Jeep Maker Stellantis bets on software to increase revenue

2021-12-14 23:12:51 By : Mr. Aaron Li

Automakers plan to hire more engineers and triple the number of cars that can generate software sales

Screenwriter: Nick Kostov & Nora Norton

Carlos Tavares, CEO of Stellantis NV, is seeking a major technological upgrade for the global automaker.

In a speech on Tuesday, Mr. Tavares outlined plans to hire thousands of software engineers and work with Foxconn Technology Group to develop semiconductors for their cars.

Executives stated that the goal is to provide a new generation of technology-rich models that can be updated throughout the life cycle using downloadable software and have customizable features unique to each of the company's 14 brands.

The automaker, which owns a series of brands including Jeep, Chrysler and Peugeot, said that its goal is to reach 20 cars it makes.

"We believe that software is the core," Mr. Tavares said. "It is impossible for us to consider completely subcontracting this to others."

The auto giant was formed by the merger of Fiat Chrysler Automobiles and French PSA Group earlier this year. The company said it also plans to use partnerships with BMW manufacturer Bayerische Motoren Werke AG and Alphabet Inc.’s Waymo LLC. Provide self-driving products, and work with Foxconn to manufacture so-called smart cockpits—car dashboard modifications designed for ultra-connected cars—to achieve revenue targets.

As the struggle with Silicon Valley around the future of the car intensifies, Stellattis is the latest car company to announce its goals and revenue forecasts related to its connected car ambitions.

Other automobile companies such as Ford Motor Company and General Motors are also rapidly developing vehicles with built-in connectivity and downloadable features that can be transferred directly to the car, making them more like other consumer electronics products today.

Tesla has long been an industry leader in automotive software and other technical features. As early as 2012, it integrated downloadable updates, similar to software upgrades on smartphones.

Other parts of the automotive industry have long tried to match Tesla's capabilities, but only recently have they begun to introduce such features on their cars. Analysts say it is also working to attract and retain the talent needed to develop in-house software expertise, usually relying on technology partners to develop in-vehicle applications and technologies.

Stellantis Chief Software Officer Yves Bonnefont said that partnerships will remain at the core of its technology strategy, but it wants to control more of the software value chain.

He declined to provide profit margin forecasts for new business lines, only that they would be more like those in the technology industry.

Stellantis said that by 2024, it will increase the number of software engineers it employs from 1,000 today to about 4,500. It plans to triple the number of cars that can generate revenue through software to 34 million by 2030.

Over-the-air updates for many models have allowed users to download the latest version of car navigation software, or choose from entertainment or driving applications.

In the future, on-demand services may include the ability to purchase insurance based on the usage of the vehicle, or the option of adding horsepower to the electric motor before road trips through rough terrain.

Mr. Bonnefont said that for Jeep owners, for example, Stellatis plans to sell an off-grid route navigation function that allows drivers to connect to each other individually or in a fleet even without network coverage.

He added that the company also hopes to use artificial intelligence to develop a more customizable media interface that can predict what drivers might need in terms of navigation and comfort.

"This will support Stellatis' profitability, which has a higher level of profitability than our traditional automotive business," Mr. Bonnefont said in a conference call with reporters.

Many automakers are betting that less growth and profits will come from manufacturing and selling cars, and more from functions such as connected car services and applications. Although software has been running in gasoline-powered cars for many years, the shift to electric cars is putting computing at the heart of the car.

After nearly a year in his tenure, software strategy marks another major move by Mr. Tavares, and he has pledged to announce the group's long-term strategic plan in the next few months.

In July, Stellattis announced plans to spend more than $35.5 billion to release a series of new plug-in models by 2025, and work with other automakers to develop plans for how to compete in the industry's increasingly fierce electric vehicle competition.

Stellantis said that by 2030, 70% of its car sales in Europe and more than 40% of its sales in the United States will be electric vehicles-analysts call this target one of the most ambitious in the industry.

The company said that the semiconductor development agreement reached with Foxconn will meet more than 80% of the automaker's needs. The first chips in the partnership will be installed in vehicles starting in 2024.

Stellantis said the agreement will help simplify its supply chain.

This move took place after a severe chip shortage led to the closure of factories in the global automotive industry.

Ford last month outlined a strategic agreement with US semiconductor manufacturer GlobalFoundries Inc. to develop chips.

General Motors also said that it is establishing contacts with some well-known companies in the semiconductor field-including Qualcomm and NXP Semiconductors-and has reached an agreement to jointly develop and manufacture computer chips.

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