of the supply chain.

This model benefits both parties - BMW and the consumer.

For BMW there's 2 main benefits here:

1) Optimized supply chain across all nodes of the network - from sourcing, distribution, inventory management, and even forecast accuracy - all brought on by minimizing production variation. It opens up a completely new realm of contract negotiations for the sourcing team, you're now better able to maximize truck utilization on the distribution side, inventory is much more predictable which enables better planning and lower cost, and your forecasts improve in accuracy due to the lower variation. ALL of this leads to minimizing cost and improved margins. So in reality, this shouldn't cost any extra for the consumer, and in some instances may even end up being cheaper.

2) BMW is banking on the "try before you buy" model to increase conversion rates of consumers that are on the fence for options. Consumers are more likely to fork over money for an option they can try out if they're unsure of its benefit prior to having tried out. In a static model as is today, most consumers in that situation are likely to skip out on the option and then that option remains outside of possibility for the life of the car (most options can't be retrofitted, at least not reasonably).

For consumers there's one BIG benefit which manifests itself in various ways: FLEXIBILITY
Certain options I can use seasonally (i.e. heated seats only in the winters). I'm free to do the break-even analysis to determine if paying for the lifetime subscription of that feature nets out cheaper or if paying for it seasonally over the course of however many years I plan to keep the car would be cheaper.

Then there's the try before you buy model which also benefits me as a consumer. Just look at any sub forum on here - there's usually a thread on if X feature is worth it or not. Well with this model that removes the ambiguity behind such a thing - I'll just simply try it out and if I don't like it or find it useful, I can rest easy knowing I didn't waste $X paying for that feature when ordering my car.

Bingo. It will probably cost BMW less to manufacture all vehicles with the same specs vs try to manage specific lines for specific features. Plus they will get more money from microtransactions worldwide vs what they may lose in manufacturing costs to put heaters in every vehicle. Now folks who may not have thought about heated seats have the chance to try it, and they will likely be sold on them.

My only issue is this, I've seen things state features like M Suspension are going to be subscription based as well. So now someone who has to replace suspension components has to deal with the cost and complexity of M Suspension when it's a feature they don't use or want.