Software Becomes the New Strategic Driver for Automakers: Spotlight on TSLA, GM, and F

The Shift Toward Recurring Revenue in the Auto Industry

Traditional car manufacturers have long depended on vehicle sales, which tend to fluctuate with market cycles. Today, advancements such as connected vehicles, over-the-air software updates, and subscription-based features are transforming the industry, paving the way for more consistent, higher-margin income streams. Automakers are now building robust software and subscription platforms, and the financial impact is becoming increasingly significant. Let’s examine how General Motors, Ford, and Tesla are positioned in this evolving landscape.

General Motors: Building a Software-Driven Future

General Motors is making notable progress in developing a comprehensive software and subscription platform. At the heart of this initiative is OnStar, GM’s in-car safety, connectivity, and subscription service. In the past year, OnStar achieved a milestone of 12 million subscribers, including over 120,000 users of Super Cruise, representing an impressive 80% increase from the previous year. OnStar Fleet subscriptions reached 2 million, outpacing competitors and providing GM with substantial recurring, high-margin revenue.

Unlike the cyclical nature of car sales, OnStar’s subscription model delivers more reliable and predictable cash flow. GM’s leadership anticipates an additional $400 million in software and services revenue this year, with deferred revenue from these offerings expected to hit $7.5 billion—a 40% year-over-year increase. This growing deferred revenue base enhances financial visibility and supports sustained profitability.

Super Cruise, GM’s advanced hands-free driving system, remains a cornerstone of the company’s software ambitions. GM plans to broaden Super Cruise’s availability throughout North America and introduce it in South Korea, the Middle East, and Europe.

Looking ahead, GM aims to launch its next-generation software-defined vehicle architecture in 2028, supporting both traditional and electric vehicles. This new centralized computing system will unify critical functions such as powertrain, infotainment, and safety, offering tenfold increases in over-the-air update capacity and bandwidth. It will also enable future autonomous driving capabilities, reinforcing software as a key element of GM’s long-term vision.

Ford: Expanding Digital Services for Commercial Clients

Ford is concentrating its software efforts on commercial customers through its Ford Pro division, which provides solutions to help fleet operators minimize downtime, reduce expenses, and maintain vehicle performance. Offerings include telematics, fleet management tools, electric vehicle charging, and integrated maintenance services.

In recent years, Ford has significantly grown its software subscription base. In 2025, paid software subscriptions rose by 30%, and total paid subscriptions—including both digital and physical services—exceeded 1.3 million, marking a 53% annual increase.

Combined revenue from software and physical services increased by 10% and now makes up 19% of Ford Pro’s EBIT. Although these high-margin streams, with software gross margins above 50%, are expanding, they still represent a relatively small portion of overall earnings, indicating substantial room for future growth as adoption rises.

The recurring nature of fleet subscriptions helps stabilize Ford’s revenue, reducing the volatility associated with traditional vehicle sales. Commercial clients prioritize reliability and cost-effectiveness, making them more likely to remain loyal to integrated service platforms. As Ford strengthens its relationships with fleet customers, Ford Pro is becoming a significant contributor to the company’s earnings and a vital driver of margin stability.

Currently, Ford holds a Zacks Rank #1 (Strong Buy).

Tesla: Accelerating Subscription-Based Monetization

Tesla’s software strategy centers on its Full Self-Driving (FSD) technology and a decisive move toward subscription-based revenue. In 2025, monthly subscriptions to FSD (Supervised) more than doubled compared to the previous period. Starting February 15, Tesla shifted to a subscription-only model for FSD, discontinuing the one-time $8,000 purchase option, as the economics no longer favored outright purchases unless buyers believed in imminent full autonomy and significant value appreciation.

This transition to subscriptions aligns with Tesla’s long-term financial objectives. While one-time sales create irregular revenue spikes, subscriptions provide a steady income stream, which is typically more attractive to investors.

The change also supports CEO Elon Musk’s compensation structure, which is heavily linked to long-term operational milestones rather than short-term profits. A key target is reaching 10 million active FSD subscriptions within the next decade. By eliminating the one-time purchase, Tesla is steering all new FSD users toward subscriptions—a metric crucial for Musk’s incentive plan.

FSD (Supervised) users have collectively driven over 8 billion miles. In 2025, monthly FSD subscriptions more than doubled. In the latest quarter, Tesla introduced FSD in South Korea, where customers logged over 1 million kilometers in just one month. While regulatory approval is still pending in China and Europe, Tesla has begun offering demonstration rides in countries such as Italy, Germany, France, and Switzerland.

Spotlight on a Promising Semiconductor Company

A lesser-known company specializing in semiconductor products not produced by industry giants like NVIDIA is now emerging as a key player in the sector’s next phase of growth. With robust earnings and a growing customer base, this company is well-positioned to meet the surging demand for Artificial Intelligence, Machine Learning, and the Internet of Things. The global semiconductor market is expected to soar from $452 billion in 2021 to $971 billion by 2028.

Additional Resources

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• Ford Motor Company (F): Free Stock Analysis Report
• General Motors Company (GM): Free Stock Analysis Report
• Tesla, Inc. (TSLA): Free Stock Analysis Report