BMW offering Heated Seats, Adaptive Cruise Control as Monthly Subscription in S.Korea |
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07-11-2022, 08:30 PM | #23 |
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What point am I trying to make? Can't see how it's missed!
Let's see, how about a sneaker manufacturer charge you for each step you take! Charge more on a subscription basis because you actually run with the sneaker! Maybe cell phone manufacturers will charge per call, not your carrier, but the phone manufacturer! Or charge additional for being able to play music through it's speakers and not just voice calls! A LCD TV manufacturer charge you per view, again, not the cable service or provider, but the actual TV people. Or limit capability by subscription. It's not a WIN for car owners, it's ridiculous! They want to make everything on their production line vanilla, ie, the same, ok. So the capability is already there in each vehicle as it streamlines and simplifies production in the fact that each car isn't different, but the same. What changes is what's used or utilized by the owner or occupants at the time. Ok, yeah, cool, sounds cool. But only if it's not your car that you've purchased! Might as well just lease every vehicle, and this business model makes sense. When I purchase it, it becomes my property, you don't retain any rights over it. And actually with the Advent of the "smart car" paradigm, there's been some big deals and fighting over who owns the "DATA" the vehicle is producing. Like your usage habits, travel, etc... All something nobody is talking about, which in my opinion is a serious invasion of privacy! But back to the "subscription" model. Yeah it works for some, it works for businesses, it works for those who don't keep their cars and lease, and it works to make cars attractive at a seemingly lesser cost, but that's belongs in the same group of people financing a depreciating asset over 7 and some even 8 years now. It's all moot in a way because the option to "buy" hasn't really been eliminated. For now... I put this in the same class as those involved with the exterior design changes that emphatically deny is a detriment to the brand! They're too smart for themselves... But only the future will tell what's going to happen. I do believe some sales figures have already shown a downward trend... Regards Have a great day! |
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07-11-2022, 08:35 PM | #24 | ||
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A huge number of BMWs are leased for 36 months and the 3 year subscription being priced just slightly below the "unlimited" is clearly to incentive people leasing new cars to subscribe. All of those off-lease cars will have their features disabled. Also if you're buying a car from a dealership and the previous owner bought "Lifetime" CarPlay and BMW just disables it anyway, how would you know? They could do that with every car that comes through the dealer. |
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07-11-2022, 08:42 PM | #25 | |
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Also it's easy to put $5000+ in options on an M550i that could all be put behind subscriptions. Driving Assistant Plus (adaptive cruise), head up display, heated steering wheel, ventilated seats, massage seats, heated rear seats, and Integral Active Steering (rear wheel steering) are all features they could lock you out of with software if they wanted to. If they were really evil they could even disable adaptive dampers or limit performance unless you subscribe. Last edited by Coi; 07-11-2022 at 08:53 PM.. |
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07-11-2022, 08:52 PM | #26 | |
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There are multiple issues for the used market too. Firstly, this will hurt resale values and trade-in values since we will know the next owner will have to re-purchase or re-subscribe for all of these features again. That loss in resale value for owners will be going straight into BMW's pockets. Secondly, BMW can disable everything on every used car that is sold through the dealer even if had be permanently paid for. The pro-consumer move would be to slightly increase prices but greatly increase standard equipment. Toyota and Lexus did this when they made adaptive cruise control standard equipment a few years ago. (Not saying they're a perfect company though and they have their own subscription scandal right now.) Subscription models are the most anti-consumer way to go about this. Last edited by Coi; 07-11-2022 at 09:06 PM.. |
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07-11-2022, 08:56 PM | #27 | |
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07-11-2022, 09:02 PM | #28 |
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If bmw is disabling features when you sell your car and making the next owner pay for them again that will undeniably hurt resale values. Even though they're not providing anything of vale at that point in time, BMW will essentially be taking a cut of every used car sale. Owners will definitely be hurt by this in the form of increased depreciation.
Last edited by Coi; 07-11-2022 at 09:09 PM.. |
07-11-2022, 09:06 PM | #29 | |
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Again, all of this is highly reliant on how BMW prices these "fully" loaded cars. The subscription part shouldn't be an issue. |
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07-11-2022, 09:20 PM | #30 | |
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Yeah, people will readjust how used cars are appraised in that values will go down. Right now my X3 M40i with a bunch of options is worth more on the used market because when the next owner gets it they know they'll have adaptive cruise, heated seats, heated steering wheel, auto parking, heads-up display, premium sound system etc. Under the subscription model not only would I have paid for those features but my trade-in or resale value will be the same as a base model car with no options whatsoever. BMW is making more money by charging the next owner to unlock stuff already on the car and I'd be loosing out. A loaded car that should be worth $50k with all the features enabled will now be priced as $45k base-model used car. Lower resale will also hurt lease residuals. That's money straight out of the pockets of people buying new BMWs and into the pockets of BMW corporate. |
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07-11-2022, 09:31 PM | #31 | |
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As an example to how much of an impact supply chain efficiency has on cost - An individual paint, which might be offered for free on one model, can easily cost someone $5,000 on a model it's not typically offered on. Why? It's not because the paint is more expensive than other paints. It's because of the disruption to the supply chain. You as a customer are paying BMW $5,000 because of the disruption you're causing to their supply chain by ordering a non-standardized color for your model.
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07-11-2022, 09:47 PM | #32 |
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Just wait until they start charging a monthly fee for performance.
Nice M5 Competition. Oh, you want more than 100 hp? That'll be $500 per extra 200 hp. |
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07-11-2022, 10:19 PM | #33 | |
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The only time it's cheaper to include an option than not include it is if the number of cars not getting it is extremely small. Like this was the case for heated seats on the "base" $35k Model 3 a few years ago because they made it pretty much impossible to actually buy one even if you wanted it to so production of that spec was miniscule. (It was mostly made to meet a specific Canadian regulation around tax credits, but I digress.) This does not apply with options where the ratio of cars with and without the option are more reasonable. The more parts BMWs needs the more they have to pay for shipping, storing, and time for installing those parts. Sure, economics of scale apply but that doesn't mean that overall buying more of something costs less than buying fewer. The total parts cost up until the point of installation is larger with more standard equipment. Also stuff like adaptive cruise control radars are expensive and often come from suppliers like Delphi or Bosch. So the car manufacturer isn't just paying the raw cost of building these parts but is covering the logistics and profit margin of a supplier too. Individual paint is actually a special case, and you're paying for more than just the disruption to the assembly line. I remember hearing about paint-to-sample with Porsche where they actually have to test the paint on every material it will be going on (steel for chassis, aluminum for body panels, and plastic for bumpers) to make sure the color matches on all of those. They they have to do durability testing for that specific paint on all those materials. This is extremely labor and time intensive. If you're picking a color under BMW individual that isn't normally offered on that model then the material composition of the exterior metals or plastics might be different, potentially requiring testing. Also the labor involved for painting one car on an entire assembly line a different color than all the others is obviously vastly more than simply installing or not installing heated seats or radar cruise. I would also guess that a huge proportion of the cost for individual color is profit because they know people who want it are willing to pay that much. Even if individual color didn't cost BMW anything they would still charge $5k for it because they can. Last edited by Coi; 07-11-2022 at 10:28 PM.. |
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07-11-2022, 10:45 PM | #34 | ||
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I'm not saying it IS cheaper, I'm saying I wouldn't be surprised if it is. Truthfully we don't have insider information on their sourcing, transportation and distribution costs, but you can bet they've conducted the break-even analysis for this proposal. I've worked in various manufacturing industries over my career and currently lead a department dedicated to supply chain optimization, so I have an idea of how much of an impact logistics and supply chain efficiencies have on overall COGS. Quote:
As for individual colors - yes I agree there's many components that go into pricing for it - perhaps even profit. But I wouldn't be surprised if disruption to supply chain is the #1 cost associated with it. If BMW was actually making a healthy profit on individual colors, they'd advertise them much more openly. Outside of this forum, few people even know what an individual color is, and most don't even know you can special order a car. Majority of people still assume your only method of purchasing is off the lot and your color selection is what has been ordered by the dealer for inventory (obviously there's some change happening in the current climate).
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07-11-2022, 11:56 PM | #35 | |
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It should be amazing when they make the braking "feature" (the basic one, besides that cruise control already mentioned) a monthly subscription. Coming to yourself after an accident: "I must have missed the payment!". Heated seats subscription must cost attractively compared to warm pants/underwear! |
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07-12-2022, 12:35 AM | #36 | |
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I can't imagine the backlash if they brought this to the U.S and people start getting nickle and dimed for every little feature. |
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07-12-2022, 01:29 AM | #37 |
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I don't understand who has the reigns at BMW where they think they can maintain their prestige while simultaneously transitioning to the Spirit Airlines pricing model.
Utterly terrible move by them. I don't think they understand that even piloting a program like this in S.Korea will hurt their reputation globally. I'm not paying $20/month to have heated seats that are already installed on the vehicle. Are you kidding me? |
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07-12-2022, 01:39 AM | #38 | |
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barely optioned toyotas and hondas already all come with these things standard. in 2019 i traded my daily driver, a 3 series, for a camry because for $28k i could get heated seats, radar cruise control, carplay, panoramic sunroof. whereas on a 3 series they nickel and dimed you to death to get any of the interesting features there was a time that the premium brands gave you standard features you couldn't even get on an economy car. bizarrely, it's now the other way around with honda civics coming with more standard tech than a bmw twice the price. while the 3 series was objectively a better car than the camry i bought, there was not enough value add for me to justify literally double the price it's even worse today. i needed an suv. for under $50k i got a highlander platinum with awd, radar cruise, lane centering, third row seating, heated/ventilated seats, hud, panoramic roof, heated second row, power tailgate, sun shades in the rear doors. it's crazy how hard it is to spec out a bmw with some of that |
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07-12-2022, 01:43 AM | #39 | |||
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Looking at examples, for the last few years Porsche has the highest margins of any major automotive brand with the most customizability and no trim levels. Every model has literally millions of possible configurations. They make most of their profit from SUVs that are only slightly more expensive than those from other German luxury brands. If shipping, logistics, and supply chain mattered more than material and parts costs then they should be loosing tons of money. Clearly that's not the case. Maybe Porsche also saves money by not installing costly equipment on every vehicle. I personally dislike their pricing model too, but it clearly works. Genesis has only a few trim levels and almost no a la carte options on any of their models. Being part of Hyundai, they're also extremely vertically and horizontally integrated even doing their own shipping and in some cases their own raw materials. Their pricing is nearly in line with Audi and BMW now and even with new cars currently having barely any manufacturer incentives Genesis is barely turning a profit. We don't need insider to data to see that there's more to profitability in the automotive industry than sourcing, transportation, distribution, and production line simplicity. Quote:
A basic principle of an economies of scale graph is that it doesn't just keep going down forever. Eventually you reach constant returns where the price levels out. After that it's diseconomies of scale where supply is overwhelmed and the cost per unit starts to go up again. This is true for everything. We've seen countless times in the last couple years that big supply chains can clearly get overwhelmed at which point it makes sense to cut features and reprioritize. There's no way every single part BMW manufacturers or orders is still in economies of scale in terms of manufacturing and installation. Quote:
I really don't see how it could be justified that BMW equipping cars with every feature then blocking them behind a subscription could possibly reduce prices for consumers. I also can't think of any industry at all where the most profitable company only sells a single variant of their product, so for that to be true for something as complex and expensive as cars seems farfetched. This is clearly a cash grab and not some amazing achievement in efficiency that no other automaker in the history of mass production has ever thought of. I think this unbecoming and anti-consumer behavior from a so-called luxury brand should be called out, not defended. On a side note, I really don't want to come across as rude or anything because I'm enjoying this discussion! You bring up a lot of points I didn't fully consider. Last edited by Coi; 07-12-2022 at 02:31 AM.. |
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07-12-2022, 01:59 AM | #40 |
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07-12-2022, 02:01 AM | #41 | |
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Yeah! Madness
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07-12-2022, 02:12 AM | #42 |
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07-12-2022, 02:21 AM | #43 |
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07-12-2022, 05:29 AM | #44 |
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A really dumb idea that only serves to hurt the brand image.
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adaptive cruise control, bmw, connected drive, drive assistant, internet, subscription |
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