Why Stellantis Expects Big Profits From Subscription Services
GM’s CEO, Mary Barra, said back in August that she believes the company will make as much revenue from its software as it will make from selling vehicles in about ten years. Today, Stellantis CEO Carlos Tavares did not go quite that far but said that Stellantis intends to make over $22 billion in annual revenue from software by 2030. Tavares is talking about income from subscription services that you would use, for example, in your Ram 1500. The company would make money off of services like navigation, real time tracking and on demand features.
Tavares was speaking as part of Stellantis’ Software Day where it was outlining its future plans concerning connectivity, electric vehicles and the push for autonomous vehicles. Stellantis is investing about $34 billion to speed up its software and electrification development through 2025. Stellantis intends to have 34 million vehicles on the road by 2030 that are connected and able to receive updates over-the-air. That connectivity is key to being able to monetize the subscription services.
New Partnerships to Accelerate Growth
Stellantis also announced new partnerships with companies including BMW, Foxconn and Waymo. The alliances will help the company accelerate its push into autonomous vehicles and connectivity, while also helping guarantee the availability of microchips. The company is also investing in three new AI-powered platforms that it will use starting in 2024. The platforms called STLA Brain, STLA SmartCockpit and STLA AutoDrive are expected to transform how drivers and passengers connect with their vehicles.
“Our electrification and software strategies will support the shift to become a sustainable mobility tech company to lead the pack, leveraging the associated business growth with over-the-air features and services and delivering the best experience to our customers,” said Carlos Tavares, Stellantis CEO. “With the three all-new, AI-powered, technology platforms to arrive in 2024, deployed across the four STLA vehicle platforms, we will leverage the speed and agility associated with the decoupling of hardware and software cycles.”
The Stellantis software strategy is timed to coincide with the company’s vehicle electrification plans. The company says more than 40% of vehicle sales in the United States will be low-emission vehicles (LEV) by 2030. Each of the company’s 14 brands is committed to offering fully electrified solutions.
Stellantis sees tremendous growth and profit potential in:
- Services and subscriptions
- Features on demand
- Data as a service and fleet services
- Vehicle pricing and resale value
- Conquests, service retention and cross-selling
Stellantis also will launch its own insurance program based on how much the driver uses the vehicle. Call me cynical, but I bet it is also based on data the company collects about speeding and detection of any crashes.
Quicker Updating and Reduced Maintenance Costs
Over the air updates save both the company and the customer time and money. Being able to update software, especially if there are software glitches, without making the customer return to the dealership is a win for the customer and the automaker. The new platforms will make AI-based applications, such as navigation, voice assistance, e-commerce marketplace and payment services easier and more manageable. Imagine over-the-air updates that can provide upgrades like more horsepower or better fuel mileage all without having to return to the service department.
The increase in connectivity will be huge when it comes to the entertainment offerings that are available. Parents will pay a lot to keep their kids entertained during long drives. Having access to the latest movies and entertainment on demand could be a tremendous revenue generator. Similarly, navigation services will be essential for people who use their Ram 1500s as their offices. Companies that have fleets of trucks will find fleet fuel and maintenance tracking invaluable.
Stellantis Hiring Software Engineers
To achieve the rapid growth it desires in the software realm, Stellantis says it intends to have 4,500 software engineers globally by 2024. Stellantis plans to retrain 1,000 engineers that already work for the company. Plus, it will develop a Software Academy to continually update training. The engineers will operate out of hubs, but the company does not say where they will be located.
It makes sense that all of the automakers are moving toward software-based solutions rather than relying on hardware built into the vehicles. All of the major automakers have been burned by the rapidly changing technology. There are older versions of Sync and Uconnect that can’t be easily updated, Older radios that can’t be updated with Sirius. It doesn’t take long for equipment to be as outdated as cassettes and cds. Streaming services like Apple TV, Netflix, Hulu and Paramount + have dramatically changed television and generated huge profits. Similarly, subscriptions services are on the verge of dramatically changing vehicle ownership.
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