4 ms·

I don't understand the point of charging people to use something that is already installed on the vehicle. I agree that advanced software that probably requires

I don't understand the point of charging people to use something that is already installed on the vehicle. I agree that advanced software that probably requires updates and improvements on a regular basis (e.g., autonomous driving) may have a monthly cost, but why pay for the mere use of things that are already on the car?

noir_lord 4y ago
Simply put - because they think they can get away with it.
atwood22 4y ago
It's a form a price discrimination.
SilverBirch 4y ago
Car manufacturers are in an extremely tight business and a very important part of their business is supply chain. It's not so much about how much the materials cost to build a car, but the complexity of managing a complex supply chain. The result is that it's extremely important for them to minimize the number of different components they have. It's extremely common across the car industry for manufacturers to share as many components as possible across as many vehicles as possible. This is why it used to be extremely common for car center consoles to have lots of blanked out buttons, they wanted to keep the main part the same even if you didn't purchase the optional extras that needed the buttons. So if the heated steering wheel is only a little more expensive that the non-heated steering wheel then it's far better to just install the heated wheel on every car. At that point you might say well if it's on the car why not just include it in the price? Well that's just down to marketing strategy, they think they can make more money by charging extra to turn it on. At the end of the day they're there to make a profit margin and price discrimination is a fairly well understood sales strategy.
- moring 4y ago
  But then why the monthly cost instead of a one-time cost for "unlocking" the feature?
  - hoppyhoppy2 4y ago
    The article says they're offering both options. >Heated seats, for instance, cost ₩24,000 (roughly $18) per month. But you can also pay for a year subscription ($176), a three-year subscription ($283), or you can buy the heated seats permanently ($406).
- spindle 4y ago
  Thank you for this. It makes sense, and IMO price descrimination is fine in principle. But in this case it's just so obviously so annoying. I bet they're losing a lot more in brand loyalty than they're gaining in cash.
- 4gotunameagain 4y ago
  This is one of the things I found absurd when reading a bit about "business". If I am not mistaken this is called "cannibalising your own market" and I find the concept repulsive. If you can sell a car with a heated steering wheel for the same price or even lower than one without, the only reason you would not do it is because you care about the profit and not the product you produce.
  - deepsun 4y ago
    What if you cannot sell if for the same price (in other words, high paying customers partially pay for lower paying customers). Afaik, car manufacturing is a pretty low-margin business, about only 5-7% profit. If you sold a car at <1%, you wouldn't make it due to competition and occasional risk. But if your high-paying customer can raise your profits to 20%+, effectively subsidizing low-paying customers, then you'd average at 5-7%. PS: low margin business is not a bad sign, in open and effective market any business must be low margin.
    - 4gotunameagain 4y ago
      It definitely makes sense framed that way, if your idea about a society is that high paying customers should subsidise the low paying customers through business
  - lozenge 4y ago
    It's called price differentiation. "Product versioning"[2][11] or simply "versioning" (or second-degree price differentiation) — offering a product line[9] by creating slightly different products for the purpose of price differentiation,[2][11] i.e. a vertical product line.[12] Another name given to versioning is "menu pricing".[10][13]
- Lio 4y ago
  This sounds like stuff that hard bargaining customers to can get dealers to "throw in for free". A bit like "mats, flaps and a tank of fuel". If you tell the salesman you're not going to buy the car unless they turn on all the features for free and it's the end of the sales month they probably will. It's not like it's costing BMW anything, it's just classic rent seeking behaviour for them. Only weak customers will pay for things like this twice (once in the purchase price and again in "feature" rent). I could also see a thriving market for used cars that have been permanently unlocked to have "better specs" than new. No secondhand car dealer worth his salt is going to put up with that bullshit when he could sell the car fully loaded for no extra cost.
twic 4y ago
This is exactly how IBM mainframes are priced (or were, for many years, not sure if it still works like this). A 12-CPU and 16-CPU machine are exactly the same, just with more cores enabled in the latter case. If you buy an upgrade from IBM, they don't send you a new machine, just send someone round to turn the other CPUs on.
kumarvvr 4y ago
> I don't understand the point Money.

noir_lord 4y ago

Simply put - because they think they can get away with it.

atwood22 4y ago

It's a form a price discrimination.

SilverBirch 4y ago

Car manufacturers are in an extremely tight business and a very important part of their business is supply chain. It's not so much about how much the materials cost to build a car, but the complexity of managing a complex supply chain. The result is that it's extremely important for them to minimize the number of different components they have. It's extremely common across the car industry for manufacturers to share as many components as possible across as many vehicles as possible. This is why it used to be extremely common for car center consoles to have lots of blanked out buttons, they wanted to keep the main part the same even if you didn't purchase the optional extras that needed the buttons. So if the heated steering wheel is only a little more expensive that the non-heated steering wheel then it's far better to just install the heated wheel on every car. At that point you might say well if it's on the car why not just include it in the price? Well that's just down to marketing strategy, they think they can make more money by charging extra to turn it on. At the end of the day they're there to make a profit margin and price discrimination is a fairly well understood sales strategy.

moring 4y ago
But then why the monthly cost instead of a one-time cost for "unlocking" the feature?
- hoppyhoppy2 4y ago
  The article says they're offering both options. >Heated seats, for instance, cost ₩24,000 (roughly $18) per month. But you can also pay for a year subscription ($176), a three-year subscription ($283), or you can buy the heated seats permanently ($406).
spindle 4y ago
Thank you for this. It makes sense, and IMO price descrimination is fine in principle. But in this case it's just so obviously so annoying. I bet they're losing a lot more in brand loyalty than they're gaining in cash.
4gotunameagain 4y ago
This is one of the things I found absurd when reading a bit about "business". If I am not mistaken this is called "cannibalising your own market" and I find the concept repulsive. If you can sell a car with a heated steering wheel for the same price or even lower than one without, the only reason you would not do it is because you care about the profit and not the product you produce.
- deepsun 4y ago
  What if you cannot sell if for the same price (in other words, high paying customers partially pay for lower paying customers). Afaik, car manufacturing is a pretty low-margin business, about only 5-7% profit. If you sold a car at <1%, you wouldn't make it due to competition and occasional risk. But if your high-paying customer can raise your profits to 20%+, effectively subsidizing low-paying customers, then you'd average at 5-7%. PS: low margin business is not a bad sign, in open and effective market any business must be low margin.
  - 4gotunameagain 4y ago
    It definitely makes sense framed that way, if your idea about a society is that high paying customers should subsidise the low paying customers through business
- lozenge 4y ago
  It's called price differentiation. "Product versioning"[2][11] or simply "versioning" (or second-degree price differentiation) — offering a product line[9] by creating slightly different products for the purpose of price differentiation,[2][11] i.e. a vertical product line.[12] Another name given to versioning is "menu pricing".[10][13]
Lio 4y ago
This sounds like stuff that hard bargaining customers to can get dealers to "throw in for free". A bit like "mats, flaps and a tank of fuel". If you tell the salesman you're not going to buy the car unless they turn on all the features for free and it's the end of the sales month they probably will. It's not like it's costing BMW anything, it's just classic rent seeking behaviour for them. Only weak customers will pay for things like this twice (once in the purchase price and again in "feature" rent). I could also see a thriving market for used cars that have been permanently unlocked to have "better specs" than new. No secondhand car dealer worth his salt is going to put up with that bullshit when he could sell the car fully loaded for no extra cost.

twic 4y ago

This is exactly how IBM mainframes are priced (or were, for many years, not sure if it still works like this). A 12-CPU and 16-CPU machine are exactly the same, just with more cores enabled in the latter case. If you buy an upgrade from IBM, they don't send you a new machine, just send someone round to turn the other CPUs on.

kumarvvr 4y ago

> I don't understand the point Money.