The era of subscription car features is coming, and lawmakers are preparing

Brianna Kraemer

Carolina Journal

Most people think when they buy a car, they’re paying for everything it can do. But what if your next vehicle has heated seats or advanced cruise control built in, and you have to pay extra later to unlock those features?

That’s the future many automakers could be heading toward, lawmakers recently discussed, and North Carolina wants to step in to ensure local dealers aren’t left out of the money pot.

New technology allows manufacturers to build cars with dormant hardware that can be activated later through software updates—a model known as “over-the-air” upgrades (OTA). Some vehicles now have advanced features like remote start or GM’s “Super Cruise” that essentially drives itself on the highway. However, industry experts say that some manufacturers are looking to offer some tech features at a monthly cost after the initial sale or trial, similar to an OnStar subscription.

“The traditional car sale for many years has been, here’s the car, everything’s on it, we’re selling it to the customer,” John Policastro, president of the NC Automobile Dealers Association, told legislators. “We’re starting to see the concept of not just the [OnStar] communication system, but things like heated seats, super cruise – different things that are functionally built into the vehicle, and just need to be turned on.”

During the House Transportation Committee meeting earlier this month, Policastro opted not to debate whether the subscription movement is a wise idea, adding that “we don’t particularly like that. We think that if the customer is purchasing a vehicle with these things on it, it should be part of the purchase price and be done with it.”

Nevertheless, he warned that it’s coming down the pipeline. As the industry moves forward, lawmakers are trying to make sure fairness and transparency for local dealers don’t fall behind.

“A lot of this is not really prevalent right now, like I said, you’re not seeing a lot of this. But we think the future of the industry is that they’re going to want to do more and more of these kind of subscription services,” said Policastro. “The dealer who assisted in the sale of that additional product should see some of the compensation.”

The sales shift creates a new challenge lawmakers address in House Bill 406: If a dealer sells you the car, but the manufacturer sells you the upgrade later, who profits?

The legislation cleared the committee and would require manufacturers to share 20% of the revenue from subscription-based features sold within a year of the vehicle purchase. It also mandates transparent reporting so dealers know what’s being sold and what they’re owed.

Supporters say the bill helps protect North Carolina’s franchise dealer system, a system that supports local businesses.

“I think what we’re going to look at, as time progresses and technology grows, is you’re going to go to, let’s just say, a Ford dealership and they’re gonna have 10 F-150s,” explained Rep. Brenden Jones, R-Columbus. “But they’re all gonna be equipped with the possibility of having these add-ons. And you’re able to choose and not choose what you want to work – remote entry, power seats, heated seats. And I think that’s the technology part we’re going to, but I think we still stay to a direct-to-consumer at the franchise dealerships and not go direct from like the internet, Amazon or a Walmart type sales model.”

General Motors typically offers a three-year free trial for its Super Cruise, followed by a $25 monthly fee or $250 annually. According to online reports, subscriptions could yield $2 billion in yearly revenue for the company, as it plans to double the number of vehicles sold with the Super Cruise system already installed.