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This is Round Table.
Heated seats, adaptive cruise, your car has it all, but only if you keep paying.
Welcome to the age of smart cars with not so smart pricing.
Today, we're diving into the rise of software based vehicle features where convenience comes at a cost and drivers are starting to feel more ripped off than rewarded.
Coming to you live from Beijing, this is Roundtable.
I'm He Yang. For today's program, I'm joined by Steve Hatherly and Yu Shen in the studio.
First on today's show.
From remote start to seat warmers, modern cars can do more than ever.
But here's the catch. Many of these features are locked behind paywalls, even if the hardware is already in your car, with automakers pushing subscription models.
Is this innovative business or just a new way to squeeze drivers dry?
Let's talk about what's fair, what's shady, and what it means for the future of car ownership.
Yuxian, tell us why are paid subscriptions in cars back in the cross hairs of drivers and automakers?
Well, you're absolutely right giving the statement earlier, Ho Young, it's not really a new practice anymore.
It's been seen as more or less a common practice that carmakers are seeking for additional revenues after the car is sold, but what's hitting the news lately is that car owners here in China are feeling trapped and complaining for being required to pay in order to get full services and updates in their car, particularly in the new energy vehicle, the NEV industry in China recently.
and this controversial practice of paid subscription models is highlighted as a potential consumer trap.
And what they do is that they set all of these features like heated steering wheels or autopiloting system or access to premium functions in the car.
They set all of these fancy functions and services behind paid walls so that You have to pay extra to get these services or updates installed in your car even though all the equipments is already kind of included in the product itself upon purchase.
So that's what's going on.
Unlocking things in your car that already exist in your car but you can't use it.
And that's the problem, right?
I mean, consumers, they were previously frustrated by unexpected charges or tiered subscription models in smart television ads and video streaming services, I don't know if you saw the latest season of Black Mirror but that was the concept behind one of the shows is that you pay for a certain subscription and then all of a sudden oh, if you update or upgrade then you can get a better version, okay well I upgraded, yeah, but now if you upgrade again, then you can get an even better version.
People are tired of that, consumers are tired of that model.
But yeah, as Yushan said, it's now entered the NEV market.
And we're talking about things like heated steering wheels or access to premium functions.
You got to pay for it.
So the heated steering wheel option what this means is it's available in the car, meaning the car has the ability to have a heated steering wheel.
But if you don't get a subscription through an app or otherwise, then you can't use it.
And consumers are very frustrated by this.
And there are a few things going on here.
There are the types that you guys mentioned, basically the hardware is already in the car and then you just cannot unlock it without paying.
Also, there's the over the air updates or the OTA updates or basically ongoing charges, and when you think about your car, Oh, I remember a while ago when Tesla was still, you know, sort of the king in EVs, but now, um, is kind of and I'm struggling to maintain that title.
But anyhow back then I remember one of the sales slogan they had was you're not driving a car, you're driving a computer.
So we are talking about the newer connected or smart vehicles here but yeah just like your smartphone it needs constant updates and then you have to pay for the updates which is never ending.
You mentioned Tesla, there was a 2024 straight arrow news report and they pointed out that brands like BMW and Tesla, they've gotten backlash from their customers over charging extra fees for things like heated seats.
Again, available in the car, just not available to the person who purchased the car.
If they didn't pay extra for it or extended battery range that too.
Again, customers not happy about that and there was backlash for those companies and not only those two companies, by the way.
Other brands as well, experience backlash from their customers.
Yeah. Such as Mazda, which is something that I read and I got a bit confused.
So the brand Mazda is setting its remote start feature as part of a paid package that they call connected service that charges $120 US per year.
So for those of you who understand what a remote start feature is, I would assume it should be part of the basic function of your car but now that they're packaging it as part of a bigger service they start to charge you and they seem to have a good reason to since it's renamed and yeah it's all fancy come along with other service types and these are including both what you said, Heoyang, the hard factors like the C, the steering wheels, but also there are software updates as well because nowadays more car makers, especially in the EV sector here in China, they're offering to install software and digital
updates on your car.
So after you pay the subscription they can just remotely update your car system and this has become a common practice among automakers here.
So basically, I would say this is a shifting in business in a way that EV is navigating to become this subscribable products, in general?
Also, just a quick question, you guys mentioned that the consumer feels meth -led.
And it's not like this is particularly a new concept we're talking about here, but given it's only been around for maybe I think become more mainstream, well -known in the last maybe three years or so.
But people feel, how are they meth -led?
Because they feel like they've already paid for it, right?
I mean, you've already paid for the steering wheel.
You've already paid for the seats.
The steering wheel and the seat can be heated.
Did I not pay for this already?
So that's why there's this feeling of, I guess, a lack of trust or being misled, as you put it.
And it's new, I think.
I mean, brand new this year?
No. But still in the auto industry, this is relatively new.
this is one of the most controversial trends in the auto industry right now and manufacturers they're looking for different additional revenue streams right profit margins on cars can be quite low and this is a way for the car makers to have a consistent and perhaps reliable revenue stream from their customers hoping that their customers will be long -term loyal customers with the company see, saying that their profit level is low is something that me as a regular consumer might just think, what?
I mean, if you pay those high level executives or make their packages a little bit thinner then everybody will be happier, but the people in high -power positions, I suppose.
But, yes, let's take a look at, you know, what these features are.
What are these software updates that fall into the category of over -the -air which is a key part of what you need to pay for the subscription.
Over -the -air sounds like a podcast. Yeah, I know, right?
The name is so, I don't know, poetic in some way.
But an over -the -air or OTA update is actually the wireless delivery of new software, firmware, or other data to mobile devices such as the system mobile system in your car.
And, OTA update management is the process of remotely updating the entire root file system and it doesn't need a technician to come approach your car or whatever mobile devices you have and insert things like installing things on a computer, but remotely, it's done without physical contact.
So, OTA updates in cars, according to Guo Min online, cover a wide range of areas including power battery management, intelligent driving assistance functions, and smart in -car systems. So these updates can even optimize potential software vulnerabilities in vehicles.
And also here in China, there is a huge market for, say, OTA updates being used in car, and that's the data from the State Administration for Market Regulation that in 2022, China conducted 17 remote upgrade recalls involving 887 ,000 vehicles.
So, we can say that remote update have increasingly become an important method for a lot of car makers to improve their vehicle safety without having to call back your car and have you wait for a month without being used.
Which on its own is amazing.
Yeah. I mean, that's amazing, right?
You can get your car taken care of without taking it to a shop, making an appointment, going to wait, leaving your car there for two or three days.
If it takes that long, then you got to make arrangements.
You got to take a taxi here and there.
I mean, all of that is just eliminated.
So on its own, that is an amazing thing that I don't think we can complain about.
Yeah, one example here would be, and this is according to industry insider that Mercedes Bens USA recalled 41 ,838 SUVs in the North American market in early 2021 due to a software error in its electronic stability program.
That's something that could be adjusted remotely but they still recalled all of their cars, so if OTA car updates had been applied back then, it could've solved all the above problems by eliminating the need for software related recalls.
So yeah, in a way it's greatly saving the time and manpower in fixing cars or just in face of small bugs like that.
So it's kind of like back to that idea of driving a computer so a lot of this stuff can be fixed remotely what about the top complaints from car owners regarding paid subscription and cars and, particularly now, new energy vehicles?
And, yeah, what are the critiques of the practice?
Just like how we mentioned earlier, there are smart TV ads and also the video streaming platforms that's charging their users by different tiers of pay walls.
But those eventually were faced with regulations nowadays because, as smart TV booths ads were eventually curbed by regulators and also the video streaming platforms have already faced growing resistance from consumers.
Nowadays, we see this happening to the NEV manufacturing business but still there are a lot of gap that's hard to meet, both for the consumers and for the manufacturers themselves because right now there are still issues with the consumer right protection and also, like If I pay this time are you going to use more rabbit holes of such to attract me to jump in, in the future?
Am I the Chinese chai waiting to be cut for you, as long as I grow, there's more chai to be cut?
I don't get that reference, but I can see you're unhappy about that.
the Chinese, a fun reference, because the chives, they always grow, and you can grow easily and fast, and they can be harvested easily.
Understood. There's also, you know, every time we talk about anything that's kind of wireless we talk about the security concerns, the ethical concerns, these over -the -air updates.
They are wireless, right?
So you know, malware attacks, exposure of personal information, but if you use secure encrypted connections that can help kind of mitigate those threats, if you will.
And also I guess you could say too that not all users understand how to perform updates or why these updates are important and that can lead to missed updates and increased vulnerability for your vehicle.
If you think about someone who's not tech savvy, it does take a little bit of understanding, right, to be able to know what's going on.
So there could be issues there too.
I thought that it's a choice, it's not a necessity, that you don't have to update all the time.
Also here I think we're - I'm so sorry, please hold that thought.
But you know I think here we're getting on to really the nail of the head of the issue, that is you know what constitutes consumer rights.
What is the gold standard here?
Because we're kind of still in the Midwest of trying to establish rules because I don't think everybody agrees on, first of all, are these updates necessary?
Is it a complete ripoff by these dealerships?
Um, well, not dealerships, the automakers.
And do I have to do this?
Or is it, you know, if I feel like it, I do it.
If I have some extra bucks that I want to throw around, I can.
or maybe you know I can yeah what about the good old days of driving a regular vehicle you know I didn't need to update anything and it was fine so what's the role here question mark I was just about the top on bad Crayon because I deeply agree with you on that as well because nowadays we're seeing this unbalanced kind of like a market marketing mechanism here that the transparency is only on the one side, it's only on the manufacturer side, not on the consumer side.
They don't know what's being done to their car.
You said it's an update but where and which exactly?
People don't know and like Steve mentioned earlier not everyone, not all car users, they're tech savvy enough to know exactly those details as being put into their cars.
Well some of them are really tech savvy.
The Mazda situation that you mentioned before, some Mazda owners decided to kind of take matters into their own hands because they were really frustrated by this.
So they used a workaround created by a software developer to hack their own vehicle and that workaround allowed them to use numerous connected features that would have otherwise been hidden behind a paywall.
And that included the remote start that you were talking about.
Also downloading owner's manuals and updating service information and monitoring health, the vehicle's health and making service appointments.
Now, Mazda of course, knew about that situation that they weren't happy about that at all.
They issued a takedown notice, but that PR damage had already been done and the customers weren't happy and then the company had to explain the reasoning behind its decision to charge $120 a year, I think you said for the features that were already built into the vehicle.
So the non tech savvy customers, maybe not so happy.
Even the tech savvy customers try to can you imagine trying to hack your own vehicle that you paid so much money for in the first place.
This reminds me of the term jailbreak and yeah like if I think for a lot of not always tech savvy consumers but smart consumers in China.
I think we were kind of used to the idea of workarounds but it's really interesting what you mentioned just now So it kind of, to me, is connected to a movement over the last few years called the right to repair.
You know, because this is also for an average user or driver, you feel like this is kind of out of my hands unless maybe you have a smart engineer who knows how to work with computers, I guess.
Otherwise you don't know how to fix this thing.
You don't know whether the update is really all that helpful like what Yuxuan mentioned.
So yeah in a way it'd be nice to sort of reclaim some of that control or whatnot.
Well I I think the problem part of the problem and this is in the list of recommendations for what companies can do is focus on the software upgrades rather than the hardware upgrades.
Instead of saying you can pay a subscription to have your steering wheel warm, then just don't even have a subscription for that.
It was BMW, I think it was in 2023 or 2024, they had their heated seat subscription and they decided to cancel it.
So the question of whether customers should be upset about this or not is kind of a moot point because the fact is customers are complaining about this.
They don't like it.
They don't like it.
Whether it's fair or not, it doesn't matter.
They don't like it and if they don't like it and it's going to create problems for the company in the future, it's better - is it not better to not have these at all?
Well that's a very good question but it kind of - does it depend on who has a bigger say or bargaining power in all of this?
Do you think this is just a blatant rip off?
Because what you said is like, yeah.
Should you just not have it at all?
Maybe because it is a rip off or maybe you should keep it, but see like when, with our smartphones, we don't pay for the over the air updates.
I was just about to say that my smartphone just automatically updated itself.
the system just automatically updated itself and just let me know in the morning that oh we did this for you.
So that's what smartphones and a lot of other portable devices do these days.
And they're not charging us.
In my personal perspective is that it's not the product's targeting area for collecting profits from their consumers.
Say for phones, they just focus on innovation and technology and focus on developing new model types.
But for cars, it seems like after the car is sold there are very little room for them to collect back those revenues that's billed within the car.
Yeah, because it's a one -time purchase, right?
That's the traditional model of car sales is that you negotiate a price with the customer, you agree on the features that the car has, and then they pay and then that's it.
Right. That and then you go home and the car immediately loses value the minute you drive away.
Exactly. But this is different.
And should, you know, again, back to the point, should customers be unhappy about this?
My answer is not really.
And the reason I say that is if you go to a car dealership and you want the base model right now, no bells and whistles, nothing fancy at all, then the price is going to be lower.
If you want to negotiate the price of having a navigation installed into your vehicle, well then the car is going to be more expensive.
If you want heated seats, again, that's gonna be an extra cost. So, that's one argument.
You could argue against that by saying, yeah, but on a subscription base, you're gonna end up paying more over a period of time.
Right, if you have to pay $10 a month for your heated steering wheel, I've never talked so much about heated steering wheels in one day.
If you want to pay $10 a month for that, then think about how much that is a year.
That's $120 a year, right?
So that's going to add up.
OK, fine, but there's a counterpoint to that, and that is you're only going to use the heated steering wheel in the wintertime.
So give me 50 % off.
No, so only get a subscription for when the weather's cold.
You can cancel these subscriptions whenever you want to, right?
But that's not always the case, though.
Well, it might not be for every situation, but it certainly applies to some.
Right. What do you think?
Well, I think in general we're still at a transitioning phase for this whole industry.
I would say in the future, this whole paid wall or paid subscription thing is going to wind down a little since now they're still, you know, marginalizing some services and call it paid service.
But hear this is not from me.
is from Jenson Huang, the founder of AI computing company, Nvidia.
He once said in a 2023 statement that by 2025, it is expected that many mainstream automakers in the market may sell vehicles at prices close to cost, and primarily provide value to consumers through software.
This will fundamentally change the business model of automotive companies.
in general. So we're looking at this trend and we're only, perhaps, at the beginning of it, where automakers, they're seeking extra, say, short, short -visioned profit earnings, say making quick money out of these subscriptions.
In the future? Yeah.
Go ahead. I was gonna say, I don't think they see it as short -term at all.
No, I think they see it as a stream of recurring revenue, right, for years.
That's where they're banking and moving on.
Yeah, because their hope, again, back to the point I made before, they're hoping for a long -term relationship with their customers.
So, the idea makes sense for automakers, and also there's another advantage for automakers because it allows them to streamline their manufacturing.
They can build cars to more uniform specifications.
Mark Wakefield, he runs the automotive and industrial practice at the consulting firm called Alex Partners, and he said exactly that.
Down the line, owners can add features on the car, almost like a la carte at a restaurant, if you will.
You just add what you want, so you go to the dealership, they have their base models, you get that and then you just add on whatever you want.
It's a new concept, and it makes, from a car manufacturer's point of view, it makes sense.
It allows them to totally streamline their production, right?
They don't have to make all these different models with all these different options.
The customers can choose to add what they want from a business point of view.
That's what they have in mind.
Right. I would like to know what is the baseline price to just get the skeleton of the car.
That's what I'm paying for.
I don't want any bells or whistles.
I don't know how to use them.
I will not use them anyway.
Every car motorists out there, owner out there, just think about how many fancy features you actually use, none!
You just drive the car and want it to be safe.
Give me the frame of a Ferrari.
I don't need the doors, the windows, I need one seat.
No windshield, I don't need the windshield, I like the wind.
I mean sure, if you want to go super baseball.
Well, I do agree with you guys.
I think with the hardware that's already in the car, oh, the audacity that these car makers make me pay for that.
excuse me there's like saliva flying out of my mouth excuse me for that I am mad about that but with the smart updates I can sort of understand but my rear end is firmly planted in this consumer seat so it makes you feel really bad and also when you look at all the other subscription models of video stream well that's a bad example okay back to the smartphone and your computer updates, you don't need to pay a dime for that.
So I think it still takes a lot of persuasion for people to constantly to want to pay for your monthly or yearly subscriptions.
I think the car companies forgot perhaps, this is just my personal opinion, the human emotional response to the situation that you just described.
If it's cold on a December morning and you're sitting in your car seat and your butt is freezing and you know your seat has the ability to be warm, but it can't because you refused to give extra money to the car company.
That's gonna make people really mad in that moment and I think that's what the automakers didn't take into consideration.
But also if the automakers are all talking to each other and they're like, Hey Steve, our industry news standard is that we don't give those people the freebies.
Let's all, you know, it's like a Kahoot.
Yeah, that's called collusion and I'm pretty sure that's illegal.
And you shouldn't be saying this on National Radio.
So basically I think we're still at a point where, well, what are the new standards going to be like?
And we are voicing our concern in that sense.
And there's a new concept that is related to this that's being floated in the US auto industry, full car subscription models?
Yeah, this is really interesting.
This is a study that was published from Extreme Terrain that explored the idea of just subscribing to a car the same way you would subscribe to a streaming service like Netflix or what have you, or a news website service, say.
They say that there are many advantages to this.
Decades ago, you know, renting a car on a monthly basis without the hopes of ever owning it would seem kind of ridiculous, but that's exactly what we're talking about here.
Taking the ownership out of owning a car.
Now, if you're in your 40s or your 50s or your 60s, the idea of a car subscription might seem very alien, right?
But this is what they said from the report.
For younger drivers, many of whom perhaps have never owned a car in the first place, the idea of subscribing to a vehicle, they are less resistant to that idea.
So they did a poll, and here's what they found.
Almost half of the respondents said they would be willing to subscribe to a car.
Again, this is in the United States only, so to be taken with a grain of salt.
10 % said that they might subscribe to a car if the insurance and maintenance costs were included.
No surprise, insurance costs are rising as well.
46 % of respondents said that they would be willing to subscribe to a car specifically if tariffs drive up prices any further.
Take that into consideration.
1 in 5 Americans said they would be willing to pay $600 a month or more for a car subscription, and that number jumps to around one in three for Gen Z, one third of Americans would be willing to subscribe if it meant that they could swap cars every six months.
Those survey results are proof that this is not such a crazy idea perhaps, the concept of only getting a car subscription and not owning it at all.
I'm not sure if I followed this part.
But did you mention whether...
is this any different from leasing or renting a car?
Well it's not... yeah, it does sound similar on the surface, right?
But it's not leasing because there's no commitment.
If you lease a car, you're gonna do that for a period of time, right?
Like a month? A year?
Well, it's usually like a year.
And then there's lease to own options.
But yeah, let's say a year or two years I think is common, right?
But this is a monthly contract, perhaps, it's a subscription, just like you sign up to a TV streaming service for a month.
After a month, you can cancel that.
If you want to keep it and continue going, you can.
More results, 58 % said that they would love to swap vehicles based on their need, rather than say, committing to, I don't know, let's say you need a full sized truck, because you have to move house, well, you could just subscribe to that truck for a month, and then that's it.
Then you don't own that truck anymore.
It's kind of a cool idea, I think.
Yeah, and it totally reflects the younger generation's need for a car, because nowadays we don't necessarily have to buy one.
It's just when we have the need, there is such service provided that we can pay, say, a reasonable amount of money, I would assume, and get a monthly subscription of a car and be able to use it when I need it and then decide afterwards if I still need it by then.
Yeah, that's the other attractive point.
And you don't need to maintain it and you know, take care of it.
Yeah, 73 % said they were attracted to the idea of driving a car with no long -term financial commitment.
Understand, well -understood.
I would reckon with that.
Yeah, that's more like access often, access often trumps possession in for young people.
And also, I think the, the real issue here is ownership versus access.
And are we hitting into a subscription society when - Well, look at all the possessions of hours.
Increasingly, in today's world, do we still own the things or are we simply leasing access to them?
Like we don't own the CDs or vinyls of music anymore.
We can only listen to certain songs when we pay for them on your streaming platform, and we're kind of used to that idea.
But when it comes to your car, that is parked in the driveway, or your parking lot, it's a solid, expensive item there, and you don't necessarily own it?
And you're only leasing access to it?
I wonder how people are gonna feel about this.
And while in China, it seems like people have some serious concerns about it for the time being.
But when Gen Z become the main consumers of cars, that's something that might change.
Could totally change, yeah.
Yeah.
