Jeep maker Stellantis bets on software to boost revenue
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3 min read . Updated: 07 Dec 2021, 06:10 PM IST Auto giant plans to hire more engineers and triple the number of cars that can generate software sales
Premium 3 min read . Updated: 07 Dec 2021, 06:10 PM IST Jeep Maker Stellantis Bets on Software to Boost Revenue
BY NICK KOSTOV | UPDATED DEC 07, 2021 07:18 AM EST
Auto giant plans to hire more engineers and triple the number of cars that can generate software sales
Jeep and Dodge-maker Stellantis NV is targeting 20 billion euros, or about $22.57 billion, of annual revenue by the end of the decade through selling software-led offerings and subscriptions related to the cars it makes.
The auto giant, formed earlier this year through the merger of Fiat Chrysler Automobiles NV and France’s PSA Group, said Tuesday it plans to leverage partnerships with BMW-maker Bayerische Motoren Werke AG and Alphabet Inc.’s Waymo LLC for autonomous driving offerings, and with Foxconn Technology Group on making so-called smart cockpits—a revamp of a car’s dashboard designed for an ultra-connected vehicle—to reach the revenue target.
Stellantis also said it would increase the number of software engineers it employs to around 4,500 by 2024, up from 1,000 today. It plans to triple the number of its cars that can generate revenue from software to 34 million by 2030.
Over-the-air updates in many car models already allow users to download the latest version of a car’s navigation software, or choose from entertainment or driving apps. In the future, on-demand services could include the ability to buy insurance based on a vehicle’s use, or the option to add horsepower to an electric motor ahead of a road trip through rough terrain.
“We believe that the capability to update the vehicle over the year makes a radical change in the industry," said Yves Bonnefont, Stellantis’s chief software officer.
Many car makers bet that growth and profits will come less from building and selling cars and more from features such as connected car services and apps. Although software has been running in gas-powered cars for years, the shift to electric vehicles is putting computing at the heart of the car. Engineers see potential in having a central processor that manages the battery, runs the electric motors, brakes, lights and other critical systems, as well as other features such as entertainment systems and heating.
Just as a gas-powered car should be serviced regularly, a modern electric vehicle can receive software updates to improve safety and performance or offer new in-car services. Auto makers have identified that as a way to unlock new revenue streams.
Stellantis said it has executed more than 6 million over-the-air updates on its fleet of connected cars already this year, and intends to offer at least quarterly updates by 2026.
“This is something that will support the profitability of Stellantis, with a level of margins that is north of what we do with the traditional automotive business," Mr. Bonnefont said on a call with reporters.
Nearly a year into his tenure, the software strategy marks another big move for Chief Executive Carlos Tavares, who has pledged to unveil a long-term strategic plan for the group in the coming months.
In July, Stellantis announced plans to spend more than $35.5 billion through 2025 to release an array of new plug-in models, joining a number of other car makers in laying out how it intends to compete in the industry’s intensifying EV race. Stellantis said that by 2030, 70% of its vehicle sales in Europe and more than 40% of its sales in the U.S. will be electric models—targets that analysts say are among the industry’s most ambitious.
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On Tuesday, Stellantis also announced a deal with Foxconn to develop semiconductors that will cover more than 80% of the car maker’s needs. The first chips from the partnership will be installed in vehicles from 2024. Stellantis said the agreement would help simplify its supply chain.
The move comes after a crippling chip shortage that has closed factories across the global auto industry. Ford Motor Co. last month outlined a strategic agreement with U.S.-based semiconductor manufacturer GlobalFoundries Inc. to develop chips. General Motors Co. also said it was forging ties with some of the biggest names in semiconductors—including Qualcomm Inc. and NXP Semiconductors NV—and has agreements in place to co-develop and manufacture computer chips.
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