What is the difference between car subscription and in-car subscription?

What is the difference between car subscription and in-car subscription?

Michael Higgins
Co-Founder, Managing Director
Subscription
December 15, 2021

The automotive industry is the latest to undergo significant transformation as a result of the usership economy, where consumers would prefer to pay for flexible access over direct ownership.

The idea of access over ownership has become commonplace in many industries such as hospitality and entertainment with services like Netflix, Spotify and HelloFresh, and the automotive industry is in a unique position where two distinct layers of usership are emerging.

The rise of both car subscription and in-car subscription is set to transform the way we pay for personal mobility, and the nuances of these two models are beginning to cause confusion among consumers and industry stakeholders alike.

So what is the difference between car subscription and in-car subscription?

In simple terms, car subscription is a flexible alternative to car ownership that provides exclusive access to a vehicle for a recurring fee, while in-car subscription refers to an ongoing fee paid to access certain (typically software-based) in-car vehicle features and options.

What is car subscription?

Often described as "Netflix for cars", car subscription provides consumers with exclusive access to a vehicle for a recurring payment without any long-term commitment.

It means consumers can drive for as long as they need without the significant upfront costs typically associated with car ownership. They are also welcome to swap to a new vehicle or pause their car subscription altogether as their needs change.

Car subscription services are emerging around the world, with notable examples from global car rental giant SIXT, and dealership-drive services such as Simplr and Motopool. The industry is growing so rapidly that software enablers such as Loopit have emerged to power car subscription services for the automotive industry.

What is in-car subscription?

An in-car subscription typically refers to providing consumers with access to various in-car features for a recurring payment. These features are typically software-based and have become more prevalent as vehicle technology becomes more sophisticated - and more expensive.

The most well-known example of in-car subscription is the Tesla Full Self-Driving Capability Subscription (also known as FSD or Autopilot) which allows Tesla owners to activate FSD on their vehicle from US$99 per month.

This represents a significant saving for consumers as the upfront cost of Autopilot, which enables features like changing lanes on highways and automatic car parking, is otherwise a US$10,000 option from factory.

Some simple math reveals that it would take 101 months - or just over eight years - before the upfront cost for Tesla's Autopilot becomes financially viable, which is realistically far longer than most Tesla owners would keep their vehicle.

Why has in-car subscription become so controversial?

While the Tesla Autopilot is perhaps the most shining example of how in-car subscriptions can provide convenience and value for consumers, it does beg the question of why consumers are having to pay for a feature that is otherwise already equipped on their vehicle.

Many of the latest Tesla vehicles leave the factory with all the hardware requirements for Autopilot, regardless of whether it was chosen as a factory option by the customer. The Autopilot subscription is then a software subscription that enables the FSD features for the customer.

Other examples are emerging that are not quite as appealing, with consumers arguing that they are being charged to access features that they should already own.

The most controversial example in recent times is Toyota's monthly in-car subscription for the remote start key fob, which allows owners to start their vehicle remotely even when they are out of range.

In reality, this paid subscription cost is associated with Toyota's Remote Connect cloud service that enables the remote start, however the optics from the perspective of consumers is that they are being charged simply to start their vehicle.

More examples of in-car subscriptions are emerging from other automakers such as Mercedes which requires a subscription in Europe for rear-wheel steering in its new EQS electric car. While BMW has since backtracked on plans to charge owners a monthly fee for Apple CarPlay.

So are car subscriptions here to stay?

Earlier this year, Volvo UK reported that car subscription represented almost 15% of its new car retail business in 2021 - significantly higher than the initial 5% figure it has targeted for the service by the end of its first year.

Consumer demand for car subscription is growing, and the market is expected to reach $40 billion by the end of the end of the decade. This comes at a time when electrification of vehicles is progressing at a rapid rate, and it's expected that the adoption of electric vehicles and car subscription will go hand-in-hand.

As far as in-car subscriptions are concerned, it's very likely that brands like Toyota are simply testing the waters for subscription features and this will likely progress as in-car technologies become more sophisticated - and more expensive to purchase upfront.

About the author
Michael is the co-founder and managing director at Loopit, a SaaS platform specialising in new mobility initiatives such as car subscription, rideshare and digital rental solutions. When he’s not launching new businesses, Michael enjoys motorsports, racing cars himself as well as boating.

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