Carmakers see big bucks from in-car software subscriptions
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Carmakers typically make their money when they sell a car. Now, they're eyeing monthly service subscriptions as a way to turbocharge growth.
Why it matters: The auto industry is aiming to be more like the tech and telecom industries, hooking customers with services and downloadable features that improve over time and — most important — generate recurring revenues.
What's happening: Stellantis is the latest automaker to set huge growth targets from software-related services.
- The European parent of brands like Jeep, Chrysler and Dodge said it plans to take in 20 billion euros ($22.5 billion) in annual revenue from entertainment, navigation and other subscription services by 2030.
- General Motors plans to double its annual revenues to about $280 billion over the next decade, in large part from software and new services, as it shifts to electric, connected and autonomous vehicles.
- Ford recently hired a former Apple and Tesla executive, Doug Field, to lead its software strategy and is looking for similar growth from connected vehicle services.
Driving the news: Stellantis, formed earlier this year by the merger of Fiat Chrysler and Peugeot SA, said it would spend 30 billion euros ($34 billion) through 2025 in a push toward software-based electric vehicles.
- It plans to have 4,500 software engineers on staff by 2024, including 1,000 current employees who will be retrained.
- Stellantis has 12 million connected cars on the road worldwide today, generating about $450 million in software-related revenue.
- By 2030, it expects to have 34 million connected vehicles.
Details: Stellantis' current subscription revenue comes from services such as satellite radio and connected navigation services.
- But the company sees other big revenue opportunities from such options as usage-based insurance or fleet-management services for businesses.
- It can also charge for software upgrades that add extra horsepower, for example, or on-demand features to customize the in-car experience.
The bottom line: Some analysts project in-car software could be a $225 billion market by 2030.
