"The Dilemma of Connected Cars: 'Used but Not Profitable' — The Limits Approaching Car Subscriptions"

Operate the air conditioner from your smartphone. Check the battery level while at home. Locate where you parked, check the lock status of the doors, and schedule charging times.

These features, once considered advanced equipment for luxury cars, are rapidly becoming commonplace in EVs and connected cars.

For automakers, this trend represents a significant business opportunity.

The traditional car business model primarily generated significant revenue at the point of sale. However, with the proliferation of Software-Defined Vehicles (SDVs), revenue can be generated continuously by providing software updates and digital services even after the car is sold.

This means the concept of "recurring billing," which has become standard in smartphones, video streaming, and cloud services, can also be applied to automobiles.

However, a troublesome issue has emerged for automakers.

Even though more people are using apps, it doesn't necessarily mean they are willing to pay for them.

In fact, the more frequently a feature is used, the more it may be perceived as a standard function of the car, making it difficult to charge for.

This contradiction is likely to become an unavoidable issue for Japanese automakers as well.

EV apps have become established, yet 64% "do not want to pay for them"

The "U.S. OEM EV App Report" released by J.D. Power in May 2026 highlights this issue with significant figures.

The proportion of non-Tesla EV users who frequently use the manufacturer's official app rose to 55%. It was 48% in 2025, indicating that apps have become an integral part of the EV ownership experience.

The app dropout rate also decreased from 22% in 2023 to 4.5% in 2026.

From the automakers' perspective, this means "user retention" has progressed significantly.

Given this, it wouldn't be surprising if subscription revenue were to increase next.

However, the outcome is not straightforward.

In the same survey, 55% of EV owners said that the manufacturer's app had a major or moderate impact on their car purchase decision.

Nevertheless,64% said they do not want to pay additional fees for app access.

Furthermore, 51% of users for whom the app influenced their purchase decision were first-time users of the manufacturer's official app.

Here lies the fundamental problem automakers face.

Users appreciate the app.

They use it as a factor in deciding which car to buy.

They actually use it frequently.

However,

"Using it because it's convenient" and "paying for it monthly because it's convenient" are not the same.

While this may seem obvious, it holds significant meaning for companies that have designed digital service KPIs centered around usage frequency and active user numbers.

The three stages of "Discover, Execute, Commit"

Zheng Xu, Connected Services App Product Owner at Nissan, as introduced in the original article, considers user behavior in connected services in three major categories.

These are "Discover," "Execute," and "Commit."

In Discover, users open the app to see "what they can do."

In Execute, they actually turn on the air conditioner, check the battery level, or find a charging location.

In Commit, they decide, "It's worth continuing to pay for this service."

Currently, many automakers excel at the first two stages.

By adding new features, making the app more user-friendly, and increasing operation speed, Discover and Execute can be enhanced.

In fact, the 2026 J.D. Power survey also found that the biggest factor affecting app satisfaction was "speed," with 72.7% of users considering 1-5 seconds as an acceptable wait time for remote operations.

However, even if the app is sped up and usage frequency increases, it doesn't necessarily lead to Commit, or contract renewal.

This is a significant difference between traditional internet services and automobiles.

The paradox of "the more you use it, the harder it is to charge"

For example, on a hot summer day, the interior temperature of a car parked in a Japanese parking lot becomes extremely high.

It's convenient if you can start the air conditioner from your smartphone before getting in.

If used daily, the convenience becomes even more apparent.

Normally, one would think "high usage frequency = high likelihood of payment."

However, in automobiles, the opposite psychology may occur.

As users use it daily,

they start recognizing it not as a

"convenient additional service,"

but as a

"function naturally included in the car."

This is because communication modules, air conditioning, and battery control functions are already installed in cars purchased for several million yen.

Yet, the moment the free period ends,

if told, "Starting next month, this operation will require a fee,"

users are likely to feel not as if they are purchasing a new service, but rather as ifa function they have been using is being taken away.

This is probably the biggest challenge of car subscriptions.

On social media, comments like "I understand if it's for server costs" and "I don't like being charged for car features"

are quite clear when looking at overseas social media and Reddit car communities.

 

In a thread about Subaru's connected services posted in August 2026, opinions gathered about how the service itself feels "overpriced" if you can't use remote start via the app without paying an annual fee.

In another thread about Hyundai's service fees, while some were surprised by the annual fees of several hundred dollars, others were willing to pay if offered at a discount due to the convenience of pre-operating heating in winter or cooling in summer.

Interestingly, users are not necessarily rejecting "subscriptions" themselves.

For services that require continuous external infrastructure, such as communication lines, cloud servers, theft tracking, and map updates, there are opinions that "since maintenance costs are incurred, it's understandable that fees are charged."

On the other hand, there is strong opposition to

"charging just to use hardware already installed in the car."

This difference is very important.

The lesson from BMW's heated seat issue

In the automotive industry, BMW was the one that made this issue globally known.

BMW offered a subscription for using the seat heater function, even though the hardware was installed in the vehicle in some markets.

However, due to strong backlash, they ended the heated seat subscription in 2023.

BMW also acknowledged that one reason was that users felt they were "paying twice."

What this reveals is that

being able to technically charge and consumers accepting the charge are separate issues

.

In SDVs, functions can be turned on and off by software.

From the manufacturer's perspective, it's a very attractive system that allows additional sales of functions after the sale.

However, from the user's perspective, it may appear as if "the manufacturer is remotely locking something inside the car they bought."

This perception gap is very significant.

Paid connected services have already started in Japan

This issue is not limited to overseas.

In Japan, automakers have already started offering paid connected services.

For example, Toyota's T-Connect charges 220 yen per month for remote start (app) on eligible models. Basic services also have monthly fees set after the free period, depending on the model and contract conditions.

There are also fee structures for digital keys, connected navigation, in-car Wi-Fi, and more.

Honda Total Care Premium includes a basic pack with emergency support, air conditioning operation, and lock reminder notifications, which costs 550 yen per month after the free period.

Nissan's NissanConnect offers multiple pricing plans depending on the model and navigation system, such as 800 yen or 1,100 yen per month plans for the current Leaf, as well as annual plans.

Some may find 220 yen per month cheap.

However, the issue is not just about each individual amount.

Modern consumers already have numerous monthly fees for video streaming, music, smartphones, cloud storage, gaming, AI services, and more.

To this,

navigation monthly fee.

remote operation monthly fee.

digital key monthly fee.

in-car Wi-Fi monthly fee.

advanced driving assistance monthly fee.

If these are added, "subscription fatigue" could extend to cars as well.

In Japan, the "free period" could become a risk

Japanese manufacturers should be particularly cautious about the free period after purchasing a new car.

Free trials are effective for introducing services.

However, in the case of connected cars, the longer the free period, such as one year, three years, or five years, the more the feature becomes perceived as a "car function" rather than a "free service" by the user.

A service used daily for five years suddenly becomes paid in the sixth year.

From the manufacturer's perspective,

it's seen as "the free trial period has ended."

From the user's perspective,

it's felt as "a car function that was usable until yesterday is no longer available."

The perception of the same event is entirely different.

The concept of "Decision Compressor," as expressed by Xu in the original article, helps explain this issue.

During the contract period, users are not constantly thinking, "This feature is worth 500 yen a month" while operating the air conditioner.

However, just before the renewal date,

it suddenly gets converted into a single decision: "Will you pay 6,600 yen annually?"

At that moment, the fee and value are directly compared.

At that point, merely being "convenient" might be a weak reason for contract renewal.

Japanese manufacturers have a powerful weapon in dealerships

On the other hand, Japanese manufacturers have a significant advantage.

The dealership network.

According to the 2026 J.D. Power survey, 86% of active EV app users received some form of assistance, such as app setup or explanation, at the time of delivery.

Furthermore, 43% learned about the app's existence for the first time at delivery.

This means the value of connected services doesn't have to be conveyed solely through the app screen.

At the dealership,

it can be clearly explained from the start:

"This feature is part of the vehicle itself."

"This is a service that continues to use communication lines and servers."

"After the free period, it costs ○ yen."

"By paying the fee, these services will continue."

This is extremely important.

It's better to have users understand "what is included in the vehicle price and what is a continuous service" from the time of purchase rather than showing the price just before the free period ends, as it will reduce later backlash.

From "selling features" to "selling outcomes"

If automakers truly want to increase subscription revenue, they may need to move away from simple feature-based charging.

For example, if it's just "You can operate the doors remotely," users will quickly start price comparisons.

However,

tracking vehicle location in case of theft,

notifying when an anomaly is detected,

automatically reporting in case of an accident,

predicting battery degradation,

predicting maintenance timing and coordinating with dealerships,

optimizing EV charging costs,

and connecting to insurance premium reductions,

if all these are integrated, what users are purchasing is no longer just "app buttons."

What they are purchasing is

peace of mind, safety, time savings, and maintenance cost reductions

.

This difference is significant.

While users might not want to pay 500 yen a month for remote air conditioning, their evaluation might change if it's "6,000 yen annually, including theft prevention and failure prediction