Jeep Maker Stellantis Bets on Software to Boost Revenue

The auto maker, which owns a range of brands, including Jeep, Chrysler and Peugeot, said it is targeting €20 billion, or about $22.57 billion, of annual revenue by the end of the decade through selling software-led offerings and subscriptions related to the cars it makes.

“We believe that software is core,” Mr. Tavares said. “There is no way we are going to consider that this can be totally subcontracted to somebody else,” he said.

Stellantis’s stock rose about 3.8% in morning trading Tuesday.

The auto giant, formed earlier this year through the merger of Fiat Chrysler Automobiles NV and France’s PSA Group, said it also plans to leverage partnerships with BMW-maker

Bayerische Motoren Werke AG

and

Alphabet Inc.’s

Waymo LLC for autonomous driving offerings, and with Foxconn on making so-called smart cockpits—a revamp of a car’s dashboard designed for an ultra-connected vehicle—to reach the revenue target.

Stellantis is the latest car company to reveal targets and revenue projections related to its connected-car ambitions as the battle with Silicon Valley intensifies over the future of the automobile.

Other car companies, such as

Ford Motor Co.

and

General Motors Co.,

are also moving quickly to develop vehicles that have built-in connectivity and downloadable features that can be beamed down to the car directly, making them more like other consumer electronics today.

Tesla Inc.

has long led the industry on vehicle software and other tech features, integrating downloadable updates, similar to software upgrades on smartphones, as early as 2012.

The rest of the automotive industry has long tried to match Tesla’s capabilities, but has only recently started to debut such features on their own vehicles. It has also struggled to attract and retain the talent needed to develop the software expertise in house, often relying on tech partners to develop in-car apps and technologies, analysts say.

Stellantis Chief Software Officer

Yves Bonnefont

said partnerships will still be core to its tech strategy but it wants to control more of the software value chain. He declined to provide margin projections for the new business lines, only saying that they would be more like those delivered in the tech industry.

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

Over-the-air updates in many car models already allow users to download the latest version of a car’s navigation software, or choose from entertainment or driving apps. In the future, on-demand services could include the ability to buy insurance based on a vehicle’s use, or the option to add horsepower to an electric motor ahead of a road trip through rough terrain.

For instance, for Jeep owners specifically, Stellantis plans to sell an off-grid trail navigation feature that will allow drivers to connect with each other individually or in convoys, even if there is no network coverage, Mr. Bonnefont said.

The company also wants to use artificial intelligence to develop a more customizable media interface, one that can predict what a driver might need in terms of navigation and comfort, he added.

“This is something that will support the profitability of Stellantis, with a level of margins that is north of what we do with the traditional automotive business,” Mr. Bonnefont said on a call with reporters.

Many car makers bet that growth and profits will come less from building and selling cars and more from features such as connected car services and apps. Although software has been running in gas-powered cars for years, the shift to electric vehicles is putting computing at the heart of the car. 

Nearly a year into his tenure, the software strategy marks another big move for Mr. Tavares, who has pledged to unveil a long-term strategic plan for the group in the coming months.

In July, Stellantis announced plans to spend more than $35.5 billion through 2025 to release an array of new plug-in models, joining a number of other car makers in laying out how it intends to compete in the industry’s intensifying EV race. Stellantis said that by 2030, 70% of its vehicle sales in Europe and more than 40% of its sales in the U.S. will be electric models—targets that analysts say are among the industry’s most ambitious.

The deal with Foxconn to develop semiconductors would cover more than 80% of the car maker’s needs, the company said. The first chips from the partnership will be installed in vehicles from 2024. Stellantis said the agreement would help simplify its supply chain.

The move comes after a crippling chip shortage that has closed factories across the global auto industry. Ford last month outlined a strategic agreement with U.S.-based semiconductor manufacturer

GlobalFoundries Inc.

to develop chips. GM also said it was forging ties with some of the biggest names in semiconductors—including

Qualcomm Inc.

and NXP Semiconductors NV—and has agreements in place to co-develop and manufacture computer chips.

Write to Nick Kostov at [email protected] and Nora Naughton at [email protected]