GM's Lucrative Subscription Model: 70 Cents of Every Dollar

Key Takeaways

• GM’s software and services business generates higher margins than traditional vehicle sales.
• OnStar and Super Cruise are significant contributors to GM’s subscription revenue.
• Automakers are shifting towards recurring revenue models.
• GM aims to reduce dependence on traditional boom-and-bust cycles.
• Modern vehicles are becoming rolling computers, enabling ongoing feature and service sales.

What’s Driving GM’s Subscription Growth?

GM’s software and services business has discovered a lucrative option in charging customers every month. The numbers are eye-opening, with GM keeping roughly 70% of every dollar generated, compared to the razor-thin margins often associated with vehicle sales.

This growth is largely driven by familiar names like OnStar and Super Cruise. OnStar, once known primarily as the emergency button, has evolved into a substantial business, generating around $800 million during the second quarter. Super Cruise, GM’s hands-free driving technology, is another big cash generator, with many owners choosing to stick around once the complimentary period ends.

How Does GM’s Subscription Model Work?

GM’s subscription model is based on the idea of charging customers every month for various services and features. This approach is made possible by the fact that modern vehicles are becoming rolling computers, enabling ongoing feature and service sales.

For example, Super Cruise is a hands-free driving technology that can be activated after purchase. Similarly, OnStar offers various services, including emergency assistance and vehicle diagnostics, for a monthly fee.

What Are the Benefits of GM’s Subscription Model?

GM’s subscription model offers several benefits, including higher margins than traditional vehicle sales. By charging customers every month, GM can generate recurring revenue, reducing its dependence on traditional boom-and-bust cycles.

Additionally, the subscription model allows GM to continue selling features and services to customers long after the initial vehicle purchase. This approach enables GM to build a more sustainable business model, with a focus on ongoing customer relationships.

How Does GM’s Subscription Model Compare to Others?

GM’s subscription model is not unique in the industry. Other automakers, such as Tesla, Ford, and BMW, are also experimenting with subscription-based services.

For example, Tesla recently shifted its Full Self-Driving offering toward a subscription model, while Ford charges recurring fees for BlueCruise. Mercedes, Audi, and BMW are also exploring software-based upgrades that can be activated after purchase.

What Does the Future Hold for GM’s Subscription Model?

GM’s CEO, Mary Barra, sees plenty of room for expansion in the subscription model. As she told investors during the earnings call, “We do think we have tremendous levers, multiple levers of growth.”

With the rise of connected and autonomous vehicles, the potential for subscription-based services is vast. As GM continues to evolve its subscription model, it’s likely that we’ll see more innovative services and features being offered to customers.

Frequently Asked Questions

Q: What is GM’s subscription model?

GM’s subscription model is a business approach that involves charging customers every month for various services and features, such as OnStar and Super Cruise.

Q: How does GM’s subscription model work?

GM’s subscription model is based on the idea of charging customers every month for various services and features, enabled by the fact that modern vehicles are becoming rolling computers.

Q: What are the benefits of GM’s subscription model?

GM’s subscription model offers several benefits, including higher margins than traditional vehicle sales, recurring revenue, and the ability to continue selling features and services to customers long after the initial vehicle purchase.