BMW – Risk on.

Subscription features is a risk worth taking.

• BMW’s potential move to feature subscription has some problems but if this pushes BMW towards having a relationship with its users, it may well be a risk worth taking.
• This is very different from BMW’s idea of charging users extra to interact with its infotainment unit (see here), which it subsequently abandoned and instead focuses on items that are normally offered as options at the point of sale.
• The idea is to build features such as heated seats or adaptive cruise control into every vehicle and then offer them on a subscription basis after the vehicle has been sold.
• This would allow users to try the options before committing to them but also allow second owners to choose which options they want and those that they do not.
• This has two immediate benefits:
  • First, ship and remember: All OEMs who want to have any revenue from digital services (a must for long-term survival in my view (see here)) must begin to have a relationship with the users of its products.
  • To date OEMs (except Tesla) forget about a vehicle and its user the minute the vehicle leaves the factory.
  • A move to subscriptions for features will push users to have an account directly with BMW opening the door to a direct two-way communication and commercial relationship.
  • This, of course, assumes that BMW (like Sony has often done) does not decide that its interests are more important than those of its customers and enrages them with poor service and bad treatment.
  • The example of trying to charge drivers $80 a year to access CarPlay on BMW vehicles is a good example of just such a move.
  • Second, cheaper design and manufacturing: If this idea is rolled out widely, it means that BMW will be able to significantly reduce the number of variations that it has to produce of its vehicles.
  • More vehicles will be physically exactly the same with the optional extras being enabled by over the air permissioning improving volume-based savings and requiring fewer designs.
  • This is a very common strategy employed by consumer electronics companies and has also been used to good effect by Tesla.
• However, there is also a potential major problem with this strategy: namely unused options.
• Luxury vehicles have many options that almost all users never use or in many cases are not even aware of.
• Moving to subscription or pay to upgrade model will make users far more aware of whether the option is useful and push them to a decision on whether it is worth paying for or not.
• Hence, this model could easily lead to the average specification of vehicles declining markedly as drivers decline to pay up for the stuff that they never use.
• This could result in BW paying for a lot of components that sit in the vehicle and are never used and, worst of all, BMW never gets paid for.
• I see this as a significant risk but if this strategy is going to push BMW to have a proper relationship with its users, it is a risk worth taking.
• This is another sign (see here) that BMW may be beginning to see the light and is prepared to take some risks with its legacy business in order to secure its future.
• I am once again a little more hopeful but still not yet optimistic.