Car manufacturers profiting from software upgrades

POLESTAR and the Stellantis Group have demonstrated just how much profit can be made from modest software upgrades to existing customers’ vehicles. 

Stellantis said this week it aimed to generate around €4 billion (A$6.3 billion) in annual revenue by 2026 via software upgrades and subscriptions, and €20 billion by 2030 (A$31.6 billion), while Polestar has already shown just how well the theory works – its recent over-the-air performance upgrade of 400 customer cars netted the Volvo Cars subsidiary over €400,000 (A$631,329).

Polestar said its most recent software update – which boosted performance of its dual-motor Polestar 2 variant by 50kW and 20Nm of torque – allowed it “to continue to explore alternate revenue streams and further strengthen its financial position”. 

Automotive News Europe said regular over-the-air software updates for Polestar models, which enable new infotainment and navigation features, performance and efficiency improvements, and even extended self-driving capabilities to a vehicle, usually attracted a fee from as little as €50 (A$79) per vehicle per year. 

Software upgrades and subscriptions are renewed over the air (OTA), with customers usually paying for the convenience in much the same way they would for a smartphone app. 

The renewal of such subscriptions over the lifetime of a vehicle can add up to thousands of dollars in profits for car manufacturers, while “greatly expanding the options customers have to add innovative features and services via regular OTA updates, keeping vehicles fresh, exciting and updated years after they have been built”, the manufacturer said.

Stellantis said it would offer three all-new Artificial Intelligence-powered technology platforms from 2024 to further boost the number of monetisable connected cars it has on the road. The group already has more than 12 million monetisable connected cars on the road globally.

And with more than 34 million vehicles expected to offer at least one form of connected technology by 2030, the incremental increase in revenue gathered from OTA updates could quickly repay the investment made in electric-vehicle platforms and associated software.

“Our electrification and software strategies will support the shift to become a sustainable mobility tech company to lead the pack, leveraging the associated business growth with OTA features and services, and delivering the best experience to customers,” Stellantis CEO Carlos Tavares said.

“With three all-new Artificial Intelligence-powered technology platforms to arrive in 2024, deployed across the four Stellantis vehicle platforms, we will leverage the speed and agility associated with the de-coupling of hardware and software cycles.”

Stellantis plans to invest more than €30 billion (A$47.3 billion) until 2025 to execute its software and electrification transformation. It said strategic partnerships formed with companies (including BMW, Foxconn and Waymo) would continue to drive innovation and efficiencies in the field.

The group will employ 4500 software engineers by 2024 and form its own Software Academy. It is actively recruiting “top software and AI talent” from tech-based industries across the globe.

Stellantis’s software strategy is said to work hand-in-hand with its recently announced vehicle electrification strategy (see links below), which projects that low-emission vehicles will make up 70 per cent of its vehicle sales in Europe, and more than 40 per cent of sales in the US, by 2030.