6 Jul 20

BMW to offer game-changing subscription model for options

BMW considers installing a range of options as standard in the factory and have the buyer of the car try them out for a month – for free. After the trial period, you can choose which options you want to keep and which not. And you don’t have to buy them: BMW is thinking of a subscription model.

It’s not because your car doesn’t have adaptive cruise control, high beam assist or navigation that it isn’t equipped with the hardware for these features. This is the result of far-reaching standardisation - equipping all cars with the technology often costs less than fitting out just a few - and the fact that this hardware is necessary for certain legally required features which the OEM cannot monetize, such as Autonomous Emergency Braking (AEB).

BMW sees a new business model: they consider selling these "ingrained" options afterwards by letting the customer have a taste of them first – for free. On the new 5-Series and the 4 Coupé, which are equipped with Operating System 7, it could soon be possible. An over-the-air (OTA) software update is all it takes to enable or disable certain features.

The idea is not entirely new. Today, you can already use various Connected Services on-demand. This is nothing but software: you pay for a subscription and as long as you do, you get data to make the services work. Think of Spotify, Apple CarPlay, weather forecast, live traffic info, and so on. BMW wants to take things one step further, though. It wants to include such things as cooled and heated seats, the adaptive M-Sport suspension, automatic air conditioning and a memory function for the electric seats as standard and switch them on or off, depending on the customer's wishes (and wallet).

Subscription model

The concept is to give the customer a month's free trial and then the opportunity to buy the features of their likin using the My BMW App. Not for the full purchase price, but for a monthly fee and for as long as you want to use the features. For instance, if you do not find the cooled and heated seats as useful after 12 months, you can terminate this particular subscription. When you sell the car, the next owner will again have the possibility to activate or deactivate certain options.

The impact of this business model cannot be underestimated. After all, you don't have to pay thousands of euros for additional options upfront. Initially, BMW could therefore miss out on revenue, but at the same time this approach offers a potential for additional margin that the brand would otherwise not have because the customer would not take the option initially. At the same time, this functionality could increase residual values: if the next owner knows that certain options are available, he might be willing to pay more than for a car that does not offer this on-demand functionality.

Photo credit: BMW, 2020


Authored by: Dieter Quartier