SUMMARYGeneral Motors is expanding its software and subscription revenue through services such as OnStar and Super Cruise, which executives say provide recurring income after vehicle sales. In the second quarter, OnStar brought in about $800 million and Super Cruise revenue rose about 70% year over year, with GM expecting nearly 13 million OnStar subscribers and more than 850,000 Super Cruise users by year end. GM said its software business keeps about 70 cents of every dollar it brings in, far above typical auto margins.
"General Motors has been pulling a Tim Cook and boosting its software and subscription business," reports Business Insider. During the automaker's Tuesday earnings call, executives said they're increasingly leaning on software subscriptions like OnStar and Super Cruise to generate high-margin recurring revenue long after customers buy their vehicles. GM says OnStar brought in about $800 million in the second quarter, while Super Cruise revenue grew about 70% year over year. From the report: GM says its software business keeps roughly 70 cents of every dollar it brings in. That's a rare level of profitability in the auto industry, as many car sales generate just four to 10 cents per sales dollar. [...] GM expects to add about 1 million OnStar subscribers this year, bringing the total close to 13 million. Super Cruise, GM's hands-free, eyes-on driving system, is growing even faster. GM added about 70,000 subscribers during the quarter and expects to end the year with more than 850,000. Revenue from the service increased about 70% from a year earlier.
And a lot of drivers are sticking around after the free period ends. GM said between 30% and 40% of eligible owners continue paying after their included three-year Super Cruise subscription expires. [..] "We do think we have tremendous levers, multiple levers of growth," Barra said on the call. "We definitely think there's a lot of opportunity at GM to grow, improve margins, and become less cyclical."
"Software and services are becoming increasingly important to how customers experience GM vehicles and how we deliver value beyond the initial purchase," a spokesperson previously told Business Insider. "As vehicles become more software-defined, we can introduce new digital experiences through updates and optional services rather than hardware changes."