New York lawmakers are renewing their push to ban subscription fees for built-in vehicle features, led by Senate Bill S5708 in the current session and a previously passed Assembly measure (A09062) that sought to prohibit automakers and dealers from charging subscription or post-sale fees for any vehicle function that relies solely on installed hardware and does not require ongoing service.

The bill’s sponsors, including Senator James Skoufis, say the intent is simple: “Consumers shouldn’t have to pay twice for the same hardware.”  The measure allows subscriptions for services that require connectivity, data, or third-party networks such as Wi-Fi, telematics, or satellite radio.

The proposal aligns with Governor Kathy Hochul’s broader crackdown on so-called “junk fees.”

Definition note: the legislation’s impact will hinge on how regulators define “ongoing service cost.” Even minimal data transmissions or software maintenance could be argued to qualify a distinction that may determine how broadly the law applies.

Why It Matters

The auto industry is racing toward a software-defined future in which recurring revenue replaces one-time sales margins. Wall Street rewards predictable subscription income, and OEMs have publicly projected billions in annual recurring revenue by 2030 — including BMW’s goal of €5 billion, Mercedes-Benz’s €10 billion, and GM’s $20–25 billion in software and services revenue.

But the strategy is colliding with consumer expectations. Buyers view physical hardware as a purchased good — not a rented service. When automakers charge to “unlock” built-in features, the perception shifts from innovation to exploitation.  That perception has now triggered legislative scrutiny.

The Automotive Subscription Landscape

Feature-on-Demand (FoD) refers to built-in hardware that can be activated or enhanced via software after purchase, often for a fee. It’s one of several models reshaping how OEMs monetize vehicles.

Feature-on-Demand is the model drawing regulatory ire because the incremental value is perceived as minimal — the feature already exists physically and requires no new cost to deliver.

Some OEMs counter that even hardware-based features require continuous software, security, and diagnostic maintenance — a claim lawmakers have yet to test.

Consumer and Market Response

Surveys from Cox Automotive and Kelley Blue Book show more than 75 percent of drivers oppose monthly fees for features included in a car’s hardware.

Critics also highlight confusion in the used-car market, where secondary buyers may inherit disabled features or be prompted to re-subscribe, complicating resale transparency.

Manufacturers defend these models as necessary for ongoing software and safety innovation, but reputational risk may outweigh incremental revenue if customers feel nickel-and-dimed.

Broader Regulatory Signals

New York’s move echoes similar bills introduced in New Jersey (S1282) and Massachusetts (SD2152), though neither has yet passed. Collectively, they suggest emerging model legislation for hardware-based subscriptions.

At the federal level, the FTC’s updated Negative Option Rule — aimed mainly at online recurring charges — signals a growing intolerance of opaque subscription practices. Automakers’ FoD programs could face comparable scrutiny.

Legal observers note that a patchwork of state rules might trigger federal pre-emption challenges under national commerce or vehicle-design laws, especially if compliance standards diverge.

Global and Ecosystem Context

Internationally, Asian automakers such as NIO and BYD have pioneered “battery-as-a-service” and software subscription tiers, demonstrating that acceptance varies by market.

The EU’s Digital Fairness and Right-to-Repair initiatives could soon limit hardware-based subscriptions across Europe.

Behind the scenes, suppliers like Bosch, Nvidia, and Qualcomm provide much of the software infrastructure enabling FoD models — meaning subscription revenue often flows up the supply chain.

Connected-service subscriptions also intersect with usage-based insurance and vehicle-data monetization, two fast-growing but lightly regulated revenue streams.

Financial and Strategic Drivers

Automakers aren’t chasing subscriptions solely for greed. Recurring revenue smooths earnings volatility, funds software R&D, and anchors customer relationships over vehicle lifecycles.

To mitigate backlash, some OEMs are re-bundling these features into trim-level or one-time software packages, preserving pricing flexibility without violating new rules.

Still, the message from legislators and consumers is consistent: recurring payment must align with ongoing value.

INSIDER TAKE

In subscription economics, recurring payment must equal recurring value. When those diverge, regulation and customer distrust follow.

The automotive “Feature-on-Demand” debate is a cautionary tale for every subscription executive:

1. Audit your value exchange. Does each renewal deliver something new or improved?

2. Avoid hidden rents. Transparency builds loyalty.

3. Watch regulatory drift. Once one state codifies model language, others follow quickly.

For automakers, this doesn’t end subscription potential — it clarifies it. Subscriptions tied to data, connectivity, safety, or continuous improvement remain viable and strategically sound.

For executives outside the automotive sector, the lesson is broader: sustainable, recurring-revenue models hinge on earning every renewal, not reselling ownership.

Bottom line: Recurring revenue is the future — but only when the value renews itself. And the next frontier — AI-driven personalization and predictive maintenance — will test that principle again.

The question isn’t whether automakers will pursue recurring revenue — it’s whether they can do so without repeating the mistakes of this first subscription backlash.

When customers see clear, evolving value, subscriptions thrive. When they don’t, legislation follows.