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DETROIT – Car manufacturer Stellantis The company has announced plans to generate around $22.5 billion (20 billion euros) in annual revenue from software services and subscriptions by 2030.
According to Stellantis, driving growth will be the proliferation of so-called carmakers’ connected vehicles – equipped with GPS, infotainment systems, driver assistance and other technologies – from 12 million today to 34 million at the time, according to Stellantis.
Stellantis, the world’s fourth-largest automaker, is the latest company to aim to significantly increase service revenue in order to better diversify its market and earnings opportunities.
“Software will improve our business model, disconnecting hardware from software … shifting the focus of our business,” Stellantis CEO Carlos Tavares said Tuesday in The company’s “Software Day”.
Tavares said profit margins for these services are expected to be comparable to those of a technology company rather than a traditional automaker. The additional revenue stream could double what the automaker generates today, said Chief Financial Officer Richard Palmer.
Shares of Stellantis closed Tuesday at $18.78 per share on the New York Stock Exchange, up 2% as part of a broader market rally. Shares are also traded on stock exchanges in Italy and Paris.
Other car manufacturers – from BMW to Synthetic engine and Ford Motor – announced similar measures following the recent growth and popularity of Tesla. The EV automaker is considered an industry leader in service and technology, providing remote or over-the-air updates to its vehicles years ahead of others.
Stellantis said it expects “the vast majority” of its new vehicles to be OTA update-capable by 2024.
Updating vehicles are seen as key for automakers to generate recurring revenue through new technologies and subscriptions for everything from video entertainment to support features driver assistance.
“Vehicles have become an integral part of customers’ digital lives with software-defined features that are continuously updated over the air,” said Tavares.
Stellantis showcased examples of software-assisted technologies Tuesday on Jeep models with new GPS maps for terrain; guide service for drivers; better car service scheduling; and upgradeable in-vehicle technologies for video entertainment and gaming as well as driver assistance features, among others.
Tavares says the updates will increase the life of the vehicle, including a higher residual value when owners choose to sell their car or truck.
The software service is part of the automaker’s previously announced plans 30 billion euro investment in advanced technologies as well as vehicle electrification.
Stellantis said it expects to use those funds to hire more software engineers who can develop new technologies in-house as well as through partnerships with other companies.
The company on Tuesday also announced it has signed a non-binding memorandum of understanding with the iPhone maker Foxconn to create a partnership to design a new line of semiconductors to support Stellantis and third-party customers.
Stellantis also has a partnership with BMW and Alphabet of Waymo is developing advanced driver assistance systems to counter Tesla’s Autopilot and others.
Stellantis is a consolidated carmaker of Fiat Chrysler and Groupe PSA based in France. It has 14 individual auto brands such as Alfa Romeo, Chrysler, Fiat, Jeep and Peugeot.
