It works in the market because sellers sellers want to charge as much as buyers are ready to pay. People who want a powerful engine are ready to pay more, so make them pay more. The limited power option is sold at a lower but still profitable margin to those who don't want to pay for the extra.

Market segmentation like this is seen everywhere. It is just that the subscription thing makes it particularly obvious.

I should tell my personal background here: Half of what I'm arguing against is my own personal experience of having people tell me that free market competition rewards those who offer the best product at the lowest price. I'm saying this is a counter-example; and, yeah, I agree with you that similar counter-examples are seen everywhere.

From manufacturer point of view it makes sense, less boost is less stress on engine and less warranty claims.

It's cheaper to design and engineer one common engine block, heads, camshafts, cylinders, etc. and regulate the output in software.