GM and other automakers are adjusting their business models to be less dependent on vehicle sales, but veering into other transportation services isn’t guaranteed to succeed. GM has to make its services valuable enough that consumers are willing to add to their monthly payments for them, said Sam Abuelsamid, principal research analyst at Guidehouse Insights.
“That’s been a challenge for the industry for 25 years now, ever since OnStar first debuted,” Abuelsamid said. As average transaction prices creep closer to $40,000 industrywide, “convincing customers to pay a subscription fee for anything in the car is tough.”
And as other automakers offer similar services, pricing competition will increase, said Philippe Houchois, an analyst at Jefferies.
“To be able to continue to generate sustainable revenue from the services, you have to assume that everybody who is able to provide them will charge customers for them,” Houchois said. “If one of the OEMs starts discounting the service or offering it for free, the whole aspiration to generate service revenue can disappear.”
If additional services end up being lucrative for automakers, the payoff will be gradual, but a stake in the technology and services segments is crucial to being a leader in future mobility, said David Whiston, analyst at Morningstar.
“To really perform at an elite level, you need to be at least in these markets. It would be foolish of GM not to try given their capabilities,” he said. “If they don’t, somebody else will.”
