Car connectivity: What consumers want and are willing to pay

Strong connectivity is essential to win in China and to attract battery-electric-vehicle (BEV) customers globally. In the McKinsey Mobility Consumer Pulse survey, 55 percent of Chinese respondents and 57 percent of BEV customers were willing to change automotive brands to get better connectivity.¹We used information from the McKinsey Mobility Consumer Pulse survey to supplement the findings from the more recent McKinsey Automotive Digital Services Customer Survey.

BEV disruptor OEMs and Chinese OEMs have long understood the importance of connectivity and are significantly beefing up their offerings. Seamless and AI-based voice assistants, subscription models for autonomous driving, advanced security features, and entertainment features such as gaming are creating a buzz. Western incumbent OEMs are improving connectivity, but their offerings often trail behind Chinese OEMs. Many features that Chinese OEMs offer as standard are still priced as separate options at Western volume and premium OEMs.

For individual connectivity features, an average of 40 to 60 percent of survey respondents indicated that they were highly likely to make a purchase. These numbers were even higher for respondents in China and for BEV owners in all countries, with an average purchase likelihood of about 60 percent and 58 percent, respectively. Such findings again emphasize the importance of creating compelling connectivity offerings in these segments. For example, about 285,000 customers bought a specific EV with autonomous-driving features in 2022, reflecting a global take rate of 20 percent. And in China, another OEM equips its vehicles with the company’s multisensor platform and has achieved take rates of over 50 percent for driving-assistance features.

In China, both Western and Chinese OEMs include many connectivity features—more than 60 percent of the 39 features discussed in our survey—in their base configurations. Chinese BEV players are propelling this trend by creating strong connectivity offerings in an attempt to differentiate themselves from competitors. In Western markets, Chinese OEMs and electric-vehicle pure players offer more than double the number of connectivity features in their base configurations than incumbent OEMs, which tend to sell single connectivity features as options. As BEV pure players and Chinese OEMs gain ground in Western markets, incumbent OEMs should consider revisiting the balance between base and optional offerings. Of course, they should also consider that BEV adoption levels remain uncertain in many countries, including the United States, and could vary based on shifting consumer preferences and subsidy fluctuations.

While some connectivity features are in high demand, many advanced offerings, such as in-car gaming, have a niche appeal. Feature preferences also vary widely among regions. For instance, more than 50 percent of the top ten features in China relate to more advanced technologies, such as advanced-driver-assistance features, while German and US customers favor comfort and convenience features. Similarly, the likelihood of considering connectivity features is more than 25 percentage points higher for customers in urban populations compared with suburban or rural customers. Click on the country names in the exhibit for more information on each location.

To maintain control over customer interfaces and data, some OEMs are restricting the offerings of third-party tech players in their vehicles.

When presented with bundle options for connectivity-enabled features, respondents’ interest in purchase was more than 16 percentage points higher than the average interest in single features in all regions. This finding is especially relevant for OEMs in the German market, where incumbent OEMs typically offer connectivity services as paid optional add-ons. OEMs that bundle features that generate medium consumer interest, such as infotainment, with other offerings can potentially increase take rates, upsell single features, and capture higher willingness to pay.

Thirty-nine percent of customers favor subscription payments for connectivity, compared with 30 percent who favor one-time payments. For subscriptions, more than 60 percent prefer yearly payments.

Recurring-revenue service models will become increasingly important for OEM connectivity offerings, and this has significant implications. First, OEMs must shape the customer journey and expand engagement beyond their dealership networks. Second, OEMs will need to consider undertaking a comprehensive transformation, moving away from a start-of-production-centric approach and focusing more on continuous improvement. In addition to frequently updating digital features, they will need to clearly convey the benefits of such upgrades throughout the entire sales process and customer journey. An omnichannel strategy that merges the offline and digital worlds will also be essential to renewing subscriptions seamlessly and to understanding how customers value different features.

The amount that customers are willing to pay for connectivity features is about 80 percent of the current average prices offered by premium OEMs. This suggests a tendency toward inflated prices for single connectivity features. For some features, willingness to pay is well under the 80 percent level, which could potentially explain relatively low take rates. These findings indicate that OEMs can refine pricing for connectivity features to ensure that they closely reflect perceived customer value. A strong pricing strategy will ultimately increase take rates.

Subscription models accrue higher cumulative revenues than one-time-payment models only after three to five years, although this varies greatly by region. On average, this amount of time is 60 percent longer for yearly subscriptions compared with monthly subscriptions.

Given that the average holding period for vehicles is around five years and the average leasing period is around three years, OEMs will need to work with their retail and service partners to demonstrate the value proposition of connectivity subscriptions to second vehicle owners if they want to generate revenues similar to or above those for traditional one-time payments. In addition, OEMs must monitor feature activation rates and, with vendor assistance, ensure that offerings remain attractive throughout the entire holding period.