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In July, luxury automaker BMW started selling some new eye-popping subscription-based services in various countries, included charging drivers $18 a month for heated seats and $10 per month for a heated steering wheel, features that critics argued should be standard.
General Motors assured investors Thursday it has no intention of charging its customers for those features, but it is certain that vehicle software, and the microtransactions it will allow, such as paying for cloud-based services, will be the bigger business for GM in the future compared with the sale of the hardware − the car − now.
Earlier this year, GM said software-as-a-service will generate $20 billion to $25 billion annually in revenue by 2030. To get there, GM has hundreds of data scientists already studying consumer behavior, promising there will be more subscription services on GM vehicles and looking at ways to tie the sale of a car to software services or to other new GM businesses, such as GM’s auto insurance through OnStar.
“I wouldn’t expect us to charge someone $18 for heated seats. We’re very in touch with our customers and where they find value. We know when it comes to features like safety or standard features, our customers expect it has to be included in the vehicle,” said Alan Wexler, GM’s senior vice president of strategy and innovation. “As much as we can standardize hardware in the vehicle and then unlock features with software, we will.”
But, he said, electric vehicles are comprised of about 25% fewer parts than gasoline-powered cars, “So we’re moving into a world of simplification in terms of hardware and we’ll capitalize on it in different segments based on what people’s desires are and what they want to buy.”
GM is studying you
Wexler spoke with Barclays auto analyst Dan Levy as part of a webcast for the Barclays Global Automotive and Mobility Tech Conference Thursday.
“Software is a business for us,” Wexler said, noting that 70% of GM’s new hires over the past two years have come from technology companies to work on GM’s vehicle software.
Wexler said GM has 300 data scientists on its data insights team analyzing and forming insights into “what customers are interested in buying, when they’re interested in buying it and how they’re interested in buying it.”
As GM develops new technology, it can garner insight from customers’ vehicle data and interact with the car buyers to sell them more services beyond the initial car purchase, he said. For example, if GM notices a pattern of a certain highway you drive or a certain time or traffic pattern routinely taken, it can send an offer to the driver saying, “Would you like to try Super Cruise on your way home tonight?” Wexler said. “We can offer it to you as a try and buy.”
Super Cruise is GM’s hands-free driving technology that can be used on 400,000 miles of mapped roads in the U.S. and Canada. It will be offered on 22 vehicles next year. Ultra Cruise is GM’s next iteration of Super Cruise, offering more roads it can be used on. It will debut on the 2024 Cadillac Celestiq EV.
Super Cruise costs $2,200 within the manufacturer’s suggested retail price and includes 3 years of service. After that, the customer has the option to pay $25 a month or $250 per year to continue using it. Wexler said both Super Cruise and Ultra Cruise offer GM greater revenue opportunities in the future either through more subscriptions or by leading to the purchase of other GM products.
“We believe our autonomous technology, whether it is Super Cruise or Ultra Cruise, leads to safer driving, so that should lead to saving money on insurance,” Wexler said. “What we’re doing on the innovation team is: How do we bring these services to life to delight our customers and (bring) what they’re willing to pay for? It’s stitching together a lot of new businesses to provide value to customers and should provide value to us.”
GM eyes Tesla and Netflix
GM has also eyed outside subscription businesses as a model to support its 2030 annual revenue target, Wexler said.
“We looked outside of what people were willing and interested to pay from a vehicle perspective,” Wexler said. “We looked at subscriptions in people’s lives: What are you paying for Netflix or a music app? We took a very comprehensive look at peoples’ willingness to buy.”
Wexler said GM’s success relies on owning its software so it can both procure and protect the vehicle data it has access to. In this regard, he said, GM is developing a software model similar to rival EV maker Tesla.
“I have a lot of respect for what Tesla has done,” Wexler said. “They had the benefit of starting from scratch in developing an operating system within the vehicle and knowing that software is core to their business. They moved at speed. They also played it very smart in terms of the experiences they created, what they would outsource to partners versus what they would own.”
GM’s innovation challenge
In 2019, GM created the Vehicle Intelligence Platform (VIP), which is the wiring in a vehicle that will enable GM’s future software platform, Ultifi. GM introduced Ultifi last year. The first vehicle it will go live on is the Chevrolet Silverado EV due out next year.
Think of VIP as a smartphone and Ultifi as the operating system that provides the functions. Similar to software on a smartphone, Ultifi can provide regular updates and let customers choose from a variety of over-the-air upgrades, personalization options and apps.
“We must own that, we’re building that,” Wexler said, noting that GM did not start from scratch with Ultifi like Tesla did with its software. “It’s a little more difficult,” he said, because GM has to design its vehicle software to work with gasoline-powered cars and EVs.
“It’s a little more complicated than starting from scratch, but we’re taking a very similar approach around the platform,” Wexler said. “We just have to be agile over time.”
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Contact Jamie L. LaReau: jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.
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