Software Emerging as Auto's New Strategic Lever: TSLA, GM & F in Focus

Legacy automakers once relied heavily on vehicle sales, which are often cyclic in nature. Now, connected vehicles, over-the-air updates and subscription features are opening the door to higher-margin, recurring revenue streams. Companies are expanding their software and subscription ecosystem. And the numbers are starting to matter. Let’s see how General Motors GM, Ford F and Tesla TSLA are placed in this race.

General Motors

General Motors is steadily building a software and subscription ecosystem that is starting to show financial progress. At the center of this strategy is OnStar, GM’s in-vehicle safety, connectivity and subscription platform. Last year, OnStar reached a record 12 million subscribers, including more than 120,000 Super Cruise subscribers, reflecting roughly 80% year-over-year growth. OnStar Fleet subscriptions also climbed to 2 million, more than double any competitor, giving GM meaningful scale in recurring, higher-margin revenues.

Unlike vehicle sales, which are cyclical, OnStar generates subscription-based revenues. That creates more stable and predictable cash flow. Management expects software and services revenues to increase by about $400 million this year, while deferred revenues from these offerings are projected to reach $7.5 billion, up roughly 40% year over year. The deferred revenues provide visibility and support long-term profitability.

Super Cruise— GM’s advanced hands-free driver assistance system— remains central to the company’s software push. General Motors plans to expand it further across North America and launch it in South Korea, the Middle East and Europe.

GM intends to introduce its second-generation software-defined vehicle architecture in 2028 for both internal combustion engine and electric vehicles. This centralized computing platform will integrate key functions like powertrain, infotainment and safety, offering 10 times more over-the-air capacity and significantly higher bandwidth. It will also support future eyes-off, hands-off highway driving using lidar, radar and cameras— positioning software as a core pillar of GM’s long-term strategy.

Ford

Ford is focusing its software push on commercial customers through its Ford Pro unit, offering tools and services that help fleet operators cut downtime, lower costs and keep vehicles running smoothly. It offers telematics, fleet management tools, EV charging solutions and integrated maintenance services.

Over the past few years, the company has expanded its software subscriptions significantly, and those efforts have started paying off. Paid software subscriptions grew 30% in 2025, while total paid subscriptions — including both software and physical services — surpassed 1.3 million, up 53% year over year.

Software and physical services combined grew 10% and now account for 19% of Ford Pro’s EBIT. While these high-margin streams, with software gross margins above 50%, are scaling steadily, they still represent a small share of total earnings. That suggests room for significant growth as adoption increases.

Importantly, the recurring nature of fleet subscriptions helps smooth revenue volatility compared to traditional vehicle sales. Commercial clients tend to value reliability and cost efficiency, making them more likely to stick with integrated service platforms. As Ford deepens relationships with fleet customers, Ford Pro is becoming a meaningful contributor to company earnings and a key lever for margin stability.

F sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tesla

Tesla’s software strategy revolves around Full Self-Driving (FSD) and a clear shift toward subscription-based monetization. In 2025, monthly subscriptions to FSD (Supervised) more than doubled sequentially. Effective Feb. 15, the company has now transitioned access to subscription-only, eliminating the one-time $8,000 purchase option as the economics of buying FSD outright stopped making much sense. It would take several years of continuous use to break even versus subscribing. For most buyers, that only worked if they believed FSD would soon become fully autonomous and significantly more valuable.

The shift to subscriptions also fits better with Tesla’s long-term financial goals. One-time purchases tend to create uneven revenue spikes, often tied to new vehicle sales. Subscriptions, in contrast, will help generate steady cash flow. This is something investors typically value more.

Also, the move aligns closely with Musk’s personal incentives. His massive pay package of around $1 trillion, approved by shareholders in November 2025, is heavily tied to long-term operational milestones, not short-term profits. One of the most important targets is reaching 10 million active FSD subscriptions over the next decade, not purchases. By removing the one-time option, Tesla is pushing all new FSD users toward subscriptions — a metric that matters for Musk’s compensation.

FSD (Supervised) users have now logged more than 8 billion cumulative miles. In 2025, monthly subscriptions to FSD more than doubled. In the last reported quarter, Tesla launched FSD in South Korea, where customers drove over 1 million kilometers in just one month. While regulatory approvals in China and Europe are still pending, the company has started offering ride-along experiences in Italy, Germany, France and Switzerland.

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