The price of many new General Motors cars are going up.
The automaker has been tacking $1,500 onto many new vehicles to cover a new connectivity package. The package is listed under options, but isn't optional at all.
Since June 2, all new Buick and GMC vehicles in the U.S. have been including three years of an OnStar and Connected Services Premium Plan found on the window sticker under "options & pricing" for $1,500.
But the three-year plan is actually standard — or rather the $1,500 will be charged whether the customer activates the OnStar and Connected services or not, GM OnStar spokeswoman Kelly Cusinato told the Free Press.
As of July 18, new retail Cadillac Escalade vehicles in the U.S. also include the OnStar and Connected Services plan. Chevrolet is currently finalizing its plans for OnStar, remote access and connectivity options through the MyChevy app and GM will be disclosing more details on it soon.
The move jibes with the automaker's plans to increase revenue by boosting its subscription offerings. Last October, GM told investors it sees software subscriptions as an $80-billion industry for the automaker in the future. Earlier this year, GM leaders said there'd be more subscription offerings to come in the next couple of years and consumers may be paying $135 a month for various subscriptions — that's on top of their car payment.
This newest $1,500 mandatory option for OnStar does not sit well with some consumers or dealers.
"We’ve had people very confused about it asking why they have to pay $1,500 for something that says it’s an option," Lynn Thompson, president of Thompson Buick GMC Cadillac in Springfield, Missouri, told the Free Press. "We say, 'We’re sorry, but we don’t price the cars.' We wish they would put it as part of the car, having an option being standard is a problem for us. Don’t put something as an option that’s not an option.”
Rolled into the price
GM said by giving car buyers OnStar and Connected Services right from the start, it will enhance their ownership experience and that's why GM made it standard.
"Providing this connectivity standard is more convenient for our customers and provides a more seamless onboarding experience," GM spokesman Patrick Sullivan said in an email to the Free Press. "The package has been offered as optional in the past, but going forward, it is standard on all Buick and GMCs."
He added, the "option is included in the Manufacturer’s Suggested Retail Price."
With the plan, a consumer gets access to a remote key fob, unlimited data, vehicle diagnostics, Wi-Fi hotspots and access to the OnStar Guardian app for roadside assistance or emergencies and more.
When the three years are up, customers will be able to subscribe to the same plan or a different plan, but Cusinato would not provide the cost saying there are various plans and the cost could change in three years. But, she said, they will not be automatically enrolled in a plan.
But when asked to explain GM's decision to label the new package as an "option" when it is actually standard, Cusinato said in an email to the Free Press, "it is an option, but it is not removable as it is delivered from the factory with it included just like an upgraded powertrain, or upgraded interior materials, or upgraded infotainment system."
She also said because this OnStar and Connected Services Premium Plan was only recently structured and offered and it applies to only certain brands and vehicles in the U.S., "it is possible that not all materials (websites, brochures, et cetera) may be fully updated just yet."
GM is working with dealers so that they know how to explain this specific offer to customers, Cusinato said. Many dealers told GM they liked the idea of offering a premium package on a premium brand because it would be easy for customer and dealer to provide a pre-set package, she said, adding it drives loyalty.
Also, Cusinato said at the point of purchase, customers will still sign and accept a Terms & Conditions and Privacy Statement, "so that level of 'optionality' to decline will always be available to a customer." But even if the customer declines to activate the service at that time, they are still charged $1,500 for the factory-installed connectivity hardware.
"We think these services are a value to our customers and we are working off feedback from our dealers," Cusinato said.
'A forced option'
At Sellers Buick GMC in Farmington, owner Sam Slaughter said there are "significant" benefits to OnStar and his team explains to customers all the safety features they will be getting including WiFi hotspots.
He has not seen a lot of customer pushback against this new "option," but he, too, wishes GM had not called it an option on the sticker.
"I don’t know why they did that, they should have just put that in the MSRP," Slaughter told the Free Press. "We’ve had a couple people say, ‘I don’t want this.' But it’s a forced option."
The thing is, carmakers are free to include whatever they want as standard equipment whenever they want, said Erik Gordon, an auto industry expert who teaches business strategy at the University of Michigan.
"When I bought my first car, a radio with cassette player was an option," Gordon said. "Then it became standard. As did power steering, intermittent wipers, air conditioning and rear window defrosters."
But if GM includes something as standard equipment that a buyer can’t opt out of, Gordon said, then "the price should be in the MSRP, not $1,500 extra, and it should not be called an 'option' if there is no option."
The 'final straw'
Just as carmakers are free to make whatever they want standard, car buyers are free to go buy a different brand.
Bruce Wendt, of Romeo, did just that when he learned about GM's new "option."
Wendt has been trying to trade his 2015 Ford F-150 pickup for a GMC Sierra pickup since May 2021. He has hit continuous ordering roadblocks.
So a few weeks ago, he decided to look at buying the smaller GMC Canyon midsize pickup instead. That's when he noticed on the window sticker a "safety option" for a three-year, $1,500 subscription to GM's OnStar.
He didn't want to pay $1,500 for the subscription-based communication service.
"My salesman said it shows on the sticker as an option," Wendt said. "But you have to take it."
Wendt tried to bypass the mandatory option by doing a build-and-price order online. Again, OnStar was listed under Interior/Safety Options, but the box next to the $1,500 was checked and Wendt could not uncheck it, he said.
"That was the final straw," Wendt said. "(OnStar) was a cash grab. They’re a good vehicle, I just hate being jerked around."
Wendt ordered a Toyota Tacoma midsize pickup that he expects to take delivery of in a few weeks.
GM's revenue stream
GM has vowed to investors it will boost revenue through other lines of business beyond new car sales.
A self-driving taxi service at GM's subsidiary Cruise is one of those businesses where GM foresees adding $50 billion in revenues one day. Cruise has not yet made a profit even as it has started running the service in San Francisco.
Then last October, GM said it sees software subscriptions as an $80-billion industry for the automaker.
As GM unveils its various software plans, it expects to make incremental revenue of $20 billion to $25 billion a year, with at least $6 billion of it coming from OnStar Insurance, GM's Senior Vice President of Innovation and Growth Alan Wexler said last October.
The balance will come from products including Maps Plus, OnStar and Super Cruise. GM introduced the car-mapping service Maps Plus last year.
Earlier this year, GM's President of North America Steve Carlisle told investors the automaker has "50-some value-added products and services that we’ll be rolling out over the next 36 to 48 months."
He did not provide specifics of what those might be, but he indicated the bigger screens on electric vehicle instrument panels allow for more data-oriented software products.
In early May, it was reported that GM expects car buyers to pay an average of $135 a month in coming years for navigation, hands-free driving technology and other customized digital services, according to a report by Axios.
"Subscriptions are the future if you want to make $30 billion in subscriptions," Thompson said, adding maybe it's a win-win for both GM and consumers. "People who use (OnStar) do like it. And, it’s $1,500, I imagine (GM) might be making a little bit of money on it, but I don’t know.”
This article originally appeared on Detroit Free Press: GM's $1,500 OnStar, Connected Services plan forced option on new cars