Ford has implemented monthly subscription fees for software-based services, and its new business model is proving to be more than just theoretical, at least with some buyers, reports Automotive News.
The automaker’s commercial unit, Ford Pro, has a subscription service that is paid for by roughly 400,000 customers, or about 12% of its total connected-vehicle base. That's 60% higher than in 2022, and one Ford believes it can push to 1.2 million by 2026, Automotive News said.
Executives forecast that 20% of Ford Pro’s earnings before interest and taxes will be generated by software services by 2026. Ford Pro is expected to earn $6 billion this year and have the highest margins in the company by 2026 at about 14%.
Executives say the added profits will boost the company’s transition to electric vehicles.
“There’s actually a value proposition for those customers,” Sam Abuelsamid, principal research analyst at Guidehouse Insights, told Automotive News. “Most of what they’re paying for is telematics, and many of those customers have already been paying for those services from various companies. The same is not true for retail customers.”
Ford Pro subscriptions are focused mainly on telematics that oversee:
- Vehicle health
- Driver performance
- Charging management
Ford offers Viizr, a service tool that helps users digitize work quotes and invoices for $39 a month. Ford also expects to generate $1 billion in revenue from commercial charging services by 2030.
Ford Pro expects to make $2,000 per vehicle annually through subscriptions, equivalent to $167 per month.
Currently, Ford is experimenting with how much to charge customers and how to bundle its services. The company could give away some services for free if they result in customers spending money on vehicle repairs.
It’s still unknown whether retail customers will be receptive to subscription-based services. According to Automotive News, studies show customers are wary of automakers that charge monthly fees for extra vehicle features.
Ford CEO Jim Farley maintains that the automaker won’t charge for amenities such as heated seats but will focus commercial and retail subscriptions on other features customers want. For example, it might offer a subscription to BlueCruise, its hands-free driver-assist feature.
Originally posted on Auto Dealer Today