A new chapter is being written in the annals of automotive history, and it might not be what you expect.
While the roar of engines and the sleek designs of vehicles often steal the show, the real future of the automotive world is much quieter and far more digital.
It's not just about the cars; it's about the software, the subscriptions, and the recurring revenue.
The Evolutionary Phases of Technology
Every major technological advancement has witnessed a distinct two-phase evolution.
First, we see the developmental stage, where innovators focus on creating the ‘thing' itself. Think of the very first computers or the first electric cars. At this stage, the primary profits go to the hardware manufacturers or the material providers. But as with every shiny new toy, the excitement around the ‘thing' eventually wanes.
Then enters the second phase – the monetization. As technologies reach saturation, the challenge shifts from creation to monetization. How can companies make money once everyone has a new gadget or vehicle? As history has shown with tech giants like Amazon, Apple, and Netflix, the answer lies in subscription models.
The Silent Revolution of EVs
Electric vehicles (EVs), with their emission-free drives and silent operations, have quietly ushered us into this second phase. Initially, companies and investors focused on the physical hardware of EVs. But the real treasure, as it appears, is not in selling these vehicles but in the software they run on.
Elon Musk's Tesla serves as a prime example. While its cars are undoubtedly a significant part of its value proposition, the real goldmine might be its software that could be sold as a subscription service.
In essence, Tesla's vehicles could become rolling software platforms, offering services, upgrades, and features on a subscription basis, adding a steady stream of recurring revenue.
Musk's Subscription Mastery
If anyone knows how to play the subscription game, it's Elon Musk. Fresh off his acquisition of Twitter, Musk wasted no time introducing a subscription model, signaling his intent and belief in the model's profitability.
This move is hardly surprising for those who've followed Musk's trajectory.
Whether it's through Tesla, SpaceX, or even OpenAI, Musk has consistently hinted at his vision for a subscription-based future.
The “$1,200 Car” Promise
In a move that has left many both intrigued and baffled the markets, rumors are abuzz about Musk's potential “$1,200 Car” program. While details remain scarce, industry insiders speculate this could be an innovative subscription model, making EVs accessible to a broader audience.
Instead of buying the car outright, users might lease or subscribe to vehicles, significantly reducing the entry barriers. This model could revolutionize how we perceive vehicle ownership and tie into the broader theme of a subscription-based auto industry.
While Tesla remains at the forefront of the EV revolution, the auto giant's massive market cap limits its potential for astronomical growth.
So, where does the smart money go next? The real investment gems might be the smaller software and hardware suppliers that will power the transition to subscription-based models.
While not as glamorous or well-known as Tesla, these companies hold the key to the next phase of automotive profitability.
Profit Sector Research
More reading:
- https://www.cnn.com/2023/02/10/business/hyundai-car-subscription/index.html
- https://www.automotiveworld.com/articles/how-can-players-profit-from-the-rise-of-car-subscription/
- https://www.cbtnews.com/how-the-acceleration-of-vehicle-subscription-services-will-impact-dealerships/
- https://www.teslarati.com/volkswagen-south-america-electric-vehicle-subscriptions/
