Most people think of automakers as car companies. But the latest earnings from Tesla and GM show they are becoming something else: software companies.
Cars are mechanically similar across brands, so the real battle now happens on the touchscreen. That's why automakers are pushing connected services - features delivered over the air after a car is sold. These updates keep a car fresh long after it leaves the lot.
The reason is the money. Electric vehicles make the math even harder, because battery costs eat up 35-45% of an EV's total build cost, leaving many sold at a loss.
Tesla is the clearest proof that this works. In Q3 2025, its Full Self-Driving feature, known as FSD, is now used by about 12-15% of owners globally, up from single digits last year. The company credits free trials, a monthly subscription, and an option to buy the feature outright for about $8,000.
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The revenue is showing up. Tesla reported $596 million in FSD revenue for all of 2024, with $326 million of that coming in Q3 2024 alone, mostly from the Cybertruck and a feature called Actually Smart Summon.
GM is posting even bigger numbers. The company's deferred revenue - money it expects to collect later - hit about $5 billion, a year-over-year increase of over 90%.
Super Cruise has already passed 500,000 subscribers and should top 600,000 by the end of the year, a jump of nearly 100%. GM anticipates that $200 million of Super Cruise revenue will be recognized in 2025. OnStar now has more than 11 million global subscribers, and the company says it will finish 2025 above 12 million, a 34% increase.
A car maker that sells a one-time car gets one check. A car maker that sells a subscription gets a steady stream. That is the difference investors are starting to pay attention to.
But the shift is not done yet. Connected services still make up a small slice of total revenue for most automakers, and they don't yet cover the heavy costs of building all that software. The real test is whether automakers can turn free trials into paid subscriptions.
GM is already looking ahead. In 2028, it will introduce a new central computing system, beginning with the Cadillac Escalade IQ, which will boost over-the-air update capabilities by 10 times, increase bandwidth by 1,000 times, and enhance AI performance by up to 35 times.
The bottom line is that automakers are starting to look a lot like tech companies. The ones that figure out how to make software feel worth paying for are the ones to watch. The ones that treat it as an afterthought are the ones that might fall behind.
Automakers are shifting to software now, and the Always Be Buying E-Book can help you invest through it all
