For a Few Dollars More

I was talking to some friends about software, and the subject of subscriptions came up. It's understood why companies would want to lease things, whether they be goods or services, via a subscription; guaranteed income streams. Companies like Microsoft portray this as something that's good for customers, and in some circumstances, it is. Were I the type to buy every new iteration of the Office software suite when they were released (especially for multiple computers), I would certainly do better to subscribe to Microsoft 365 and always be on the cutting edge with all of the latest feature updates. But as someone who has made barely any use of functionality released since Office 2013, a subscription would have me constantly paying for features that I don't use, but needing to constantly pay to retain access to the limited feature set that I do use.

But where the discussion became interesting was when it turned to electric vehicles. Zero Motorcycles offers a number of features for its vehicles that are effectively paywalled.

For example, with the 2022 Zero SR/S, if you want to charge your bike 17% faster, that’s $295. Want to use the built-in dash-display navigation system? $195. To double your charging speed, as explained in the previous section, that is $1,495. Live somewhere chilly and want to use the included heated grips? That’s another $195.
The New (Worrying) Trend Coming with Electric Bikes: Features as a Service

These aren't add-ons to the motorcycle. They all come with it. But in order for a rider to use them, they must have been purchased by the owner. And because the features are built into the motorcycle at the factory, if the machines are profitable at the base price, all of the extra features are pure profit.

Because these are one-time payments, they aren't exactly the same as a "features as a service" subscription model. But one can see how it would operate. But I'm not sure that it's a concept that will really catch on. I have a fairly basic model of car. It's nice, but it lacks a lot of the bells and whistles that I could have gotten, had I decided to pay more. I can, however, see where they would have gone, had they been installed. This modular approach makes more sense than a single model, with all of the features locked down, because it allows automakers to tailor their vehicles to the needs of their buyers. Consider someone who doesn't live somewhere chilly. Not only are they unlikely to pey $195 for heated handlebars, why would they pay for the hardware if there were an option from another manufacturer where they wouldn't have to?

In this, the "feature as a service" model seems to be a rather large opening to lower cost competitors. To go back to the example of Zero Motorcycles, why would someone pay for an 18 kWh battery that will then cost them an extra $2,000+ to fully use, when a motorcycle with a 15 kWh battery would be cheaper from the outset? The cost savings that Zero would have to realize with its unified production model would have to be able to beat the lower costs that other could offer for similar performance. When dealing with small numbers of units, it can make sense, but at scale, it seems dubious; which is likely why we haven't seen the model more in the automotive or gasoline-powered motorcycle markets.

Investors are important to businesses. But a small business with few investors and a large customer base will likely do better than one with lots of investors, but few customers. And if someone thinks that they can lure customers away from "feature as a service" models by not spending so much money up front, they'll likely attempt it.