Automobiles = the next frontier for subscription services

On Monday, Ford announced it’s hired former Apple exec Peter Stern to lead a newly created division focused on selling subscription services to its customers, in the latest push by automakers to build high-margin software businesses.

Stern – who left Apple after a six-year tenure heading up the launch of a portfolio of services, including Apple TV Plus, Apple Arcade, Apple Books, and iCloud storage – holds the title of president of “Ford Integrated Services.”

And, like toddlers doing scissor-focused arts and crafts, he has his work cut out for him.

• The revenue from the automakers’ current software services is in the hundreds of millions of dollars, Ford CEO Jim Farley revealed on a recent call with reporters. That translates into roughly 550,000 paying subscribers.
• But it’s the division’s potential that really has Ford excited. According to Farley, the automaker is projecting its subscription revenue to grow 10x in the coming years.

💰🚗 *Movie trailer voice* In a world dominated by subscriptions, car companies want you to add at least one more. Ford isn’t alone in its subscription push. GM wants to generate $25 billion in annual subscription revenue by 2030 – and BMW, Volkswagen, Toyota, Audi, Cadillac, Porsche, and Tesla have all dabbled with subscription models for certain options (like driver-assist features or heated seats).

But there’s one big obstacle in the way of automakers’ plans – consumers. According to a 2022 Cox Automotive survey, 75% of car buyers would not be willing to pay a monthly or annual fee to unlock a feature in their vehicle.