DETROIT – Automaker Stellantis plans to generate about $22.5 billion (20 billion euros) in incremental annual revenue from software services and subscriptions by 2030, the company announced Tuesday.
Driving the growth will be an increase in the automaker’s so-called connected vehicles — stocked with GPS, infotainment systems, driver assistance and other technologies — from 12 million today to 34 million by then, according to Stellantis.
Stellantis, which is the world’s fourth-largest automaker, is the latest company to target a substantial increase in services revenue to better diversify its market opportunities and earnings.
“Software will improve our business model, disconnecting hardware from software … shifting the center of gravity of our business,” Stellantis CEO Carlos Tavares said Tuesday during the company’s “Software Day.”
Tavares said profit margins for those services are expected to be more comparable to those of a technology company rather than a traditional automaker. The additional revenue stream could potentially double what the automaker makes today, CFO Richard Palmer said.
Stellantis’ stock closed Tuesday at $18.78 a share on the New York Stock Exchange, up by 2% as part of a broader market rally. Shares also are traded on stock exchanges in Italy and Paris.
Other automakers – from BMW to General Motors and Ford Motor – have announced similar measures following the recent growth and popularity of Tesla. The EV automaker is considered an industry leader in services and technologies, offering remote, or over-the-air, updates for its vehicles years ahead of others.
Stellantis said it expected “a majority” of its new vehicles to be capable of OTA updates by 2024.
Vehicles capable of over-the-air updates are viewed as key for automakers to generate recurring revenue through new technologies and subscriptions for everything from video entertainment to driver-assist features.
“Vehicles have become an integral part of customer’s digital life with software-defined features constantly updated over-the-air,” Tavares said.
Stellantis showed examples of software-enabled technologies Tuesday on Jeep models with new GPS maps for off-roading; concierge services for drivers; better vehicle service scheduling; and upgradeable in-vehicle technologies for video and gaming entertainment as well as driver-assist features, among others.
Tavares said the updates will increase the lifecycle of vehicles, including higher residual values for when owners choose to sell their cars or trucks.
Software services was part of the automaker’s previously announced plan to invest 30 billion euro 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 iPhone maker Foxconn to create a partnership intended to design a family of new semiconductors to support Stellantis and third-party customers.
Stellantis also has partnerships with BMW and Alphabet’s Waymo developing advanced driver-assist systems to combat Tesla’s Autopilot and other systems.
Stellantis is the merged automaker of Fiat Chrysler and France-based Groupe PSA. It has 14 individual auto brands such as Alfa Romeo, Chrysler, Fiat, Jeep and Peugeot.