When electric vehicle maker Rivian filed the paperwork for the company’s initial public offering (IPO), there was a lot to unpack. The documents noted that Rivian had a billion-dollar loss in recent years, among other things. Detailed in the large document was information about subscription-based features that will hopefully make the company a ton of money. Is this the future of vehicles?
What did the Rivian IPO filing reveal?
The full document filed with the U.S. Securities and Exchange Commission is available to read. Within the document, Rivian notes that the company offers Software Enabled Services. The documents refer to “LTR,” which is defined as lifetime revenue.
“We calculate our SAM and TAM based upon the market for new vehicle sales across consumer and commercial vehicles in addition to the lifetime revenue (“LTR”) potential of services, which includes the resale of these vehicles.”Rivian | IPO Filing
Essentially, Rivian plans to integrate subscription-based features to create more lifetime revenue for the company. Selling cars is a good way to do that, but there has to be more to succeed.
What features will Rivian offer as subscription-based?
The IPO filing had a lot of information in the document. Rivian plans to offer subscription-based features to the customer. “We assume the LTR opportunity from software to be $15,500.” This consists of a $10,000 offering for a Full Self-Driving subscription, plus others. Rivian anticipates that the other $5,500 will come from offering things like “infotainment, connectivity, diagnostics, and other services.” Rivian says the company based this value on other industry benchmarks for similar features.
Rivian says that the EVs will be equipped with Level 3 driving capability, but you won’t be able to access it without the subscription. The vehicles will come with some standard driver-assist features, but not the full Level 3.
Tesla offers Full Self-Driving for $10,000. It also recently changed to offer a monthly subscription fee for FSD. But $15,500 is a lot of money on top of actually purchasing a vehicle. Is this number inflated, or is this an actual value that consumers will have to pay after buying a Rivian electric vehicle? Rivian won’t be the first or the last to offer such paid services.
Historically, companies have made money on fixing parts of vehicles or just repairing vehicles. EVs have fewer parts and work more with software than actually physical parts. It seems that perhaps this is a way to recoup some of that money that would have been spent on fixing parts of the vehicle. Your car will likely come with all of the features you can rent monthly, but you won’t have access to the extra features.
Companies have been using subscription-based features for years
It isn’t clear yet how many of these features will come with a subscription feature. In some cases, this isn’t new. Features like OnStar or Crisis Assist require a subscription. Sometimes to use complete GPS or other features, buyers have to have a subscription. Many individual companies offer an app for the car that already has various levels of subscription features.
Not everyone will need these features. You don’t have to subscribe to this system yet, but automakers will try and entice buyers into wanting the subscription features. Since Rivian hasn’t released information about what features this will apply to, buyers might have to wait and see if it is necessary.
Most recently, Mercedes-Benz made the news for announcing rear-wheel steering would require an annual subscription. If people are willing to rent features monthly, automakers are going to continue offering the option. Many buyers will probably be interested in Level 3 driving features, so it won’t be a surprise if many buyers end up paying for it.