Welcome back to the latest episode of The Future of Automotive on CBT News, where we put recent automotive and mobility news into the context of the broader themes impacting the industry.
I’m Steve Greenfield from Automotive Ventures, and I’m glad that you could join us.
This week, I’d like to talk about vehicle subscriptions. Not subscribing instead of owning a car, but the unbundling of vehicle features and options and charging the consumer a monthly fee to activate them.
If you remember during Covid, when buzz around the “Connected Car” was at it’s peak, automakers like GM, Ford and Stellantis, each said that they expected to generate upwards of $30 billion annually, by the end of this decade, from unbundling vehicle options and features and selling them to consumers on a monthly subscription basis.
This was the era of Software-as-a-Service (or SaaS) companies selling at 15-times forward annual revenue. (as a point of reference, they’ve since fallen to about 20% of those sky high valuations). Back then, the more that an automaker could make its’ revenue look and feel like recurring software, the better it would be for their stock market valuations. Needless to say, the stock markets rewarded automakers with increased share prices when they announced this strategic shift. At least in the short term.
Well, fast forward to today, and we’re seeing some evidence, albeit tempered, of these strategies playing out.
Ford, in their commercial vehicle FordPro division, is now generating over 900k paid subscriptions, usually priced at about $20 per vehicle per month, which contribute upwards of 20% of FordPro’s earnings.
This week, we have news from GM about their success in generating new, recurring subscription revenues. And it turns out, according to plan, these new software revenues are very, very profitable.
General Motors says its software business keeps roughly 70 cents of every dollar it brings in. That’s a rare level of profitability in the auto industry, as many car sales generate just four to 10 cents per sales dollar.
The automaker’s OnStar business — which offers GPS and cellular safety services — brought in about $800 million of revenue during the second quarter of this year, up more than 20% from a year earlier. GM expects to add about 1 million OnStar subscribers this year, bringing the total close to 13 million.
Super Cruise, GM’s hands-free, eyes-on driving system, is growing even faster. GM added about 70,000 subscribers during last quarter and expects to end the year with more than 850,000. Revenue from the service increased about 70% from a year earlier.
What about cancellations? It turns out that a lot of drivers are sticking around after the free period ends. GM said between 30% and 40% of eligible owners continue paying after their included three-year Super Cruise subscription expires.
A few years ago, BMW faced tremendous consumer backlash when they announced you would be able to pay monthly for access to your rear heated seats. But subscription pioneers like Tesla charges $99 per month for their Full Self-Driving subscription.
The success of Tesla, Ford and now GM mean that other automakers are on notice.
I wouldn’t be surprised that in this age of increasing vehicle prices and payments, and affordability pressures for the average consumers, that more OEMs look for ways to unbundle vehicle options and features and offer them on an a la carte monthly subscription basis.
More flexibility for the consumer may result in greater affordability, and more high-margin recurring revenue for the automaker.
So, with that, let’s transition to Our Companies to Watch.
Every week we highlight interesting companies in the automotive technology space to keep an eye on. If you read my weekly Intel Report, we showcase a company to watch, and take the opportunity here on this segment each week to share that company with you.
Today, our new company to watch is PromptPath.
Meaningful phone and in-person conversations are what keep customers coming back, and what technology alone can’t deliver.
PromptPath enables your team to master every interaction, putting people skills front and center, building the kind of trust that turns shoppers into buyers.
Exceeding customer expectations today requires more than technology. It requires meaningful human conversations. PromptPath enables your team to master every conversation, bringing people skills back front and center, to create elevated experiences and better outcomes.
Your team is having hundreds, if not thousands of customer conversations every week. The challenge isn’t having them, it’s conversion to appointment and sale, all while delivering an exceptional customer experience.
PromptPath activates the value of every interaction to support your personnel on the phones or in person.
Most platforms track what happened. PromptPath shapes what happens, equipping your team in the moment, capturing every detail, and turning conversations into data that drive results.
If you’d like to learn more about PromptPath, you can check them out at: www.PromptPath.ai.
So that’s it for this week’s Future of Automotive segment.
If you’re an AutoTech entrepreneur working on a solution that helps car dealerships, we want to hear from you. We are actively investing out of our new Mobility Fund.
Don’t forget to check out my two books, The Future of Automotive Retail and The Future of Mobility, both available on Amazon.com.
Thanks (as always) for your ongoing support and for tuning into CBT News for this week’s Future of Automotive segment. We’ll see you next week!
