Automakers' Software Business Poised for High Margins
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 5 days ago
0mins
Source: NASDAQ.COM
- Software Growth Potential: Rivian's partnership with Volkswagen is expected to yield up to $5.8 billion in investments, driving the development of a software-defined vehicle architecture that significantly enhances profitability and encourages traditional automakers to explore software opportunities.
- Profitability Boost: Rivian's total revenue reached $1.28 billion in Q1 2026, with the software and services segment growing 49% to $473 million, demonstrating the positive impact of software on overall gross profit, which totaled $181 million, surpassing competitor Lucid Group.
- GM's Strategic Shift: General Motors anticipates $3.1 billion in realized revenue from OnStar and Super Cruise in 2023, with projected gross margins nearing 70%, fundamentally altering its investment appeal in a low-margin industry and supporting future growth.
- Increased Customer Retention: GM plans to provide an eight-year basic OnStar subscription for every new vehicle starting in 2025, with early data showing that 30% of Super Cruise users renewed their subscriptions in 2025, indicating strong customer acceptance and future revenue potential.
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Analyst Views on GM
Wall Street analysts forecast GM stock price to rise
19 Analyst Rating
14 Buy
4 Hold
1 Sell
Moderate Buy
Current: 77.850
Low
57.00
Averages
95.06
High
122.00
Current: 77.850
Low
57.00
Averages
95.06
High
122.00
About GM
General Motors Company designs, builds and sells trucks, crossovers, cars and automobile parts and provides software-enabled services and subscriptions worldwide. The Company's segments include GMNA, GMI and GM Financial. Its GM North America (GMNA) and GM International (GMI) segment develop, manufacture and/or markets vehicles under the Buick, Cadillac, Chevrolet and GMC brands. The Company's GM Financial segment provides automotive financing and related services. The Company is also focused on investing in electric vehicles (EVs) and autonomous vehicles (Avs), software-enabled services and subscriptions and new business opportunities. The Company's portfolio includes OnStar, GM Energy, GM Insurance, GM Genuine Parts, and the GM Company Store. Its OnStar portfolio offers safety, connectivity and hands-free driver assistance technologies. Its GM Energy provides Home EV Charging, Public EV Charging, Vehicle-To-Home and Energy Storage services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Production Challenges: Two supplier fires last fall severely impacted Ford's aluminum supply, leading to reduced production capacity for the F-150, with expected EBIT losses of $1.5 billion to $2 billion in 2026, forcing management to adjust earnings guidance.
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- Competitive Market Advantage: This move aims to narrow the sales gap with America's largest automaker, General Motors, with forecasts suggesting that Toyota's sales will rise in 2024 due to the popularity of hybrid models, thereby enhancing its market position.
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