AD #4264 – GM’s $10 Billion Software Bet; Ford’s Farley Scores $27 Million Payday; 1% Solid-State Market Share Will Take a Decade

This is Autoline Daily, the show dedicated to enthusiasts of the global automotive industry.

GM’S $10 BILLION SOFTWARE BET: SUPER CRUISE & ONSTAR
Automakers are having mixed results selling subscription services to customers. But General Motors believes OnStar and Super Cruise will start generating big profits for the company soon. Last year, OnStar and Super Cruise accounted for about $2.7 billion in realized revenue and $5.4 billion in deferred revenue and this year, GM expects them to generate $3.1 billion in realized revenue and $7.5 billion in deferred revenue. Overall, 13 million people are subscribed to GM services, generating about $20 per person each month. The company is now offering long-term subscriptions for every vehicle purchase. And starting last year, each new vehicle includes an eight-year basic subscription to OnStar and vehicles with Super Cruise have a three-year subscription. GM believes this strategy will lead to more customers renewing their subscriptions because they will get to experience the features for years, as opposed to a short trial that only lasts weeks or months. The company doesn’t expect a majority of customers to renew but it says that’s ok because the subscriptions generate high-margins that are similar to the software industry.

      

WASHINGTON DEALERS CAVE ON DIRECT SALES
Rivian scored a major victory in the state of Washington. It’s been fighting car dealers in the state for years, trying to sell cars directly to consumers. But those efforts were going nowhere, so it changed tactics and threatened to launch a ballot initiative that would allow voters to decide if startups like Rivian should be allowed to sell direct. After car dealers saw polls which showed that 70% of the voters in Washington approved of selling direct, they caved. They actually supported legislation that would allow Rivian and Lucid to sell cars on their own. But that legislation only applies to Rivian and Lucid, though Tesla got prior approval. That leaves startups like Scout out in the cold. Interestingly, GM, Ford and Stellantis lobbied against the legislation, saying it would leave them at a disadvantage. And that sure says a lot about what they think of franchise laws. About three years ago, Ford CEO Jim Farley said that Tesla had a $2,000-per-car cost advantage by selling direct instead of using the franchise model.   

BYD’S FIRST PROFIT DROP IN 4 YEARS
BYD’s stock tumbled earlier today after it reported weaker than expected 2025 earnings. Its net profit dropped 19% last year, its first annual drop in four years. And its total share of the Chinese EV market slid to 24.6% in the fourth-quarter, down from 33% the year before. In addition to the sales dip, the price war in China is also hurting BYD’s profits. Analysts expect BYD to have a tough first-quarter but they expect its business to improve in the second, thanks to the launch of vehicles with its new flash-charging technology, continued expansion overseas and energy-storage system growth.

SOLID-STATE SKEPTICISM: 1% MARKET SHARE STILL A DECADE AWAY 
A number of automakers say they will launch solid-state batteries soon, but as we’ve been reporting here, those applications will be low-volume and widespread adoption will take longer than some people think. One battery expert in China is now predicting that for solid-state batteries to reach just 1% market share it will take another 5-10 years. He thinks there’s still too many technical challenges around production and lifecycle operation.

CHINESE OEMs STUMBLE ON SERVICE IN MEXICO
Chinese automakers first started selling vehicles in Mexico around 2020 and they’ve quickly gained a foothold in the market. According to the Mexican Association of Automotive Distributors, about 30 Chinese brands sold 1.6 million vehicles, accounting for 15% of the market. However, many companies didn’t establish strong aftersales services when they launched. And as a result, most Chinese brands rank below average in JD Power’s sales satisfaction and customer service indexes. And a recent survey of car dealers in Mexico rated Chinese brands poorly on factory relations and most dealers say they haven’t turned a profit on Chinese cars because of missed sales goals and high upfront costs. And the head of one dealer group only expects 5 or 6 of the 30 Chinese brands to remain viable in Mexico long term.

SKODA LEADS VW GROUP WITH 3-ROW EV
The Volkswagen Group as a whole only has two fully-electric 3-row vehicles in its entire portfolio, the ID.BUZZ and the ID.6, which is only sold in China. But that’s about to change. Skoda is getting ready to launch a new 3-row SUV, called the Peaq, that’s based on a stretched version of the MEB platform. The model will offer rear- and AWD setups with up to nearly 300 horsepower and two battery packs that provide up to 460 kilometers or 285 miles and up to 600 kilometers or about 370 miles of range. The Peaq also comes with new software based on the Android operating system and it will have bi-directional charging capability as well. VW recently laid out its new strategic plan for its core group of brands, which also includes Seat, Cupra and Volkswagen, where it talked about closer collaboration between them. So, we would expect to see more electric 3-row SUVs from the Group. And we think it makes sense that Skoda is kinda the first to get one because the brand seems pretty popular with consumers right now. It sold well over 1 million vehicles last year, an increase of nearly 13%. Meanwhile, the core brands were up 3.3% and the entire VW Group sales, also including Audi, Porsche and Bentley, were down slightly.  

USED EV BARGAINS ARE A $8 BILLION NIGHTMARE
Used EVs that are coming off lease are some of the best bargains in the market right now. No, make that the best bargains right now. You can get 3-year-old, low mileage EVs for well under $30,000 and some, like Chevy Bolts, Nissan Leafs and Tesla Model 3s, for less than $20,000. But those big drops in residuals are going to cost finance companies billions. Automotive News reports that EVs coming off lease are worth $10,000 less on average than the finance companies figured, and by 2028 they could be racking up $8 billion in losses from them. GM and Tesla could lose a billion dollars each. Here’s our Autoline Insight. Finance companies are going to have to take EVs sharp depreciation into account when writing new leases. And that can only mean one thing. It’s going to be more expensive to lease an EV. 

FORD’S RECORD RECALLS & WHY FARLEY SCORED A $27 MILLION PAYDAY
Last year Ford set a record for recalling vehicles. It launched 150 recalls involving 13 million vehicles. Yet, Ford just awarded CEO Jim Farley $27.5 million in total compensation, up $2.6 million from the year before. His bonus was based on factors such as quality, sales of electrified vehicles and revenue generated by services, like monthly payments for Blue Cruise. Ford measures quality as repairs per 1,000 new vehicles for up to 3 months in service. And while Ford spent a staggering $5.2 billion on warranty and recalls last year, that was actually down 10.6% from the year before. That helped Farley boost his bonus. For comparison, Stellantis spent $6.8 billion on warranty and recalls, up 4%. GM spent $4.9 billion, up 10%, and Toyota spent $4.5 billion, up 8.8%.  

Company	Recalls & Warranty	Change
Stellantis	$6.8 B	+4.0%
Ford	$5.2 B	-10.60%
GM	$4.9 B	+10.0%
Toyota	$4.5 B	+8.8%

But that’s a wrap for today’s show. Thanks for tuning in.