Software Emerging as Auto's New Strategic Lever: TSLA, GM & F in Focus

Core Insights - Legacy automakers are transitioning from reliance on vehicle sales to developing software and subscription ecosystems, which provide higher-margin, recurring revenue streams [1] General Motors - General Motors is building a software and subscription ecosystem centered around OnStar, which reached a record 12 million subscribers, including over 120,000 Super Cruise subscribers, reflecting approximately 80% year-over-year growth [2][3] - OnStar generates subscription-based revenues, creating more stable cash flow, with management expecting software and services revenues to increase by about $400 million this year and deferred revenues projected to reach $7.5 billion, up roughly 40% year-over-year [3] - GM plans to expand its Super Cruise system and introduce a second-generation software-defined vehicle architecture in 2028, which will enhance over-the-air capabilities and support advanced driving features [4][5] Ford - Ford is focusing on commercial customers through its Ford Pro unit, offering tools and services that enhance fleet operations [6] - Paid software subscriptions grew by 30% in 2025, with total paid subscriptions surpassing 1.3 million, up 53% year-over-year [7] - Software and physical services now account for 19% of Ford Pro's EBIT, with high-margin software gross margins above 50%, indicating potential for significant growth [8][9] Tesla - Tesla's software strategy emphasizes Full Self-Driving (FSD) with a shift to subscription-based monetization, as monthly subscriptions to FSD more than doubled in 2025 [12][15] - The transition to subscription-only for FSD aligns with Tesla's long-term financial goals, providing steady cash flow compared to one-time purchases [13] - Tesla aims to reach 10 million active FSD subscriptions over the next decade, with significant incentives tied to this metric for CEO Elon Musk [14]