GM is studying customer subscription habits to add fees to future cars
In July, luxury automaker BMW began selling some eye-catching new subscription-based services in various countries, including charging drivers $18 per month for heated seats and $10 per month for a heated steering wheel, features that critics argued should be standard.
General Motors assured investors on Thursday that it does not intend to charge customers for these features, but it is certain that vehicle software and the microtransactions it will allow, such as paying for cloud-based services, will be the biggest business for GM going forward compared to selling the hardware − the car − now.
Earlier this year, GM said that software-as-a-service will generate $20-25 billion annually in revenue by 2030. To get there, GM has hundreds of data scientists already studying consumer behavior and promises that there will be more subscription services on GM vehicles and is looking at ways to tie the sale of a car to software services or to other new GM businesses, such as GM’s auto insurance through OnStar.
“I wouldn’t expect us to charge someone $18 for heated seats. We are very much in touch with our customers and where they find value. We know that when it comes to features like safety or standard features, our customers expect that to be included in the vehicle,” said Alan Wexler, GM’s senior vice president of strategy and innovation. “As much as we can standardize hardware in the vehicle. and then unlock features with software, we will.”
But, he said, electric vehicles have about 25% fewer parts than gasoline-powered cars, “So we’re moving into a world of simplification in terms of hardware, and we’ll leverage that in different segments based on what people’s wants are and what they want to buy.”
The GM is studying you
Wexler spoke with Barclays automotive analyst Dan Levy as part of a webcast for the Barclays Global Automotive and Mobility Tech Conference on Thursday.
“Software is a business for us,” Wexler said, noting that 70% of GM’s new hires in the past two years have come from technology companies to work on GM’s vehicle software.
Wexler said GM has 300 researchers on its data insights team who analyze and generate insights into “what customers are interested in buying, when they’re interested in buying it and how they’re interested in buying it.”
As GM develops new technology, it can gain insights from customers’ vehicle data and interact with car buyers to sell them more services beyond the initial car purchase, he said. For example, if GM notices a pattern of a particular freeway you drive or a particular time or traffic pattern routinely taken, it can send an offer to the driver that says, “Do you want to try Super Cruise on the way home tonight?” Wexler said. “We can offer it to you as a try and buy.”
Super Cruise is GM’s hands-free driving technology that can be used on 400,000 miles of mapped roads in the US and Canada. It will be offered on 22 vehicles next year. Ultra Cruise is GM’s next iteration of Super Cruise, offering multiple avenues in which it can be used. It will debut on the 2024 Cadillac Celestiq EV.
Super Cruise costs $2,200 within the manufacturer’s suggested retail price and includes three years of service. After that, the customer has the option of paying $25 a month or $250 a year to continue using it. Wexler said both Super Cruise and Ultra Cruise offer GM greater revenue opportunities in the future, either through more subscriptions or by leading to the purchase of other GM products.
“We believe that our autonomous technology, whether it’s Super Cruise or Ultra Cruise, leads to safer driving, so that should lead to savings on insurance,” Wexler said. “What we’re doing on the innovation team is: How do we bring these services to life to delight our customers and (bring) what they’re willing to pay for? It’s bringing together a lot of new businesses to bring value to customers and should bring value to us.”
GM looks at Tesla and Netflix
GM has also looked outside subscription businesses as a model to support its 2030 annual revenue goal, Wexler said.
“We looked outside of what people were willing and interested in paying from a vehicle perspective,” Wexler said. “We looked at subscriptions in people’s lives: What do you pay for Netflix or a music app? We took a very comprehensive look at people’s willingness to buy.”
Wexler said GM’s success depends on owning the software so it can both acquire and protect the vehicle data it has access to. In this regard, he said, GM is developing a software model similar to rival electric car maker Tesla.
“I have a lot of respect for what Tesla has done,” Wexler said. “They had the advantage of starting from scratch developing an operating system in the vehicle and knowing that software is at the heart of their business. They moved at speed. They also played it very smart in terms of the experiences they were creating, what they wanted to outsource to partners versus what they would own.”
GM’s innovation challenge
In 2019, GM created the Vehicle Intelligence Platform (VIP), which is the wiring in a vehicle that will enable GM’s future software platform, Ultifi. GM introduced the Ultifi last year. The first vehicle it will go into service on is the Chevrolet Silverado EV due out next year.
Think of VIP as a smartphone and Ultifi as the operating system that provides the features. Like software on a smartphone, Ultifi can provide regular updates and let customers choose from a variety of over-the-air upgrades, personalization options and apps.
“We have to own it, we build it,” Wexler said, noting that GM didn’t start from scratch with Ultifi like Tesla did with the software. “It’s a little more difficult,” he said, because GM has to design its vehicle software to work with gasoline-powered cars and electric cars.
“It’s a little more complicated than starting from scratch, but we’re taking a very similar approach around the platform,” Wexler said. – We just have to be flexible over time.
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Contact Jamie L. LaReau: [email protected] Follow her on Twitter @jlareauan. Read more about General Motors and sign up for our car newsletter. Become a subscriber.
