Ford Motor Co. sees revenue from in-car software services, like its hands-free driving feature, surging by 1,000% over the next few years.
(Bloomberg) — Ford Motor Co. sees revenue from in-car software services, like its hands-free driving feature, surging by 1,000% over the next few years.
To harness that growth, the automaker on Monday said it hired Peter Stern, the former vice president of services for Apple Inc., to run a newly created technology-focused unit. Stern is tasked with growing Ford’s BlueCruise hands-free driving system, as well as developing other in-car services to sell to millions of owners.
Chief Executive Officer Jim Farley is aiming to create a continuing revenue stream from software services that will smooth out the boom-and-bust cycles in the car business. Ford already has a half-million software subscribers, mostly in its commercial fleet business, Farley said on a call with reporters.
“We are in the hundreds of millions of dollars now in revenue with very healthy margins,” he said. “We expect to 10X that in the coming years just based on the growth we see.”
Selling services, such as software that controls the speed of the vehicle, generates gross margins above 50%, Farley said. That compares to the 8.3% margin before interest and taxes that Ford had in this year’s first half.
Ford will roll out new electrical architecture on its gasoline-fueled and electric models in 2025 and 2026, including its best-selling F-150 pickup truck, that will enable the automaker to offer more subscription services, particularly in areas of safety and security, Farley said.
“This is going to be the fastest growing revenue at Ford,” Farley said. “And unlike our vehicle business sometimes, you’re talking about enormous margins.”
Stern is the latest ex-Apple executive to shift to the auto industry. At Ford, he joins Doug Field, who was hired by Farley in 2021 as the automaker’s chief advanced technology and embedded systems officer. In May, General Motors Co. hired Mike Abbott, former vice president of engineering for Apple’s Cloud Services division, to start a new software unit.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.