It's often said that a car is essentially a smartphone on wheels. Whether users have fully embraced this concept or not, many automakers certainly have. In particular, the sustainable payment business model prevalent in smartphones has truly resonated with automakers, inspiring them to explore similar avenues.

At present, a rough estimate indicates that over 90% of mainstream automakers have adopted a model where hardware is pre-installed, and software-based functionalities are unlocked through paid subscriptions. The standard approach involves equipping vehicles with advanced hardware such as LiDAR, high-computing-power chips, and high-performance sensors right from the factory. However, their advanced features are restricted via software locks. Users are then required to pay monthly or yearly subscriptions, or make a one-time purchase, to unlock functionalities like intelligent driving, cabin features, sensors, and even seat heating.

Of course, automakers are not merely transplanting the smartphone business model; many are taking cues from Tesla. Tesla, a pioneer in software subscription services, has achieved an FSD (Full Self-Driving) payment rate exceeding 30% in the North American market. This has made software subscriptions—a sustainable, low-cost, and high-gross-margin business model—a core revenue stream for the automotive giant.

Envious of Tesla's success, Chinese companies have eagerly embraced the 'car subscription systems,' 'software-defined vehicles,' and 'one-time purchase, decade-long fees' models. However, while their aspirations are grand, the path is fraught with challenges. Subsequent developments have not unfolded as smoothly as automakers had hoped. Domestically, the paid subscription rate for intelligent driving services among leading automakers hovers around 5%, with some brands even falling below 1%. Survey data indicates that less than 20% of Chinese users are willing to accept subscription-based models. As the car subscription model gains traction in the Chinese market, a surge of user rights protection issues and compliance disputes has emerged.

It appears that the business model of hardware pre-installation and software subscriptions has encountered strong resistance from Chinese car owners almost as soon as it emerged. Car subscriptions have swiftly veered from the broad road onto a dimly lit dead end.

Why are Chinese users reluctant to pay for automotive software? Let's delve into the reasons.

Technical Challenges

The core reason for the low software subscription rates in the Chinese automotive market is not overly complex. In essence, inadequate technology inevitably leads to business failure.

Tesla's success in opening the door to software payments is primarily attributed to its widely adopted, high-performance FSD system. In major North American cities, FSD has achieved a series of core functionalities, including end-to-end large models, city-wide Navigate on Autopilot (NOA), automatic parking, and summon features from parking lots. These functionalities are applicable across major scenarios such as highways, urban areas, and parking. While Tesla's aggressive approach to intelligent driving applications has sparked controversy, it has also comprehensively demonstrated the company's technological prowess in this field.

The resulting paid experience is clearly perceptible to users, to the extent that many now equate FSD with autonomous driving. Regardless of the potential issues this conclusion may raise, the payment orientation driven by this technological experience is exceptionally clear.

In contrast, the domestic market is still grappling with ambiguous distinctions between intelligent driving, autonomous driving, and assisted driving. Ultimately, the functionalities that users pay to unlock are mostly intelligent driving features with high takeover rates and limited coverage of urban NOA. Among various software subscription features, intelligent driving is the most compelling and valuable. Beyond the underperforming intelligent driving technology, most entertainment and comfort-oriented auxiliary features appear non-essential and merely "icing on the cake." Given the lackluster performance of intelligent driving—a key capability—it is essentially deemed unfit for the new round of competition in automotive intelligence.

Further evidence that technological capability is the core reference point for automotive software payments is Huawei's ADS (Advanced Driving System), which has achieved a paid option rate exceeding 60%. This proves that the path of automotive subscriptions is feasible as long as technological capabilities are widely recognized. However, if the technological mountain cannot be surmounted, attempting to bypass it and reach the idyllic realm of software-based revenue will only lead further astray.

Market Barriers

Beyond technological differentiation, the current domestic automotive market environment differs significantly from Tesla's situation in North America. In the North American market, Tesla holds a near-monopolistic position in automotive intelligence and software OTA (Over-the-Air) updates, facing virtually no competition. However, in the domestic market, the new energy vehicle competition has reached a fever pitch. Manufacturers must continuously offer more technological options while lowering prices to maintain competitiveness.

In reality, automakers have begun introducing a significant amount of intelligent capabilities and high-cost hardware into the mainstream market segment priced between RMB 100,000 and RMB 300,000. The ongoing price war has created a paradoxical situation: automakers aim to further reduce prices to capture market share while also seeking to emulate Tesla by adding software services as profit points. This has made it difficult to determine whether automotive subscriptions can be charged and, if so, how much. Overcharging for software risks reducing cost-effectiveness and losing customers, while not charging for software means missing out on strategic opportunities and potentially lowering brand valuation. This has led Chinese automakers to adopt a "Schrödinger's car subscription" strategy—on the one hand, extensively implementing hardware pre-installation schemes while hesitating to charge obvious fees. Ultimately, many new cars now offer limited-time free intelligent driving trials, transforming software charging from a profit-growth tool into a promotional gimmick amid price wars. Faced with competitors' promotional tactics, other automakers have no choice but to follow suit.

This has resulted in the failure to effectively cultivate a market base for automotive subscriptions. Users continue to perceive automotive software as inexpensive or even as a bargaining chip when negotiating with dealers.

Thus, Chinese automakers have found themselves trapped in a deadlock of "wanting to charge but dare not, charging but no one buys." The imagined windfall from software subscriptions remains out of reach, with the sickle of software revenue only able to be raised high and gently lowered. Ultimately, one can only lament Tesla's fortunate circumstances.

Mental Resistance

A more significant obstacle to automotive subscriptions in the Chinese market may stem from the mental barriers erected by users. These barriers encompass various aspects, including extended consumer habits and a lack of trust in automakers, dealers, and the overall vehicle usage environment.

Objectively speaking, Chinese consumers lack a strong awareness of software payments. While the mobile internet era has successfully cultivated a habit of paying for software, most payments are for content and services rather than for unlocking basic functionalities.

For the vast majority of consumers, a car should be a deliverable asset akin to real estate or jewelry—preferably something that is fully visible and entirely owned. Having to make monthly payments after purchasing a car creates a natural psychological discomfort. In other words, while automakers have accepted the notion that cars are "mobile terminals" and that software payments are inherent, users do not share this perspective. Especially the setup of pre-installing hardware that cannot be used without subsequent payments naturally evokes a sense of deception in users, making it difficult for them to quickly accept such practices from a consumer habit standpoint.

Building upon this resistance is a pervasive sense of mistrust towards various aspects of automotive subscriptions. Firstly, many dealers employ ambiguous or even wordplay tactics to induce consumers to purchase hardware such as LiDAR and high-computing-power chips, which point towards intelligent driving capabilities. However, during the sales process, they fail to clarify that these hardware features require ongoing payments to unlock. When users realize they have been deceived, a genuine sense of disgust arises, feeling as though they have been exploited twice.

This sense of deception continues to fester and is directed towards the automakers behind the dealers. Currently, a major dilemma for automotive subscriptions is that many automakers, eager to explore this new revenue model, hastily designate a multitude of features as paid unlocks. Users are overwhelmed by the plethora of unlockable options, unsure which ones are useful to them, and quickly develop a sense of alertness towards potential consumer traps. Simultaneously, users must contend with issues such as poor functional experiences after unlocking, automakers subsequently making paid features free—thereby betraying early adopters—and automakers neglecting to take responsibility for paid features, failing to provide subsequent updates or upgrades. Widespread problems create a trust gap, leading users to prefer immediate gains and reluctance to pay for the unknown.

Further erosion of trust stems from users' concerns about the subsequent impacts of these paid intelligent capabilities. For instance, questions arise regarding whether software functionalities that users have paid to subscribe to can be transferred when the car is sold. How are safety issues arising from paid intelligent driving capabilities to be apportioned? How are related insurance, claims, and accident determinations to be handled?

Recent data shows that complaints related to automotive software payments received by the China Consumers Association from January to March 2026 increased by 128% year-on-year. It is evident that the automotive subscriptions pushed by automakers not only have a limited audience but also leave paying users deeply dissatisfied.

Breaking through this mental barrier requires more than just technological upgrades and market prosperity. More importantly, automakers need to convince users that they are approaching automotive subscriptions with sincerity and determination. How to break through this barrier is the ultimate test for Chinese automobiles as they move towards the era of software-defined vehicles.