Competition in the electric vehicle (EV) space is heating up, so General Motors (NYSE: GM) is diversifying its business model. The Detroit-based company stated that it expects its in-car subscription services to accumulate almost $2 billion in sales this year. In addition, the automaker believes the sector will reach revenue of nearly $25 billion in the next ten years.
If successful, this amount would put it in the big leagues with subscription giants Netflix, Peloton, and Spotify. So how is it going to make this money?
Well, General Motors' Senior Vice President for innovation and growth, Alan Wexler, explained at the company's investor meeting yesterday that it currently has 16 million cars on the road in the U.S. and Canada. Of these vehicles, the firm said around a quarter, 4.2 million, are drivers that pay for subscription services. And General Motors expects these numbers to increase given that it is also hyping customers up with the launch of its Ultifi end-to-end software platform in 2023.
General Motors' current subscription model supports services including OnStar, which is a subsidiary of the firm that offers in-vehicle security, emergency services, and navigation. In a bid to draw in more subscribers, this addition will reportedly offer an enhanced subscriptions platform and over-the-air software updates.
The company's research found that clients' willingness to pay for multiple services is high after it surveyed thousands of customers, offering them 45 different features and service options. On average, those questioned selected a bundle of 25 various products and services.
"Our research indicates that with the right mix of compelling offerings, customers are willing to spend $135 per month on average for products and services."
By 2030, the EV maker expects 30 million of its vehicles sold in the U.S. to feature connected car technology. This would give it a potential addressable market of $80 billion left to service. Alongside these sales, General Motors also predicts to bring in an additional $6 billion from insurance and the remaining from one-time purchases and subscriptions.
In other positive news for shareholders, Wexler also dropped more details and early performance indicator metrics for its subscription services. He suggested that its subscription model will be a platform for further growth and recurring revenue.
Year-to-date, General Motors stock has risen over 33%, and with more good news and lucrative revenue opportunities in the pipeline, this might be a good stock to diversify your EV investments.
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