General Motors has shed Tim Cook and boosted its software and subscription businesses.
During the automaker’s earnings call on Tuesday, executives highlighted the rapid growth of OnStar and Super Cruise, its two most popular software services.
Subscriptions are becoming increasingly important for car manufacturers. Unlike a car sale that only happens every few years, they can continue to generate high profit margins long after a customer has left the parking lot.
GM says its software business keeps about 70 cents of every dollar it brings in. That’s a rare level of profitability in the automotive industry, as many car sales generate just four to ten cents per dollar of sales.
The automaker’s OnStar business, which provides GPS and cellular security services, brought in about $800 million in the second quarter, up more than 20% from a year ago. GM expects to add about 1 million OnStar subscribers this year, bringing its total to nearly 13 million.
Super Cruise, GM’s hands-free, visible driving system, is growing even faster. GM added about 70,000 subscribers during the quarter and expects to have more than 850,000 by year’s end. Revenue from the service increased by about 70% compared to the previous year.
And many drivers stick around even after the free period expires. According to GM, between 30 and 40% of eligible owners continue to pay after their included three-year Super Cruise subscription expires.
The company also said Super Cruise will be standard on high-end trims of its redesigned Chevy Silverado and GMC Sierra full-size pickups, which the company said is expected to attract about 160,000 users.
“We believe we have tremendous levers, multiple levers of growth,” Barra said on the call. “We definitely believe there is a lot of opportunity for GM to grow, improve margins and become less cyclical.”
GM’s Super Cruise, the company’s hands-off, eyes-open self-driving system, is attracting more and more subscription customers.
GM
“Software and services are becoming increasingly important to how customers experience GM vehicles and how we deliver value beyond the initial purchase,” a spokesperson previously told Business Insider. “As vehicles become more software-defined, we can introduce new digital experiences through updates and optional services rather than making hardware changes.”
The surge in subscriptions comes as automakers look for new ways to make money after cars leave dealer lots — especially as Detroit automakers roll out new electric vehicles.
Electric vehicles typically require less maintenance than gasoline-powered cars, resulting in fewer repairs and services that have long been a reliable profit driver for dealers and manufacturers.
GM has structured its subscriptions to make it easier for customers to get started. OnStar Basics is included in GM vehicles starting in 2025 at no additional cost and bundles safety features, navigation and audio apps for up to eight years.
Paid subscriptions come later. GM charges $19.99 a month for Connect Plus, which offers in-car Internet access, and $39.99 a month for Super Cruise, its hands-free, hands-free system. Driver assistance is free for the first three years.
GM isn’t the only automaker betting on its subscription business.
Ford also added subscription services for BlueCruise, its interactive highway driving system.
Brandon Bell/Getty Images
In February, Tesla discontinued the $8,000 option to purchase its self-driving software called “Full Self-Driving (Supervised).” After February 14, owners will have to pay $99 per month for the service – a price that Elon Musk says will rise as the technology improves.
Ford’s highway assistance feature – called BlueCruise – costs $49.99 per month, $495 for a year or $2,495 for the life of the car.
Mercedes-Benz and BMW also offer autonomous driving upgrades for some of their new vehicles.
But for GM, America’s largest auto company by sales, the profits from the new subscriptions could be a boon. Wall Street was pleased with the automaker’s earnings report, sending the company’s shares up 8.8% in the hours following the earnings release.
“This is playing out like a software story that GM first told us about in 2021,” Morningstar analyst David Whiston previously told Business Insider. “If they can develop other software for a fee and provide local governments with traffic and accident risk data, there is real potential for revenue streams that would not be possible to achieve margins from just selling a car.”
https://www.businessinsider.com/general-motors-gm-earnings-subscriptions-revenue-business-2026-1
