EVs & Hostageware: The Push To Sell Stuff Over The Air
Tesla started the whole “car as computer” thing. 10 years ago, the idea that a manufacturer could improve the features of the cars it builds via over the air updates was novel. Today, no self respecting car company would offer cars without that feature, especially electric models. Chalk up another victory over conventional thinking from the mind of Musk!
Until Elon came up with the whole OTA update thing, the conventional business model was for auto manufacturers to update their cars annually. Why give away stuff for free when you can get people to trade in the old family bus to get the latest and greatest features in a new model? It was a built-in marketing scheme that worked to perfection for generations. If an update was truly needed, let people trundle on down to their local dealer and pay for it.
Just like the changeover to electric cars, the traditional car companies resisted the idea of over the air updates at first. But now they have seen the light. There’s gold in them thar updates! It’s a whole new opportunity to sell people stuff. In this week’s Bloomberg Green email, Kyle Stock tells us how Porsche is marketing “intelligent range manager,” an over the air software update that limits the maximum speed and tweaks the car’s navigation system to stretch how far it will travel on a single charge. The price? $474 upfront or $12 a month.
Stock says Porsche is “selling a slightly brighter shade of green like a Netflix subscription or some kind of extra swag in a video game. Get ready to see a lot more of this.” Karl Brauer, executive analyst at iSeeCars, tells Bloomberg Green, “It’s a subscription world and we just live in it. There could be dozens — even hundreds — of unique capabilities that you may or may not have soon, depending on what you pay every month.”
Upgrades From Mood Lighting To Driver Assistance
What sort of things are we talking about here? Elon Musk has already hinted that autonomous driving could be available on subscription basis. Turn it on when you are planning that family vacation to The Mouse. Turn it off when you are back home and commuting to work every day. More mundane features like interior lighting that changes to sync with the music, more powerful headlights, parking assistance, or help with backing up a trailer could all be made available to those who want them.
How about a special traction control app for those who live where icy and snow covered roads are common? BMW currently offers drivers an optional package that includes real-time traffic alerts and a recorder that captures a 40-second video from the front of the car that can be replayed after an accident. Not all such offerings are appreciated. In 2019, the company was forced to drop an $80 fee for enabling Apple CarPlay after an outcry on social media. More recently, it has taken a drubbing on Twitter because of a subscription fee for intelligent high beams, which one Twitter user dubbed “hostageware.”
The Road To Enormous Profits
Remember when companies made money by making and selling cars? Forget that so last century thinking. Kjell Gruner, CEO of Porsche Cars North America, told Bloomberg recently, “If you don’t have digital experiences, you are not on the radar screen. You’re irrelevant.” Audi, BMW, Lexus, and Mercedes all confirmed to Bloomberg that a range of new digital options will appear on their most expensive models soon. It’s “part of a global BMW strategy,” said BMW spokesperson Phil DiAnni. “When and how the concept gets rolled out in individual markets, and to what extent, is still to be determined.”
The cars of the future will require massive computing power. In 2019, General Motors introduced its Vehicle Intelligence Platform which can process 4.5 terabytes of data per hour — five times more than prior automobiles from GM. There’s big bucks in play here. Auto analysts at Morgan Stanley say that Ford’s cloud computing platform that will enable digital subscriptions could become a $100 billion a year business — three times the company’s current market capitalization. Here’s the math according to Bloomberg: “$10 a month from the 75 million Ford’s on the road adds up to $9 billion a year — and an extremely profitable $9 billion a year at that.” [Of course, not all those Fords are OTA capable at this time.]
The takeaway from Morgan’s team of auto analysts is, “We believe the industry is in the early innings of a profound shift to securing revenue measured in data, derived from its hardware ‘real estate’ and monetized through a range of recurring business models.”
The Future’s So Bright…
In this brave new world of digital driving, we could be rolling along when a popup on our infotainment screen tells us that one of our Facebook friends is currently ordering a Super Duper Burger at the local fast food emporium 1 mile ahead on the left and if we pull in within the next 5 minutes, the restaurant will Plus Size our order for free. The local tire store on your way to work may invite you to take advantage of a limited time offer to switch out your old treads for brand new rubber at 30% off (mounting and balancing extra). Walmart may notice you are in the area and send you time sensitive digital coupons based on your most recent buying habits. As Steely Dan would say, “What a wonderful world it will be. What a glorious time to be free…”
Technology, however, is nothing more than a tool, and like most tools, it can be used for good or evil purposes. Ever heard of ransomware? Not good if you are speeding down the superslab when the digital slicky boys decide to invade your personal space. Police departments may like it, though, if they can use facial recognition software to identify “persons of interest” and disable the cars they are driving until the minions of the law can glide up and arrest them.
And those dark thoughts lead to even darker thoughts. Who actually owns that spiffy new Electromobile 5000, you or the company that controls the software that operates it? Late on your monthly payment? Boom! No driving for you. Driving without proof you are legally in the country in your possession? You will go no further until this gets straightened out by duly constituted authorities.
Who Owns What?
Let me tell you a story. My local community recently asked a civil engineering firm to do a study of our property and recommend ways to future-proof it. The company was happy to help and we were glad of their assistance — until they told us their work would sit on their server and we would have to pay to access it every time we want to strategize about widening a sidewalk here or re-routing a bike path there. We would pay for the study and then pay again to use the results we already paid for.
Remember the old days when you could copy a cassette full of your favorite music or share a DVD of your favorite movie with friends? Nuh-uh. Can’t do that any more. You can rent the content for a fee, but the ownership of that content remains with the person or company that created it.
Think of the implications for drivers as their cars age. Who really owns them if most of their operating systems are digital and controlled by the manufacturer? What can you actually repair yourself? Will independent mechanics be shut out in the shiny bright future?
And here’s another question for you to ponder. You know how Microsoft and Apple sometimes decide to stop supporting certain digital platforms? What happens if GigantaCorp decides it no longer wants to support the software in the ElectroMobile 5000 it sold you in 2022? What then? Over the air updates sound wonderful, but what about when updates are no longer available?
The other thing to consider in all this is, what if the whole idea of owning a personal vehicle is outdated? What if in the future we simply order up the wheels we need for today, this week, or this month? What if subscription services that include all maintenance, insurance, and repair costs become the norm? Then we won’t care about over the air updates at all because the vehicle we select online will have all the upgrades and updates we need included.
Looking further down the road, robocars may mean the end of private transportation devices entirely, at least in urban areas where parking them all simply takes up too much room. Today, all the parking spaces and parking lots in Manhattan occupy as much space as 12 Central Parks. Imagine if some of that area could be devoted to greenways and recreation instead of exhaust spewing monsters!
The world of transportation is changing before our eyes and it involves a lot more than the EV revolution. Whether that is a blessing or a curse is a story that remains to be written.