Ford predicts 10x growth for in-car software services

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【Summary】Ford predicts a 1,000% growth in revenue from in-car software services, such as hands-free driving, over the next few years. To tap into this growth, the automaker has hired Peter Stern, a former Apple executive, to lead a new technology-focused unit. Ford aims to create a steady revenue stream from software services to mitigate the cyclical nature of the car business. Selling services generates high margins, with Ford expecting to increase revenue by 10 times in the coming years.

FutureCar Staff Aug 15, 2023 9:26 AM PT

Ford predicts 10x growth for in-car software services

Ford is expecting a massive surge in revenue from in-car software services, such as its hands-free driving feature, with a projected increase of 1,000% in the coming years. To capitalize on this growth, the automaker has hired Peter Stern, the former vice president of services for Apple, to lead a newly created technology-focused unit. Stern's responsibilities include expanding Ford's BlueCruise hands-free driving system and developing other in-car services for millions of owners.

CEO Jim Farley aims to establish a consistent revenue stream from software services to mitigate the cyclical nature of the car business. Ford already boasts half a million software subscribers, primarily in its commercial fleet business. Farley anticipates significant growth, stating that the company expects to increase revenue by 10 times its current amount in the coming years.

Selling services like software that controls vehicle speed generates gross margins exceeding 50%, a stark contrast to Ford's 8.3% margin before interest and taxes in the first half of this year. Ford plans to introduce new electrical architecture in its gasoline-fueled and electric models between 2025 and 2026. This update will enable the automaker to offer more subscription services, particularly in the areas of safety and security.

Farley believes that software services will be the fastest-growing revenue stream at Ford, with significantly higher profit margins compared to the vehicle business. Peter Stern is the latest former Apple executive to join the auto industry, following Doug Field, who was hired by Farley in 2021 as the chief advanced technology and embedded systems officer. General Motors also made a similar move by hiring Mike Abbott, the former vice president of engineering for Apple's Cloud Services division, to establish a new software unit.