General Motors' Software Business Shows Promising Growth Potential
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 day ago
0mins
Should l Buy GM?
Source: Fool
- High-Profit Business Growth: General Motors expects to generate $3.1 billion in revenue from OnStar and Super Cruise subscriptions in 2023, a significant increase from $1.7 billion in 2020, indicating strong potential for its software business and further enhancing overall profitability.
- Market Share Enhancement: GM is addressing consumer subscription fatigue with a long-term subscription strategy, planning to offer an eight-year basic subscription for OnStar and three years for Super Cruise starting in 2025, aimed at increasing customer renewal rates and market penetration.
- Margin Transformation: With an average gross margin of just over 16% over the past decade, GM's shift towards software services, which boast margins nearing 70%, is set to significantly enhance profitability, attracting more investor interest in its long-term growth potential.
- Customer Upgrade Trends: Currently, about one-third of basic OnStar subscribers are opting for additional features, and at least 30% of expiring Super Cruise subscriptions are being renewed in 2025, indicating growing consumer recognition and demand for these high-value services.
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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: 75.040
Low
57.00
Averages
95.06
High
122.00
Current: 75.040
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, Cruise and GM Financial. Its GM North America (GMNA) and GM International (GMI) develop, manufacture and/or markets vehicles under the Buick, Cadillac, Chevrolet and GMC brands. The Company provides automotive financing services through its General Motors Financial Company, Inc. (GM Financial) segment. Its Cruise segment is engaged in the development and commercialization of autonomous vehicle technology. Its software-enabled services and subscriptions, including OnStar, its advanced driver-assistance systems (ADAS), including Super Cruise driver assistance technology, and its end-to-end software platform. The Company is also focused on investing in electric vehicles (EVs) and AVs, software-enabled services and subscriptions and new business opportunities.
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.
General Motors' Software Subscription Business Shows Significant Growth
- Revenue Growth: General Motors expects to generate $3.1 billion in revenue from OnStar and Super Cruise subscriptions in 2023, a significant increase from $1.7 billion in 2020, highlighting the company's potential in high-margin software business.
- Margin Improvement: GM's average gross margin over the past decade has been just over 16%, while software services typically boast margins close to 70%, indicating a promising outlook for the company's profitability.
- Long-Term Subscription Strategy: Starting in 2025, GM will offer an eight-year basic subscription to OnStar and three years for Super Cruise with new models, aiming to enhance customer renewal rates and mitigate subscription fatigue.
- Customer Upgrade Trends: Currently, about one-third of customers with basic OnStar subscriptions are opting for additional features, and at least 30% of expiring Super Cruise subscriptions are being renewed in 2025, demonstrating consumer acceptance and demand for these services.
See More
General Motors' Software Business Shows Promising Growth Potential
- High-Profit Business Growth: General Motors expects to generate $3.1 billion in revenue from OnStar and Super Cruise subscriptions in 2023, a significant increase from $1.7 billion in 2020, indicating strong potential for its software business and further enhancing overall profitability.
- Market Share Enhancement: GM is addressing consumer subscription fatigue with a long-term subscription strategy, planning to offer an eight-year basic subscription for OnStar and three years for Super Cruise starting in 2025, aimed at increasing customer renewal rates and market penetration.
- Margin Transformation: With an average gross margin of just over 16% over the past decade, GM's shift towards software services, which boast margins nearing 70%, is set to significantly enhance profitability, attracting more investor interest in its long-term growth potential.
- Customer Upgrade Trends: Currently, about one-third of basic OnStar subscribers are opting for additional features, and at least 30% of expiring Super Cruise subscriptions are being renewed in 2025, indicating growing consumer recognition and demand for these high-value services.
See More
General Motors' Software Revenue Surge
- Revenue Growth: General Motors expects to generate $3.1 billion in revenue from OnStar and Super Cruise subscriptions in 2023, a significant increase from $1.7 billion in 2020, highlighting the company's potential in high-margin businesses and enhancing shareholder returns.
- Long-Term Subscription Strategy: To combat consumer subscription fatigue, GM plans to offer an eight-year basic subscription to OnStar and three years for Super Cruise starting in 2025, aiming to increase customer renewal rates and enhance loyalty.
- Margin Improvement: GM's average gross margin over the past decade has been just over 16%, while software services typically boast margins nearing 70%, indicating a significant potential for enhanced profitability that could attract more investor interest.
- Competitive Market Advantage: As more vehicles are equipped with infotainment technology and sensors, GM's subscription services have the potential to surpass traditional wholesale business in the coming years, further solidifying its market position in the automotive industry.
See More
Leasing Market Faces Challenges for EVs
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- Surge in Supply: By 2028, around 800,000 EVs are projected to hit the used market, leading to oversupply and further price depreciation, which may put additional financial strain on leasing companies.
- Tesla's Market Dominance: Tesla's leasing volume is substantial, with nearly 229,000 EVs leased last year, far exceeding the combined totals of General Motors and Ford, highlighting its strong influence in the industry.
- Financial Management Strategy: Despite industry challenges, Tesla mitigates its financial risk by managing a portion of its lease portfolio through partnerships with third-party lenders, allowing investors to remain cautiously optimistic while monitoring market developments in the coming years.
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- Leasing Market Risks: Tesla is expected to see a wave of off-lease EVs flooding the market in the coming years, with industry experts projecting these vehicles to return at values approximately $10,000 lower than anticipated, potentially costing the industry about $8 billion.
- Depreciation Trends: According to Cox Automotive, by 2025, a three-year-old EV will maintain only about 40% of its original value at auction, a significant drop from 90% in early 2022, indicating pressure on the used EV market.
- Tesla's Market Dominance: Tesla dominates the EV leasing market, having leased nearly 229,000 vehicles last year, which is significantly more than the combined total of General Motors and Ford, highlighting its strong industry influence.
- Investor Confidence Reminder: Despite the challenges posed by off-lease EV depreciation, Tesla's finance arm collaborates with third-party lenders, allowing it to mitigate most of the leasing losses, suggesting that investors need not panic just yet.
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Impact of Trump's Tariffs One Year Later
- Widespread Tariff Impact: Trump's tariff policies have placed significant economic pressure on U.S. businesses over the past year, with approximately 80% to 85% of costs absorbed by companies, leading to reduced profits and increased consumer prices, thereby exacerbating overall economic uncertainty.
- Retail Sector Adaptation: While large retailers like Walmart have emerged relatively unscathed, smaller businesses have been severely impacted, with Home Depot aiming to limit purchases from any single country to 10% to reduce dependency and enhance supply chain flexibility.
- Automotive Industry Cost Surge: Automakers such as General Motors and Toyota are facing tariff impacts estimated at up to $9.5 billion, and although the Trump administration has taken steps to alleviate overlapping tariffs, overall costs remain significant, forcing companies to reassess their supply chain strategies.
- Pharmaceutical Sector Stability: Pharmaceutical companies have secured three-year tariff exemptions through pricing agreements with Trump, although new tariffs impose 100% on companies that do not reach agreements, the overall industry is still striving to increase investments in U.S. manufacturing.
See More
General Motors' Software Subscription Business Shows Significant Growth
- Revenue Growth: General Motors expects to generate $3.1 billion in revenue from OnStar and Super Cruise subscriptions in 2023, a significant increase from $1.7 billion in 2020, highlighting the company's potential in high-margin software business.
- Margin Improvement: GM's average gross margin over the past decade has been just over 16%, while software services typically boast margins close to 70%, indicating a promising outlook for the company's profitability.
- Long-Term Subscription Strategy: Starting in 2025, GM will offer an eight-year basic subscription to OnStar and three years for Super Cruise with new models, aiming to enhance customer renewal rates and mitigate subscription fatigue.
- Customer Upgrade Trends: Currently, about one-third of customers with basic OnStar subscriptions are opting for additional features, and at least 30% of expiring Super Cruise subscriptions are being renewed in 2025, demonstrating consumer acceptance and demand for these services.
See More
General Motors' Software Business Shows Promising Growth Potential
- High-Profit Business Growth: General Motors expects to generate $3.1 billion in revenue from OnStar and Super Cruise subscriptions in 2023, a significant increase from $1.7 billion in 2020, indicating strong potential for its software business and further enhancing overall profitability.
- Market Share Enhancement: GM is addressing consumer subscription fatigue with a long-term subscription strategy, planning to offer an eight-year basic subscription for OnStar and three years for Super Cruise starting in 2025, aimed at increasing customer renewal rates and market penetration.
- Margin Transformation: With an average gross margin of just over 16% over the past decade, GM's shift towards software services, which boast margins nearing 70%, is set to significantly enhance profitability, attracting more investor interest in its long-term growth potential.
- Customer Upgrade Trends: Currently, about one-third of basic OnStar subscribers are opting for additional features, and at least 30% of expiring Super Cruise subscriptions are being renewed in 2025, indicating growing consumer recognition and demand for these high-value services.
See More
General Motors' Software Revenue Surge
- Revenue Growth: General Motors expects to generate $3.1 billion in revenue from OnStar and Super Cruise subscriptions in 2023, a significant increase from $1.7 billion in 2020, highlighting the company's potential in high-margin businesses and enhancing shareholder returns.
- Long-Term Subscription Strategy: To combat consumer subscription fatigue, GM plans to offer an eight-year basic subscription to OnStar and three years for Super Cruise starting in 2025, aiming to increase customer renewal rates and enhance loyalty.
- Margin Improvement: GM's average gross margin over the past decade has been just over 16%, while software services typically boast margins nearing 70%, indicating a significant potential for enhanced profitability that could attract more investor interest.
- Competitive Market Advantage: As more vehicles are equipped with infotainment technology and sensors, GM's subscription services have the potential to surpass traditional wholesale business in the coming years, further solidifying its market position in the automotive industry.
See More
Leasing Market Faces Challenges for EVs
- Leasing Market Risks: A wave of off-lease EVs is expected to return with values approximately $10,000 lower than projected, potentially costing the finance arms up to $8 billion, which could significantly impact overall industry profitability.
- Surge in Supply: By 2028, around 800,000 EVs are projected to hit the used market, leading to oversupply and further price depreciation, which may put additional financial strain on leasing companies.
- Tesla's Market Dominance: Tesla's leasing volume is substantial, with nearly 229,000 EVs leased last year, far exceeding the combined totals of General Motors and Ford, highlighting its strong influence in the industry.
- Financial Management Strategy: Despite industry challenges, Tesla mitigates its financial risk by managing a portion of its lease portfolio through partnerships with third-party lenders, allowing investors to remain cautiously optimistic while monitoring market developments in the coming years.
See More
Tesla Faces Off-Lease EV Depreciation Risks
- Leasing Market Risks: Tesla is expected to see a wave of off-lease EVs flooding the market in the coming years, with industry experts projecting these vehicles to return at values approximately $10,000 lower than anticipated, potentially costing the industry about $8 billion.
- Depreciation Trends: According to Cox Automotive, by 2025, a three-year-old EV will maintain only about 40% of its original value at auction, a significant drop from 90% in early 2022, indicating pressure on the used EV market.
- Tesla's Market Dominance: Tesla dominates the EV leasing market, having leased nearly 229,000 vehicles last year, which is significantly more than the combined total of General Motors and Ford, highlighting its strong industry influence.
- Investor Confidence Reminder: Despite the challenges posed by off-lease EV depreciation, Tesla's finance arm collaborates with third-party lenders, allowing it to mitigate most of the leasing losses, suggesting that investors need not panic just yet.
See More
Impact of Trump's Tariffs One Year Later
- Widespread Tariff Impact: Trump's tariff policies have placed significant economic pressure on U.S. businesses over the past year, with approximately 80% to 85% of costs absorbed by companies, leading to reduced profits and increased consumer prices, thereby exacerbating overall economic uncertainty.
- Retail Sector Adaptation: While large retailers like Walmart have emerged relatively unscathed, smaller businesses have been severely impacted, with Home Depot aiming to limit purchases from any single country to 10% to reduce dependency and enhance supply chain flexibility.
- Automotive Industry Cost Surge: Automakers such as General Motors and Toyota are facing tariff impacts estimated at up to $9.5 billion, and although the Trump administration has taken steps to alleviate overlapping tariffs, overall costs remain significant, forcing companies to reassess their supply chain strategies.
- Pharmaceutical Sector Stability: Pharmaceutical companies have secured three-year tariff exemptions through pricing agreements with Trump, although new tariffs impose 100% on companies that do not reach agreements, the overall industry is still striving to increase investments in U.S. manufacturing.
See More
