The future of driving can cost you $ 8.50 an hour if Volkswagen follows through its boardrooms.
The German carmaker is considering charging an hourly fee for access to autonomous driving functions when these functions are ready. The company is also exploring a range of subscription features for its electric vehicles, including increases in range or performance that can be purchased hourly or daily, Thomas Ulbrich, a board member of Volkswagen, told German newspaper Die Welt. Ulbrich said the first subscription features will appear in the second quarter of 2022 in vehicles based on Volkswagen̵
The director said Volkswagen will also offer video games in cars similar to Tesla’s arcade. “During the charging breaks, even though they only last 15 minutes, we will offer customers something,” said Ulbrich. He said the carmaker would not develop the games itself and it is not clear if they will come pre-installed or can be purchased through an app store.
However, Volkswagen’s real money provider can drive autonomously. “In autonomous driving, we can imagine that we turn it on per. Hour. We assume a price of about seven euros per hour. So if you do not want to drive yourself for three hours, you can do it for 21 euros, ”said Klaus Zellmer, sales director for the Volkswagen brand.
In a streak at Tesla, he said that by charging hourly rates, VW would make autonomous driving more accessible than “a car with a five-digit surcharge.”
That does not mean that Volkswagen does not hope to make serious money on the subscriptions. In all, Zellmer said he expects the subscriptions will eventually provide the company with hundreds of millions of euros in additional revenue.
Over the last few years, Volkswagen has been paying increasing attention to the software that goes into the vehicles. In 2019, the company launched an attempt to streamline its software. At the time, the company had eight different electronic architectures across all VW Group brands. For a carmaker that prides itself on developing a handful of mechanical platforms, it can adapt to suit different segments that the diversity of architectures was inefficient and wasteful. VW Group merged all of its software divisions into an internal group that changed its name to Cariad in November.
“Cariad is extremely important for our future in the group,” said Ulbrich. “As a brand, the unit develops the basis for future electric cars. This allows us to focus on software for the vehicle and applications for customers. ”
Willingness to pay
Car manufacturers have been eating over the idea of subscription revenue for years. As more functions in vehicles are controlled via software, the idea of flipping a switch to enable or disable them has become more and more appealing. And after seeing software companies switch, it is not surprising that car companies are taking serious steps to bake subscriptions into their offerings.
Volkswagen is not the first car company to consider subscriptions or after-sales purchases. Tesla once offered Model S cars with a 75 kWh battery that was only software-limited to only 60 or 70 kWh, depending on when the car was purchased. In the case of the 70 kWh models, customers could pay $ 3,250 to unlock the last 9.33 percent. Recently, Telsa temporarily locked extra range in these and other models to give customers affected by hurricanes and forest fires extra juice to drive to safety.
BMW in particular charged an $ 80-year subscription to CarPlay in its 2019 models. It was a deal for renters who saved $ 60 over a three-year lease compared to buying the feature directly. But the subscription also meant that BMW could double-dip when reselling the car and offering a similar subscription or direct purchase to the other owner. And if you wanted your car for more than three years, the deal was awful. BMW gave everyone a one-year free trial, and before the trials were over, the company decided to offer the software for free to all owners. (BMW has not given up on the idea and is testing subscriptions for other features in some markets.)
Whether Volkswagen’s offered offerings will be embraced by consumers remains to be seen. Temporary increases in range can catch on if the price is right. As someone who is now on his third EV, I can tell you that I would gladly pay for temporary range if they would save me money to pay for full capacity in advance. Most electric cars have batteries that far exceed my daily range. Performance enhancements can be harder to sell every hour or daily – they can make track days more fun, but I think it would be hard to return to a discouraged model the next day.
Autonomous driving is what is likely to make or break Volkswagen’s subscription ambitions. Seven euros – $ 8.50 – an hour is a lot of money to spend on letting the car drive itself. Yes, it allows people to do something other than drive, and for some drivers, the extra time is worth it. But for most, the decision gets tougher. In surveys of willingness to pay for autonomous driving, the range tends to be $ 1,000- $ 7,000, which would buy you between 120-820 hours at Volkswagen’s level. In 2018, commuters drove an average of 225 hours a year. Drivers typically estimate their time at 20-40 percent of their salaries, and given that the average U.S. salary is around $ 52,000 a year or approx. $ 26 an hour, Volkswagen is not necessarily unreasonable with its pricing.