Connected Car Goldmine – Don’t Boast, Deliver Value
By Edward A. Sanchez – Oct. 20, 2021
Over the last few weeks, several OEMs, both legacy and startup, have made claims or boasts about how much revenue they expect to make from connected services. Just last week, in an investor’s report, Rivian said it expected to derive $15,500 in additional revenue per vehicle over a period of 10 years. Earlier this month, General Motors, in an investor presentation, said it expected to “double revenues” by 2030, and surpass Tesla in U.S. EV market share. And of course, we’re all aware of the price tag of $10,000 on Tesla’s “Full Self-Driving” option that is a perpetual work-in-progress.
While most consumers and car buyers are probably oblivious to these announcements and declarations, for those who pay attention, it’s a bit galling to think that the management of these companies simply sees you as nothing more than a perpetual profit center, and insidiously seeks to squeeze you out of every last penny.
To be clear, I don’t have a problem with companies making a profit, nor do I have an issue with them charging a fee for goods and services provided. However, I think there is sometimes an institutional arrogance with some companies that simply expect consumers to dutifully fork over money for an unexceptional or mediocre product or service. If this is the motivating factor, it is doomed to failure.
General Motors’ OnStar connected services division recently commemorated its 25th anniversary, being one of the early pioneers in automotive connected services. In its early days, OnStar was a truly unique proposition. While there had been other attempts at vehicle telematics, OnStar was the first major go-to-market service offering live agent assistance and service dispatch.
Rivian recently noted that it expects to derive an additional $15,500 in revenue from each sale over a 10 year period.
The cost to launch the service in the mid-‘90s was likely staggering. In subsequent years, the service was expanded to China, Mexico, Canada, and other international markets, and went from an analog to digital service.
Other companies that were later entrants to the game were able to take advantage of advancements in wireless network technology, process automation and other technological advancements to offer similar services and functionality for a lower price.
Although OnStar does not publicly disclose its post-trial paid subscription rate, it’s believed to be somewhere in the neighborhood of 10-20%. Other OEMs are not believed to be substantially better, although the free trial period can vary anywhere from six months to five years and longer.
Will Rivian customers still be smiling while paying subscription fees in addition to making their car payments? Perhaps, if the offered product is good enough.
For me, the bottom line is this: I don’t mind paying for a product or a service if I feel it genuinely delivers value and improves my life in some way, however seemingly minor. But nothing makes me angrier or more frustrated than paying money for a subpar service that either doesn’t deliver on its promises, has poor reliability, or poor or incompetent customer service.
The focus for OEM’s connected services should be on delivering value, and a constant internal “gut check” among the team of “Would I pay this price for this service?” If the answer is ambivalent or “no,” then the approach and pricing should be reconsidered. Customers will happily pay for something that delivers on the “surprise and delight” factor or improves productivity, efficiency, or convenience. If, on the other hand, they seethe in anger and frustration every time they see the recurring subscription fee on their bill, then that’s an indication that something along the value chain is broken.
So to all the OEMs out there looking to squeeze their customers for every penny for this supposed goldmine of connected service revenue, say to yourself: “Would I be happy to pay this to get this?”
(Images courtesy Rivian)
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