As automakers work to convince dealers and investors that they can generate big profits in the years ahead by charging monthly subscription fees for software-based services, Ford Motor Co. is proving the business model to be more than theoretical — at least with some buyers.
Roughly 400,000 customers, or about 12 percent of its total connected-vehicle base, now pay for subscription services offered by Ford Pro, the automaker's commercial unit. That's 60 percent more than just a year ago, and Ford thinks it can triple that figure to 1.2 million by 2026.
Big money is at stake. By 2026, executives say, 20 percent of Ford Pro's earnings before interest and taxes will come from software services. They project that Ford Pro will generate $6 billion in earnings this year and by 2026 will have the highest margins in the company, at around 14 percent.
Ford Pro is at the vanguard of a business model that executives say will make the company less cyclical and boost profits to fund the transition to electric vehicles. Even as questions remain about the viability of subscriptions on the retail side, Ford has been able to make a compelling case for such services to commercial buyers.
"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's subscriptions mainly relate to telematics that monitor vehicle health and driver performance as well as charging management.
Among the offerings is Viizr, a $39-per-month field service tool that helps users digitize work quotes and invoices. Ford Pro also offers a number of charging services and has said it expects to generate $1 billion in revenue from commercial charging services by 2030.
Ford Pro CEO Ted Cannis said such offerings are no-brainers for fleet owners because they reduce costs and downtime. Cannis cited one instance in which a customer said software services helped identify more than $25,000 in annual savings from excessive idling.
"We'll be able to capture more share of wallet as the economic value we provide increases," Cannis said in a presentation last week. "We're expanding our revenue pools beyond the vehicle itself and extending it across the whole vehicle life cycle."