Our first post dealt with the large investment in India by Mercedes-Benz to develop its new Operating System. This next post looks at some of the disruptive new business model this new OS will enable.
Mercedes-Benz considers the Implementation of digital luxury key for brand reputation and revenue models. It is set on a new revenue model that expands its direct relationship with customers and direct recurring revenue.
The subscription model where consumer direct revenue is made across the entire life of the car is an objective for MB. Like competitors GM, Ford, and Tesla, Mercedes Benz sees customers as sources of a monthly fees. Customers paying monthly for new features and upgrades to existing functions are a huge departure from capital-purchase costs for vehicles.
This model promises continued revenues over the life of a vehicle. Even when a ‘used car’ is sold MB will link features, functions, and personalization to the paid subscriptions. It is pursuing a software-platform centric approach for all vehicles products. Mercedes Benz considers digital luxury as a brand value to be paid for by costs to acquire the products and subscription revenue.
Mercedes Benz sees data acquired from the vehicles as a critical component of its strategy implemented by MB.OS. MB wants to monetize data by follow-on sales of features, upgrades to existing features, and cloud-based data services (navigation, entertainment, and personalization). Starting with 2024 product launches MB sees high growth in subscriptions adding hundreds of millions of Euros per year on a cumulative basis as software and AI drive new revenue streams. R&D for MB.OS software, databases, and networks are key to MB’s transformation for subscription revenues.
Direct-to-consumer subscription revenues will transform MB’s relationships with dealers and product distribution as well. MB wants direct consumer relationships instead of leaving huge after-market revenue to dealers and independent service providers on a global basis. Huge investments for MB dealerships (in the 10’s of millions of Euros per location) will see revenue flowing instead direct to MB.
Cloud-based data operations will also drive add-on sales direct to customers with MB holding critical and highly personal data not necessarily available to dealers. “Repairs” are obviously limited as dealers will not be enabled to perform more than installation and configuration changes to software. Dealer capabilities to add ‘hardware’ onto MB platform products are not yet clear as vehicles will be highly integrated by MB.OS architecture and implementation. MB seeks to control the post-sales revenue streams directly with consumers bypassing dealers.
Some people may see more than a passing resemblance to Tesla’s direct sale model.
If you’d like to read the first post in this series, you can find it here – https://www.ekalore.com/post/india-in-the-driver-s-seat
Or if you’d like to see other articles about Alien Invasions (overwhelming competitors from outside the marketplace) https://www.ekalore.com/alien-invaders
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