Rivian, General Motors Get Greedy, Sell Customers Out to Shareholders With Software Subscriptions
Modern cars require lots of software. When automakers charge subscription fees for some software, they can recoup their costs and justify updating the software. But when Mercedes announces it will lock rear-wheel-drive behind a paywall, things are out of hand. Recently, Rivian revealed it hoped to make an average of $15,500 in subscription fees over the lifetime of each $70,000 vehicle. Then General Motors told investors its cars would serve first-and-foremost as a “technology platform” to collect subscriptions fees. But some automakers, such as Alfa Romeo, are setting themselves apart by defining their vehicles as more than a software ecosystem.
General Motors: makes ‘technology platforms,’ not cars
Apple first pioneered the captive software ecosystem with its app store. Third-party developers can offer software in the app store, but Apple gets a cut whenever users pay a subscription or make an in-app purchase.
Tesla was the first automaker to turn its vehicles into software ecosystems. Once Tesla acclimated owners to paying for software subscriptions, the company transitioned key vehicles features to a subscription payment model. For example, Tesla’s Full Self Driving (FSD) mode will not be a feature you can buy outright, but a subscription you must pay yearly.
With Tesla’s current valuation of over $700 billion, General Motors pays attention to the startup’s business plan. This week, General Motors reported to investors it plans to transition from being primarily an automaker to a “technology platform.”
General Motors rolled out a “Utilify” software ecosystem it plans to use in every new vehicle. Just like Apple’s app store, third-party developers will be able to offer software in GM vehicles. But of course, GM wants a cut of subscriptions.
Rivian: ‘forever’ comes with reoccurring fees
While many automakers are predictably transitioning to subscription models, Rivian is an interesting case study. This is because Rivian was supposed to be an anomaly, a startup that went against the system. Its mission statement goes against Detroit’s establishment: “Keeping the world adventurous forever.” But it appears “forever” will come with recurring fees.
The Rivian startup is going public on Wall Street. For Rivian’s initial public offering (IPO), Wall Street required the company to present a business plan to investors. According to the plan, Rivian hopes to make an additional $15,000 over the lifetime of each vehicle from subscription software upsells.
Rivian’s big-ticket item will be self-driving capability. This software will cost a one-time $10,000 fee to unlock. Rivian assumes many owners will opt for self-driving but says the rest of the $15,500 average will come from high subscription fees for “infotainment, connectivity, diagnostics, and other services.”
Alfa Romeo: more than ‘mere machines’
Since returning to the U.S. market, Alfa Romeo has had to differentiate itself from its established German cousins. BMW’s slogan is “Ultimate Driving Machine.” Alfa Romeo made a statement with the slogan, “Without heart we would be mere machines.” And while the Alfa Romeo Giulia matches the M4 in performance, its success comes from being one of the most beautiful sedans ever.
German carmakers have hopped aboard the subscription software and subscription feature bandwagons. The German manufacturers are all attempting to pioneer their own in-car app stores. In addition, features such as the handy Mercedes rear-wheel-steering option in the new EQS require a subscription. Even the new BMW heated seats will gouge you for a recurring fee.
Alfa Romeo is always looking to set itself apart. It is unsurprising that the automaker condemns the captive software ecosystem approach to auto manufacturing. But the Stellantis-owned company still made waves when CEO Jean-Philippe Imparato said, “I don’t sell an iPad with a car around it.”
Imparato may be objecting to the subscription-fee-collecting app store in many cars. But at least part of his insistence stems from keeping the Alfa Romeo driving experience pure. He said he aims for “As few screens as possible.” So don’t expect Alfa Romeo to do away with the radio knobs anytime soon. Here’s to hoping less screens means less subscriptions.