GM is quietly becoming a subscriptions company

Core Insights - General Motors (GM) is significantly expanding its software and subscription business, generating $2 billion in software revenue over the past nine months and securing $5 billion in future subscriptions from customers [1][2]. Subscription Growth - GM has reached 11 million subscribers for its OnStar safety system, marking a 34% increase from the previous year, and an additional 500,000 customers are subscribed to the Super Cruise hands-free driver-assistance system [2][4]. - The subscription services, while currently a small portion of GM's total revenue of $45.29 billion in the last quarter, offer higher profit margins compared to traditional car sales [2][3]. Profitability and Strategy - GM's software business retains approximately 70 cents of every dollar earned, a notable profitability level in the auto industry where car sales typically yield only 4 to 10 cents per dollar [3]. - The company plans to enhance its software and services, such as OnStar and Super Cruise, to drive greater revenue during and after vehicle sales, indicating a strong growth opportunity with attractive margins [3][4]. Software-Defined Vehicles - As vehicles become more software-defined, GM aims to introduce new digital experiences through updates and optional services rather than relying solely on hardware changes [5][6]. - The subscription model is designed to ease customer adoption, with OnStar Basics included at no extra cost for newer GM vehicles, while paid subscriptions for services like Connect Plus and Super Cruise are available at monthly rates [6][7]. Competitive Landscape - Other automakers, including Ford and Tesla, are also expanding their subscription services, indicating a broader industry trend towards monetizing software and services post-sale [8][9]. - Wall Street responded positively to GM's earnings report, with the company's stock rising 8.8% following the announcement, reflecting investor confidence in the subscription model's potential [9][10].