The road to the future for automakers looks digital. As software continues to drive innovation and redefine the automotive industry, major players are shifting gears and racing to monetize the software services embedded in their vehicles.
Software: The New Driver of Revenue
Ford Motor Co. has set its sights on a digital horizon. With expectations of a 1,000% surge in revenue from in-car software services over the next few years, Ford is steering full-throttle into the software lane. This recent strategic focus follows the appointment of Peter Stern, Apple's former vice president of services, to lead Ford’s new tech-focused unit. Stern will be at the helm of Ford’s BlueCruise hands-free driving system, and his appointment signals a greater commitment to expand Ford's software offerings.
Moreover, with already half a million software subscribers under its belt, Ford CEO Jim Farley is driven to leverage software services to iron out the volatile nature of car business cycles. As opposed to the 8.3% margin Ford recorded in the first half of this year, software services, like speed control, boast an impressive gross margin above 50%.
The transformative strategy doesn’t end there. By 2025 and 2026, Ford plans to implement a new electrical architecture in both its petrol-fueled and electric models. This upgrade will pave the way for an enhanced subscription service spectrum, notably in safety and security domains.
Shifting Lanes: From Hardware to Software
For decades, cars were hardware-centric entities. Today, as data-driven services promise a potential revenue spike of up to $1.5 trillion for OEMs, the paradigm is shifting. When juxtaposed against the modest 13-21% gross profit margin from car sales, the tantalizing 72.31% average GPM from the software sector becomes even more attractive.
Companies like Tesla have been pioneers in monetizing software upgrades. With the push of an update, Tesla owners can unleash acceleration upgrades – for a fee. Similarly, the Polestar 2 underwent a metamorphosis with a powertrain ECU update, elevating its horsepower for a premium price.
Moreover, car owners are no longer confined to the features they initially purchased. With over-the-air (OTA) updates, vehicles can evolve over time, mirroring the dynamic upgrade capability we've become accustomed to with smartphones and other smart devices.
10 Future Software Ideas in Vehicles:
Dynamic Driving Modes: Customizable driving modes for various terrains and weather conditions, available for purchase.
AI Driving Assistant: An AI that learns from the driver's habits and provides suggestions for optimal driving.
Entertainment Packages: Subscription-based, immersive in-car entertainment systems for passengers.
Advanced Security Features: Biometric-based vehicle access and anti-theft systems.
Health Monitoring: Seats with built-in health monitoring that can provide real-time feedback and emergency alerts.
AR Windshields: Augmented Reality windshields for enhanced navigation and infotainment.
Dynamic Exterior Display: Customizable vehicle exterior display for communication, branding, or aesthetics.
On-Demand Repair Diagnostics: Software that can run a diagnostic and connect directly with repair services.
Environment Adaptation: Software that adjusts vehicle settings based on external environmental data, optimizing performance.
In-Car Office Suite: A dedicated software suite for professionals on-the-move, allowing safe work during commutes.
As the lines blur between hardware and software, the automotive industry is on the cusp of a revolution. While the journey has just begun, the road ahead is paved with endless possibilities.
Closer to Home
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