Automakers spent more than 100 years perfecting the science of the internal combustion-powered car. They know how to build them, market them, and sell them in huge volumes with massive profits. They know how to make them feel a certain way. Then, they know how to service them when they break, also for huge profits.
We are, right now, in the peak-profit phase of cars. Guess what? EVs are expensive to make. They don’t need as much service. Many of them largely drive the same. Profits are slim for most. What is an automaker to do? Subscriptions!
Automotive subscriptions are a classic example of bean counter-first thinking. Subscriptions are nice because they’re recurring revenue you can continue to book after you sold the car. (Side note: please become an Autopian member.)
The problem is… what’s worth actually subscribing to that you wouldn’t otherwise put on a car? We’re gonna explore that today, as well as talk about how Toyota, Volvo, and Penske are fairing in the late-ICE stage.
On The Mercedes ‘Performance Acceleration On-Demand Upgrade’
There are practical limits to how fast your electric car can go but, much like gas-powered cars, it’s rare that automakers give you 100% of the go-fast horsepower right off the dealer floor. This is why it’s still popular to “flash” ECUs on cars to try and squeeze extra power by adjusting various parameters. In theory, this is also possible with electric cars, which are primarily designed to optimize range over performance.
Mercedes just announced its plans to do exactly that, with the succinctly named: Performance Acceleration On-Demand Upgrade. (Editor’s Note: Or PAODU. I can’t wait for this to catch on at Cars and Coffee. “Say, what kinda PAODU you got?” -PG)
The full press release is here if you’re curious, though I shall summarize or quote the key parts:
Mercedes-Benz EQE and EQS customers in the North America can now opt for even more performance with the new Acceleration Increase On-Demand upgrade for select Sedan and SUV models. Optionally available as an Over-the-Air update, this new feature raises the vehicle’s output by up to 80 hp and improves acceleration from 0 to 60 mph by as much as a full second. It is available to customers in the Mercedes me connect Store with the option of a one-time purchase for the lifetime of the vehicle or the flexibility of monthly and yearly options.
Acceleration Increase is offered exclusively to Mercedes-Benz EQE 350 4MATIC and EQS 450 4MATIC Sedan and SUV customers in the U.S. and Canada. On eligible EQE models, it boosts output from 288 hp to 348 hp – a 60 hp increase – to deliver up to 1.0 second quicker acceleration from 0 to 60 mph (SUV). Applicable EQS models receive an additional 80 hp for a total output of 435 hp, enabling impressive 0-60 mph acceleration in as little as 4.5 seconds (Sedan). These enhancements are achieved without impacting the vehicles’ electric range.
There’s even a handy-dandy chart showing how this all works:
So, 60 extra horsepower costs $60 a month or $600 a year. If you want 80 horsepower, that’s $90 or $900 a year (why not $80/$800?) On a monthly basis, making up the lifetime upgrade is about 33 months. Obviously, if you plan to own the car for three years or more, just get the one-time deal.
This raises all sorts of fun questions, however, like: How quickly can you dial up the horsepower of your car if you end up at a stoplight next to another car? Can you just cancel it immediately after you win or lose the stoplight drag race? Is this secretly a good deal?
(Additional Editor’s Note: I actually don’t think this is a terrible deal! You pay less than a grand per year to make your Mercedes go a full second quicker 0-60 mph. Tuning a gas Mercedes to do that would be a lot more expensive, probably, when you include parts, labor, time and so on. -PG)
Mercedes does a nice job of optioning even its lower trim models, so both the EQE 350 and EQS 450 have almost everything you’d want or need in a vehicle. Additionally, all the EQEs and EQSs have the same-sized battery pack along their ranges, so an over-the-air flash might be a reasonable upgrade.
Think about it this way: An EQE 500 Sedan costs $85,900 (before taxes and delivery) and gives you 402 horsepower and 4.5 seconds of 0-60 acceleration from the same battery pack. If you add $1,950 to the $77,900 starting price of the EQE 350 it’s somewhere nicely in between a base 350 and the 500. The weird thing about Mercedes electric cars is, generally, you’re paying more money for less range.
I drove an EQE 450 4MATIC and it wasn’t as blisteringly fast as other EVs, but I didn’t feel like I needed more power. I also wouldn’t exchange the range for more power. Still, I wish I could dial up an extra 30 horsepower in my E39 BMW on demand.
I’m sure some Mercedes accountant somewhere would be quite happy if you just checked the box for more horsepower and let that subscription go forever! Assuming the car is usable for 10 years, that would be $7,200 for an over-the-air update if you paid monthly. Obviously, don’t do that. Buy it upfront or don’t buy it at all.
And if you’re asking, “What happens when I buy it used?” Sorry, these cars aren’t being designed for you. That’s long been the case. Expect that trend to get worse.
Because this is an additive feature, I don’t hate this as much as the GM CarPlay plan or all the stuff BMW wants to charge for that should just come with the car. We’ll keep reporting on this because expect to see more of it as automakers try to maintain their revenue in the uncertain future.
Volvo Is Happy Making Money, Thank You
Tesla is really screwing it up for the rest of the OEMs, and it’s largely to the benefit of consumers. Sure, they’re charging money for features that don’t exist or don’t work, but Tesla’s price war means every other automaker has to try and compete on value.
There’s definitely an alternative future where Tesla doesn’t lead the way into the EV future and, instead, it’s Hyundai Motor Group or BYD. If automakers were the ones in charge, there’s a possibility that the inevitable price decline would come slowly, over many years. Instead, we’ve got these Plaid-speed price cuts.
Still, gas-powered cars are making money, and with production lagging and rich people still remaining rich, it’s a great time to be a premium automaker. Take, for example, Volvo. Its Q1 report is out, and here are the highlights:
Revenues for the first three months grew 29 per cent compared to the same period last year to SEK 96 bn. The increase came on the back of the double-digit growth in retail sales for the quarter versus the corresponding period in 2022.
EBIT during the first quarter, excluding joint ventures and associates, increased 7 per cent compared to the corresponding period last year and reached SEK 6.3 bn. The increase in EBIT was delivered despite raw material prices remaining at elevated levels.
This performance was the result of higher volumes sold during the period, increased price realisation per car, a favourable geographical mix and the effects of pricing actions initiated last year, especially in Europe. The company-wide resource optimisation and efficiency initiative is also gathering momentum through direct savings which helped the underlying profitability. The company will continue to focus on this initiative.
The bolding is mine and it goes back to what I said at the top: Premium gas-powered cars are still highly profitable. We know the average transaction price is basically $50,000, which means that premium automakers are in a great position to not only squeeze more money out of their traditional customers but also target people who are getting asked to pay BMW money for a Toyota and might be persuaded to look at a nicer car.
Volvo, of course, is going to be all-EV by the end of the decade, so it’s gotta make those profits while it still can.
Penske Automotive’s Car Sales Business Is 72% In The Premium Sector
If you talk to anyone high up at any of Roger Penske’s operations, you’ll hear them talk about “stacking pennies.” The concept is that you’re constantly doing all the little things thoughtfully, stacking one thing carefully on top of the other. It’s probably one of the big reasons why Penske’s companies and racing teams are so successful across the board.
The company also released its Q1 financial report and there’s something in here that jumped out at me and, I’ll be honest, I hadn’t realized this before: 72% of its retail car revenue is from premium automakers.
I knew the company had a lot of BMW and Porsche dealerships, of course, but not to this extent. Did you know a full quarter of that revenue is BMW/Mini, followed by Audi at 11%, Mercedes at 10% and JLR at 9%? Non-premium, non-U.S. brands make up a dwindling part of their earnings, with GM/Stellantis brands now about 1% of the total.
That probably explains some of their performance:
For the three months ended March 31, 2023, total retail automotive revenue increased 4% to $6.3 billion. Same-store revenue increased 2%, including a 10% increase in service and parts revenue. Total retail automotive gross profit increased 1% to $1.1 billion, including a 2% decrease on a same-store basis. Same-store service and parts gross profit increased 9%. Excluding the impact from foreign currency exchange, total retail automotive revenue increased 9% (same-store +6%) and total retail automotive gross profit increased 5% (same-store +2%).
Just as a fun point of comparison, here’s a pie chart of what that revenue looked like in 2010:
We’ll all have to wait and see what happens in a few years when the marketplace is flooded with new EV models, but in the interim it’s a fun time to sell fancy cars.
Toyota Is Still Making Cars, In Case You Forgot
I love reports. I love numbers. I love data. Toyota’s business year ended on March 31st and Reuters has the details on how they did from a production standpoint:
Japan’s Toyota Motor Corp (7203.T) set a global annual output record in the business year ended in March, just edging past its target of 9.1 million vehicles as factory disruption from global chip supply woes and pandemic lockdowns eased.
But the world’s biggest automaker by sales warned it continued to see impacts from the long-running global chip shortage, saying it remained hard to predict its effect going forward.
That’s up from 8.57 million cars in the prior year, which is good for Toyota, though I’m not sure that’ll be enough to help keep the company from bleeding share in key markets. Here’s the more interesting data, to me:
It disclosed it has so far sold just 17,473 battery electric vehicles (EVs) worldwide, including those of its luxury Lexus brand, for the first three months of 2023.
That compared with 24,466 battery EVs sold by Toyota worldwide for the whole of 2022.
Woof. That’s an improvement but, also, not a lot of cars. Now you know why Toyota is so desperate to catch up on electric cars. By comparison, Polestar delivered 12,000 cars in Q1 of 2023 and GM managed to sell more than 19,000 of just the Bolt/Bolt EUV.
The Big Question
Like it or not, the subscription thing is coming and it’s a huge part of every OEM’s software pivot. So is there anything you’d actually pay a subscription for on your car?
Photos: Porsche, Mercedes, Toyota, Volvo
After reading this headline (and the one after it), I thought Mercedes Streeter’s Track Bus had 60hp and she was asking readers to guess how much she paid for it.
Hoo boy, I’m behind the Autopian 8-ball today!
SXM radio, sure. Anything else is pretty much a hard no, especially things like heated seats and performance upgrades.
subscription in a car ?
Choose another car that’s subscription free.
So is there anything you’d actually pay a subscription for on your car?
No.
I don’t understand how this is supposed to appeal to someone in the EQE or EQS’ income bracket. The EQE350 starts at $76k. The C&D “as tested” model was $94k.
Is the person buying a $94k vehicle really troubled by paying $1950 up front for a feature as opposed to $60 a month? Seems the “just $60 a month” approach is what you pitch to a subprime buyer looking at a Hyundai Elantra who is financing every cent they can because they can’t rub two nickels together. Not a Mercedes buyer spending almost $100k.
And I’d be happy if Toyota just made some more hybrids. Forget EVs. Get more Siennas, Highlanders, RAV4 Primes, and Priuses on the lot.
This. There is no world where this subscription idea makes financial sense, and I can see MB dropping it quietly for just the one time payment at some point. Or raising the one time payment a lot. Either way.
What you know will happen is at some point in the future, you’ll no longer be able to pay for the performance at all, because the service that allows you to pay for it will be permanently offline.
Mercedes could have just charged 2k more and cut the crap. No one would be hating on it. Hopefully it flops. Don’t get any car-related subscription – Do not enable this type of behavior
Dom, I promised you a 10 second car. You just need to pay the subscription fee.
I hate that we’re living in the timeline where that “If Microsoft made cars…” joke from 30 years ago is coming true. Everything going on with car companies these days is straight out of the tech bro playbook. Subscriptions, buggy/incomplete software, toxic work environments. My only hope is that this all ends in tears and doesn’t become the norm like it has in the tech industry.
Subscription features sound like a great opportunity for those that sail the high seas, if you know what I mean.
while my general response to paying to have performance unlocked on a car that already has the potential ( in other words a software barrier is the only thing preventing full performance) is negative, lets look at this another way:
if I want to buy a mid range trim of a certain car, and it has 250HP, the automaker/dealership may let me know i can order an option package or higher trim level to “unlock” additional power. i can choose that option at the point of sale or not. after i drive off the lot, the options for adding those options is pretty limited.
with these new subscription programs, you could theoretically add on that option package anytime you want, and then opt back out of it too. that’s added flexibility that i appreciate. it also means the models themselves would not have to have as many trim levels from the factory, at least for the features that could be remotely added/removed.
I could see that being a nice way to broaden the options for a second owner. you don’t have to track down a specific trim level to get those heated seats or the uprated towing modes if all trims have those but the just have to be activated.
I’m a little more dubious regarding the monthly fee model sort of thing. I would prefer a single price for permanent unlock
agreed, this mercedes package is a better deal than what it would’ve cost for me to have the performance tune from Ford done on my Focus ST. I’m just wondering if the tune even carries over to a second owner, though, or if MB is gonna pull a Tesla and remove shit that the first owner paid for.
sure. the idea that they could take away the option for future users is suspect, as is the loss of significant features if you miss a monthly payment. I can absolutely see a day when a “tune” may give better range or charging speed, and losing that because you forgot to pay or couldn’t for some reason could wreak havoc. suddenly you can’t make it to work because the X-range mode is gone one morning, etc
My reflexive reaction to automotive subscriptions is truly profane. My reflexive suspicion of any corporate scheme doesn’t help. It will make me want to choose another brand.
That or learn how to hack my cars the way some people did their satellite systems in before times.
Hackers got to hack. Just like phones, I’ll wait for the root kit to come out and I’ll just jailbreak my car. This would be when it’s out of warranty or flash it back for in-warranty work.
We’ll see what “right to hack” laws result. Or the companies can randomly brick your and blame it on your tampering.
That didn’t work out well for John Deer. I’m guessing the same thing would happen for any auto maker.
Like my fellow commenters, only features that have some recurring or ongoing expenses should come with a subscription. Like mapping highways for geofenced assistance systems. Other than that, nope!
Subscription hop-ups make sense as a kind of warranty upcharge – you’re hammering the drivetrain (and battery on EVs) a lot harder, so the manufacturer can cover the cost of increased service and warranty claims.
I drive old crap I paid cash for though, so subscription stuff is entirely outside my personal reality.
“What that Pao du” – the deer that got up close and personal with JT’s car, probably
I kind of agree with Patrick in that the cost of the power upgrade isn’t that much in terms of $/hp. The two exceptions I know of are for my 2001 Saab 9-3, where I was able to go from 205 hp to 250 hp courtesy of Noobtune for £100 ($125), and the W212 Mercedes E300, where you can gain an extra 80 hp for 1000€ ($1100) via an ECU flash by Kleemann.
I agree that it isn’t that much, but I don’t want them to be able to do this at all. Subscriptions should not be a part of a car unless it is for something optional. Taking away power that is already there unless I pay more, is not something I want to see happening in any cars.
i mean, that’s sort of already happening in traditional ICE cars, right?
you might buy a car that’s a mid trim, but an optional package or trim level upgrade updates the ECU/timing for more power/torque, or it adds a few small bolt-ons and unlocks more power. i don’t necessarily see this as being any different except that you could do it wirelessly at any time.
the monthly fee sort of thing I’m less enthusiastic about. give people the option for permanent unlock and then it’s generally fine by me
That’s exactly what Mercedes did with the W212 E300 (which they didn’t sell in the US). I had one in Germany and it was mechanically identical to an E350. The E300 had 250 hp and the E350 had 300 hp. When I looked into the option details on the car, I found that it had SA Code “M013” which had the description “MOTOR LEISTUNGSREDUZIERT”, or “engine power reduction.” The M276 engine was mechanically identical to the M276 in the E350, but Mercedes detuned it via the software to lop off 50 hp.
Now I wouldn’t want to pay a subscription for additional power on an EQS or EQE either, but so long as there is a “lifetime” option, it’s not terrible.
I would feel a lot better if I knew that the douche who cut me off in their Mercedes this morning had to pay an extra $60 to accelerate illegally into the HOV lane in order to cut off and tailgate a few more cars. Bring it on, Mercedes.
Looking further down the Car Features Subscription model, I gots a question….
What happens 3 to 6 years down the road when they decide that your hardware isn’t going to be supported anymore because its too much hassle? E.g. Smart phones that no longer get OS and security updates. You know with all the connectivity that the cars are going to have, there will be exploits that bad people will try to use. “We have encrypted your car. Call this number and have $1000 in gift cards ready.”
My car still has screwed up integration for apps like Pandora, but the manufacturer stopped providing ‘fixes’ a year before the warranty was up. Got an official email from the manufacturer saying that they are sorry the infotainment system isn’t living up to expectations but that the unit’s software will no longer be supported in full. They recommended that I switch from the integrated features to Android Auto or Apple CarPlay. Best I can deduce is that the ancient OS and the less than cutting edge hardware just was EoL. Upgrading isn’t an option with all the vehicle management features integrated.
If you are hoping that there will be hardware upgrades (OEM or aftermarket) available, you are dreaming. The infotainment system is sooo deeply integrated into your vehicle that you will never be able to replace it. Plus, there isn’t enough interchangeability or standardization to even think about it. Planned obsolescence at its best.
What happens after 3 or 6 years? You’re fucked, lease a new one.
What happens today when the inevitable security vulnerabilities of various manufacturers’ OTA updates are exploited and your car gets bricked or worse for the lulz?
You think The Kia Boyz jacking your ride with a USB cable is fun, just wait until they do it over wireless. I’m pretty sure I saw that scenario in a Fast and Furious movie.
It’s not wireless as in WiFi, the OTA is usually carried by an embeded 3G or 4G chip somewhere in the car computer system.
This make it a little bit more difficult and expensive to hack than the Kia trick.
But since the car companies relies on IaaS ( Infrastructure as a service, in that case Telecom Infastructure ) provided by various companies ( including the carious telecom equipment builders ) for OTA, there’s lots of wiggling room for some serious hacking.
And since we are talking of Mobile… 3G is on the way of the Dodos, so cars that have 3G OTA will stop getting patched ( and if they had subscription those would also stop to work ).
When room needs to be made for the 6G 4G will start to be on the chopping block, and that’s what cars currently on the market uses… what will happen when they can’t call home ? Will they become bricks ? will they go in maintenance mode and require an hardware upgrade to come back to life ?
Tesla’s OTA is done via wifi even if you are subscribed to their “permium connectivity” package..They are pretty much the only game in town that is doing it nearly monthly. One thing about the modems on Tesla, they did upgrade the hardware for customers from whatver G previously to LTE. It is small M.2 type modem. Can’t predict the future, but it has been done before.
When it comes to OTA, I rather trust Tesla since their service model depends on it.. vs legacy makers where they want you to go to service stations for $ (eg Hyundai Ioniq initially). Just an extra thing to consider.
Oh there are aftermarket hacks for Tesla to boost power. 50hp for ~1200USD https://ingenext.ca/
software engineer, been coding since 1978. There isn’t any software for which I’m willing to pay subscriptions. My car even less so.
I’d pay a subscription for self-healing cars that fixed themselves – this is actually a concept in software engineering though never realized – maybe it will happen in our fully automated luxury communist future.
Oh man you left off the “gay space” part of the luxury gay space communist future
I’m escaping to the one place that hasn’t been corrupted by capitalism….SPACE!
Pride month is about the immense pride that members of the LGBTQ community – including myself – have at our successful conquest of the stars.
First, I believe the primary reason that high-trim EV get lower range is the bling bling huge rimz for which high-efficiency tires don’t (yet?) exist.
Second, can I get a “delete subscription” where they pay me every month but my 0-60 time is reduced to 9.8 seconds? Because I’m not in that much of a hurry.
Subscriptions for music? Sure, if it’s worth it (it rarely is to me). Map access? Maybe, again, if it feels justified. But a subscription to “unlock” performance or features that the car you own already has? There’s a name for that: Ransomware.
Buy the thing, own the thing, use the thing. Nothing else is acceptable.
Music is an entirely different thing. Songwriters and musicians (might/should) be getting a royalty when their song is played. The figures are minuscule, but at least some of the subscription money is going to the artists. I feel better about that than pahying to unlock existing car features.
Or, you know, buy their music (CD or FLAC), store it on an SDCard, and play it whenever you want without using internet bandwidth.
I don’t know, some think that royalties in general aren’t proper. That work was already completed, and all you’re doing is replaying a recording of it. The artist and composer aren’t doing any additional work so maybe additional pay isn’t warranted. It’s a strange concept to consider both sides of.
And it costs money for Apple or Spotify to host those millions of tracks on a server for you to access from your phone. They’re also constantly updating the database with new music or maybe even old music.
I’m OK with paying every month for stuff like that. Same with things like GM Super Cruise where there is a database being maintained for the software to work off, and in theory there are improvements being made to the capability as a whole as you own the car.
Remember when Pay-to-Win was just for videogames?
It’s always been “how fast can you afford”
I guess it’s just that we’re always thinking more about range with EVs that this is an issue. You’re essentially doing the exact same thing with an aftermarket tune when you want to get a better 0-60 time.
..except for diesel tunes, where an aftermarket tune will get you more torque, HP and mpgs
… and more emissions out the tailpipe.
sure, about 10mins of school bus running worth of emissions over a year of driving with the tune 🙂
probably even less, considering less fuel used means less CO2 out the pipe
Subscriptions don’t bother me much when it’s a feature that has an ongoing expense on the automakers side – mostly for services. That could be a call center (for something like OnStar), a cell data connection, or just maintaining data and servers. Even SiriusXM has to pay for the programming they offer. Not everyone wants or needs those features, better to give those who do the option to pay separately than make all buyers pay for it up front. Subscriptions also provide some motivation for those services to actually be maintained and provide ongoing value.
I am much less convinced about using subscriptions to unlock existing hardware is reasonable. I could see *maybe* making the argument it gives the option to try the feature cheap-ish before spending the money to permanently enable it – but on the whole, if there isn’t an ongoing expense for the automaker, it probably shouldn’t be a subscription.