GM positions OnStar as revenue center, brand builder

OnStar, part of GM's global connected customer experience unit, will continue to manage vehicle data and connectivity operations for the auto brands. Gerard Connell, director of sales and marketing for global connected customer experience, said the new strategy doesn't change the company's plans to expand OnStar or its connectivity and data operations.

"The strategy, if anything, just enables that," he told Automotive News in OnStar's office at GM headquarters here.

"You've got two lines of business that are both really important adjacent revenue streams for General Motors. That continues. We have really high hopes."

OnStar, he said, is an important part of a $1.5 billion profit growth opportunity mentioned by GM CFO Chuck Stevens for some noncore businesses over the next several years, including plans for monetizing data.

GM has 12.7 million OnStar-connected vehicles in the U.S. and Canada, where the company also is launching new packages that differ slightly from those in the U.S.

CEO Mary Barra said last week that GM will continue to expand services "that will generate revenue and profitability as we leverage the connectivity and then the ability to monetize data both in the vehicle and sharing it with other companies."

One example — enabled by OnStar — is a partnership announced last week with Amazon that allows for packages to be delivered to GM vehicles, with GM getting a cut of the revenue. Barra said GM is just "unlocking the value" of such services with Amazon and others.

Another opportunity, she said, is the company's Marketplace e-commerce app, an in-vehicle billboard and payment portal for partner companies. She said GM receives revenue based on impressions as well as transactions.

The restructuring of OnStar creates a new matrix of service and pricing tiers for dealers to offer starting Tuesday.

What used to be three tiers of paid plans that grouped connectivity and safety and security are now five paid plans, including two connectivity packages, one standalone safety-and-security offering and two top-end bundled offerings.

One key change is to the most basic tier of connectivity services offered free when buying new GM vehicles and included in all OnStar plans. The Connected Access package retains vehicle diagnostics, dealer maintenance notifications, driver report cards and the Marketplace app for newer vehicles, and will be extended to 10 years after purchase, from five, providing GM a richer trove of data on a vehicle's condition and performance over time.

But it no longer includes remote key-fob operations available through the individual brands' smartphone apps, such as unlocking or starting a vehicle.

Those operations, which had 291 million interactions with customers in 2017, are now part of a Remote Access plan that costs extra and includes other amenities.

"Really, the primary purpose of that basic plan is to make sure we know what's going on with the car," Connell said.

"We can get them to a dealership and we can help them understand the state of their car."

Prices for the paid services range from $14.99 a month or $149.90 a year for the Remote Access package, to $59.99 a month for an all-inclusive Connectivity, Safety and Security package, including an unlimited data plan.

The entry-level Safety and Security package begins at $24.99 a month. It's similar to a current offering that includes emergency roadside assistance and stolen-car recovery services. It also adds turn-by-turn navigation.

A current three-month free trial of OnStar's full suite of offerings for new-car buyers will be cut to 30 days for Buick, Chevrolet and GMC vehicles. Cadillac vehicles will continue to have a longer period.

The changes enable GM to better tailor connectivity options by brand, as it did this year by offering free data for Buick customers during the NCAA men's basketball tournament.

Current OnStar pricing ranges from $19.99 per month, or $199.90 a year, to $54.99 per month, or $589.90 a year. The top price includes a $20-a-month unlimited data add-on.

Connell said GM has been researching and developing the new packaging and strategy for more than a year. It included "significant" feedback from customers and dealers.

As of last week, more than 20,000 dealership personnel had been trained on the new plans, which are meant to simplify the menu options for dealers and customers.

"We partner really closely with the dealership network to make sure that this makes sense for them as well," Connell said. The company found there are "different customers with different priorities" as to the connectivity services they're willing to pay for.

GM is sharing revenue with dealers who sign up people for OnStar, whether new- or used-vehicle buyers or those coming in for service. That practice is expected to escalate in the coming years.

"With dealer input and working with GM leadership, we have come to a really good spot for OnStar that will benefit the consumer, dealer and GM," said Mike Bowsher, chairman of the Chevrolet National Dealer Council and owner of Carl Black Automotive Group in Georgia. "If a dealer does a great job, they can greatly benefit."