$18 per month over 10 years is $2,160. MSRP for the 2020 2 Series--BMW's cheapest sedan--is $35,300.
So instead of charging $2K--5% more--for heated seats out right they have no gone through the expense of (1) building the software, billing, and support infrastructure to manage this (2) pissing off customers.
I'm assuming they're also streamlining production by building heated seats into every car instead of selective models, but again, why not just go with a permanent upgrade model? Everyone buys heated seats, BWM provides a special chip to activate them.
The feature is sold for much less than $2K. In the article it mentions $400 for a lifetime subscription. What could be attractive to that executives is an opportunity to broaden the market for this feature.
I.e. instead of having only one chance to sell you this feature at the time of order, they now can let you trial this after the purchase. They might even run a promo during a cold streak for free (just like SiriusXM gives free access during major holidays). $18/mo is there just to make $406 number more attractive.
I think people are too distracted by the subscription aspect and missing the fact that the "conversion rate" for heated seats purchases could be improved.
Yes, but this is the future they want to move to where you pay $60k for your car, but you need to also pay them $1k per month (for nothing) to drive it - obviously not including your insurance or gas.
To grow profits in excess of inflation in a saturated market, you must charge your costumers continuously more for the same product.
These kind of initiatives aren't about the first customer. The person buying new will likely get a free subscription as part of some dealership deal, or will buy the feature outright at purchase time and wont notice. This is about rent seeking from the freeloaders.
That dumbass executive looked at the healthy used car market, got pissed that some people owned BMW's without paying their dues, and asked how to fix that.
This service allows a customer to purchase a feature outright, now do you think that feature belongs to the car, or does it belong to the customer? Will it transfer during a sale?
Remember, the feature has a lifetime value. All that's happening here is those payments are being deferred. You could (1) charge the 10 year value outright or (2) charge it on a monthly basis.
In scenario 1, BMW captures the full value and basically allow their customers to negotiate the remaining value of the feature in the used car market. In scenario 2, BMW requires the second purchaser to enable the feature. It additionally requires that the feature never be turned off for an extended period of time. Say the car sits in a dealership lot for 6 months. Do they profit from the feature then?
Altogether it looks like they're trying to streamline production. It's likely a lot cheaper to have all the cars manufactured with heated seats and have some mechanism to enable them. Monthly subscription cost, however, seems insane.
Also, inflation is actually a counterargument for a strategy like this.
In inflationary environments, money today is worth more than money tomorrow. Also, can you imagine trying to hike subscription prices frequently to keep up with inflation?
I find this great, let them build under priced cars, goto a shop and get the "all features go" chip welded in and pirated firmware. Shareholders financially supporting customers driving better then they could afford, the same fate that you can expect for tesla. Which reminds me what is the tesla dark quota? How many cars totally disappear from the always connected feature and never reconnect?
I suspect the heated seats were/are just a simple thing they could add onto the infrastructure, which must support a lot more services than just the seats.
$18 per month over 10 years is $2,160. MSRP for the 2020 2 Series--BMW's cheapest sedan--is $35,300.
So instead of charging $2K--5% more--for heated seats out right they have no gone through the expense of (1) building the software, billing, and support infrastructure to manage this (2) pissing off customers.
I'm assuming they're also streamlining production by building heated seats into every car instead of selective models, but again, why not just go with a permanent upgrade model? Everyone buys heated seats, BWM provides a special chip to activate them.