Ford CEO: The future of the automotive industry in software


According to the CEO of Ford Motor Company, an increasing share of the automotive industry’s revenue mix will be software, services and shared mobility. Jim Farley.

Software becomes the key feature that differentiates an automaker from its competitors, and it’s often something they can charge extra for, Farley said Wednesday (June 1) during a speech at the Bernstein Strategic Decisions Conference.

“I think this is the biggest and most exciting type of land grab in our industry since Model T,” Farley said. “I really believe it.”

Adopt a smartphone-like business model

Just as phones were once used only for making calls but became capable of doing so much more when software was added, the same is happening with cars, Farley said.

Some software features will become staples, such as in-car control of smart home functions and garage door openers. As was the case with airbags years ago, these features may earn a premium at first, but will later become standard equipment.

However, other software features will help the automaker stand out and win a top prize, Farley said. For example, advanced driver assistance systems (ADAS) and self-driving features are things that consumers are willing to pay dearly for.

“We’re about to change the ride, just like Apple and all the smartphone companies have changed the call,” Farley said. “I think when that happens, when you can send a lot of software to their car and you have great sensors, really change that experience and be a lot more productive, there’s going to be a big increase in revenue.”

Helping fleets keep their vehicles running

The current best market for software services sold by subscription is commercial fleets. Because these operators cannot afford to take their vehicles out of service, they are willing to pay for software subscriptions that help keep vehicles maintained and on the road.

“People are willing to pay for an integrated system of telematics, fleet management, energy management, electric utility vehicle billing, prognostics and predictive breakdowns because when those vehicles break down, that plumber , that electrician, that police, that ambulance are losing revenue — may not be doing their job,” Farley said.

As a result, these customers already look more closely at software than other vehicle attributes when purchasing new vehicles.

Towards shared mobility

When it comes to passenger vehicles, the industry will move towards shared mobility, Farley said. Due to the cost of vehicles with electric powertrains and a lot of ADAS content, more people will shift away from buying vehicles to renting them by the mile, day, week or weekend .

“I really believe that most people can’t afford these vehicles anymore, and even if there’s a plethora of $25,000 vehicles from China or whoever it is, it’s not going to be enough for them – they want a great experience,” says Farley.

Farley noted that the largest fleet in service today is one operated by Lyft and Uber drivers. These gig economy workers drive 1.3 million vehicles, more than all car rental companies combined.

Going forward, Ford will build a product that’s optimized for ridesharing — one that’s low in operating cost, low in insurance, electric, and comes with full ADAS gear, Farley said.

“I think moving to a concept or a per-mile model will also unlock a lot of new revenue,” Farley said.



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