The automotive industry has long been plagued by negative narratives. A prime example of this is that operations are capital intensive and leave automakers with thin margins, which negatively impacts earnings potential and valuations.
But the automotive industry is evolving rapidly to include more software and technology for automated driving features, advanced infotainment solutions and over-the-air updates that can reduce costs by eliminating the need for service center visits – all while improving the driving experience.
As investments, these factors can transform automakers, and here are two examples Rivian Automotive (RIVN 18.12%) And General Motors (GM 2.34%) could generate billions through unique software innovations and strategies.
Table of Contents
First: Rivian
Towards the end of 2024, Rivian and Volkswagen have teamed up to develop a state-of-the-art software-defined vehicle (SDV) architecture that can be used across all of the duo’s vehicle portfolios. The initial investment was significant, the potential is enormous and the financial impact is already driving Rivian. Let’s delve deeper.
Today’s change
(-18.12%) $-3.65
Current price
$16.49
Important data points
Market capitalization
$21 billionMarket capitalization is calculated solely based on publicly traded shares outstanding. Includes unlisted, private or non-traded dual class shares. The implied market capitalization can vary.
Daily range
$16.38 – $18.09
52 weeks range
$11.57 – $22.69
volume
225.3K
Avg. Vol
31.8 million
Gross margin
-441.39%
Volkswagen’s initial investment in Rivian was up to $5 billion, which was quickly increased to $5.8 billion, to be paid out upon reaching certain goals and milestones. At launch in late 2024, Rivian received a $1.3 billion lump sum investment, followed by a $1 billion tranche in early 2025, a mix of equity and debt to meet operational milestones. After passing winter testing in spring 2026, the company secured another $1 billion investment from Volkswagen, establishing Volkswagen as Rivian’s largest shareholder Amazon.
Investors only need to look at its first-quarter 2026 results to see the impact Rivian’s software is having on the company’s finances. Consolidated revenue was $1.28 billion, largely driven by two segments: Automotive and Software and Services. The former generated $908 million, down 2% year-on-year, while software and services generated $473 million, down 49%. increase.
Revenue growth was positive, but the impact on gross profit is arguably more important. Automotive segment gross profit was $62 million in the first quarter, while software and services segment gross profit was $181 million.
The boost in profitability from the software business helped the young electric vehicle (EV) manufacturer achieve a positive gross profit result in the first quarter – better than the competition Lucid Groupwhich is struggling to improve gross profitability – giving investors reason to believe that it can one day generate profits and become a profitable long-term investment.
Keep in mind that by partnering with Volkswagen alone, Rivian brings a lot of growth in its software business and opens the door for other traditional automakers to explore potentially lucrative software opportunities with Rivian.
Next up: General Motors
General Motors offers investors another perspective on monetizing software innovations. The Detroit automaker expects huge growth in OnStar and Super Cruise subscriptions and even has a long-term strategy to make that a reality.
Image source: General Motors.
Let’s take a look at some real data to highlight the software potential. Last year, GM recorded $2.7 billion in realized revenue and $5.4 billion in deferred revenue from OnStar and Super Cruise subscriptions – a healthy growth of $1.7 billion realized and just $200 million deferred in 2020. This business is growing rapidly, with management expecting these software services to generate $3.1 billion in realized revenue and $7.5 billion in revenue this year will generate deferred income.
Investors shouldn’t underestimate how this deal — with margins that GM says could be as high as 70% of gross margins — will transform GM as an investment in an industry known for low margins. “These software-like margins that are emerging in the connected business can actually drive and potentially over time eclipse even the wholesale business, which is remarkably strong and remarkably large,” said CFO Paul Jacobson Automotive News.
GM also follows its words with actions. Starting with the 2025 model year, every new GM vehicle rolling off the assembly line will include an eight-year base OnStar subscription, and vehicles with Super Cruise will have a three-year subscription included in the price. This essentially opens the widest funnel for its software and services businesses, betting that customers will get used to it and re-subscribe and/or re-purchase with their next vehicles.
The initial findings are quite positive. At least 30% of GM’s 35,000 drivers with an expiring three-year Super Cruise subscription will renew in 2025.
Today’s change
(-2.34%) $-1.82
Current price
$76.03
Important data points
Market capitalization
$69 billionMarket capitalization is calculated solely based on publicly traded shares outstanding. Includes unlisted, private or non-traded dual class shares. The implied market capitalization can vary.
Daily range
$75.64 – $77.72
52 weeks range
$48.87 – $87.62
volume
264
Avg. Vol
7.8 million
Gross margin
6.10%
Dividend yield
0.87%
What it all means
Car manufacturers are rapidly evolving with the industry and vehicles are being equipped with more and more software technologies and innovations. This means that new business models can generate additional sources of income and higher margins. Additionally, in the long run, it could help an industry struggling with poor price-to-earnings (P/E) ratios rise as Wall Street recognizes the more profitable companies in the coming years.
Rivian and GM aren’t tech stocks, but software could certainly drive their stocks higher over the next decade.
https://www.fool.com/investing/2026/07/03/2-stocks-that-could-soar-driven-by-billions-from/
