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2022 Automotive Software Survey: New Business Models Offer Great Opportunities, and also Great Challenges!

by Ian Riches | Nov 02, 2022

Strategy Analytics and Aurora Labs have just published the results of their third annual software survey.  This year, we included some more detailed questions about attitudes to paying for optional vehicle features.  The results to one such question are shown below:

As a consumer, how would you prefer to pay for optional vehicle functionality?

Perhaps unsurprisingly, the most popular answer here was that respondents would prefer all features to be included in the base price of the vehicle. That’s perhaps an unrealistic wish – but does show that simplicity and transparency of pricing are valued by the consumer.

There are two ways of looking at the rest of the answers. 

  • New business model pessimists might choose to combine the 37% of people who said “included in the base price” with the 19% who answered “At the point-of-sale”, and make the case that well over half of respondents were effectively saying that they did not wish to purchase additional features after the vehicle was delivered.
  • Optimists will look at the same data and see that almost half of respondents were not just open, but would actually prefer to use some form of new business model to pay for their optional vehicle functionality.

Strategy Analytics is siding with the business model optimists on this one.  For what is a new initiative in automotive, the fact that well over 40% of respondents stated that they would “prefer” to download features is a very encouraging start.

Further questions in the survey looked people’s willingness to spend on these features as a monthly payment.  Full details can be seen in the downloadable analysis, which is available from both Aurora Labs and Strategy Analytics.

What’s clear, however, is that challenges remain.  Only 3% of respondents stated that they were willing to pay over $50/month for all optional vehicle services.  This is clearly way below the $199 monthly fee that Tesla currently charges for Full Self-Driving. 

One way to explain this discrepancy is that consumers are prepared to pay more when they perceive clear value in the new features.  Regardless - as automakers seek to monetize the software defined vehicle, it is clear from these results that they still have work to do in demonstrating the value proposition to consumers of paying for features after the point-of-sale.

The delivery of these new features will require a robust OTA solution that meets customer needs.  This was highlighted by another survey finding.  Over of respondents 70% stated that they would not be willing to wait more than 10 minutes for an update to complete.

The challenge for automakers is thus clear.  There are many people out there both ready and willing to pay for downloadable features in their vehicles.  However, both the value proposition and the delivery mechanism need to be right before the consumer will open his or her wallet. 

Done correctly, there are huge sums to be won.  If automakers can boost revenues by just 5% by selling features over-the-air (which, based on our survey responses is seen as achievable) then an automaker the size of Toyota could see an extra $13B+ of annual income.

The full results of the survey can be downloaded at the links below:

Aurora Labs

Strategy Analytics

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