2 Revolutionary Developments That Should Change Your Investing Thesis on Ford and General Motors
When it comes to the fierce Detroit automotive rivals Ford Motor Company (NYSE: F) and General Motors (NYSE: GM), both have much to offer investors.
Ford has long been coveted by income investors for its lucrative dividend yield, which currently sits at about 5%, as well as extra dividends when cash flow exceeds expectations. General Motors has aggressively repurchased its shares, drastically reducing its shares outstanding, helping drive its stock price 173% higher over the past three years.
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That said, there are two huge developments — one positive (digital monetization) and one negative (rapid Chinese expansion) — that investors must note in their investing thesis because they will define the future of the automakers.
The good news first
The good news for investors is that both Ford and GM are seeing light at the end of the tunnel after enduring the “razor thin margin” narrative for decades. One factor that’s quickly changing is the automakers’ ability to monetize the ever-increasing software going into new vehicles.
GM has roughly 70% gross margins on its digital services OnStar and Super Cruise, which leaves its traditional automotive gross margins of mid to high single digits in the rearview mirror. Management understands that driving these subscription and digital services are the key to unlocking higher valuations for its stock, and to reverse the low-margin narrative of the past — and it has a unique strategy.
The company is playing the long game with its digital services and is currently giving all model year 2025 and newer vehicles a OnStar Basic eight-year owner-support subscription and, for vehicles equipped with driver-assist software Super Cruise, a three-year subscription. The idea is simple: Rather than give consumers a free month, which isn’t enough time to learn and appreciate the services, these longer subscriptions up-front open the widest possible funnel for renewals.
The early results look great for GM: OnStar has between 12 million and 13 million total subscribers and generated $800 million in revenue during the second quarter alone, with deferred subscription revenue of $6.3 billion. Super Cruise has an install base of roughly one million vehicles, and early tracking is showing about a 35% renewal rate after the initial three-year subscription expires.
Ford is going about it slightly differently by focusing largely on monetizing its digital services with its commercial business, Ford Pro, which has quietly turned into arguably the best part of its overall business. Management has a powerhouse commercial business both in the U.S. and in Europe and is working to deliver its business customers value through telematics, maintenance and repair services, and reduced fleet downtime. Ford has reported about 1.6 million paid subscribers overall, and BlueCruise driver-assist subscriptions are growing by about 40% year over year.
Now, the bad news
Current heavy U.S. tariffs on imported Chinese electric vehicles (EVs) have kept many consumers unaware of the growing threat. However, the threat is very real and could upend the U.S. automotive market sooner than we think.
Chinese automakers have rapidly pushed their vehicle technology ahead, drastically reduced development time by about half, and have undercut the globe on pricing. Those developments combined with the Chinese automotive market decline and price war have pushed its domestic autos overseas, where they have rapidly gained market share in Europe, and other markets.
“I watch what’s happening in Europe right now,” Ford CEO Jim Farley said at the 2026 Automotive News Congress. “It’s really something that they have to deal with now, and it’s too late. For us in our country, we just have to be very careful.”
Chinese automakers on are pace to export 11 million vehicles this year alone, which is a figure that surpasses U.S. and European production totals. And in Australia, Chinese brand market share soared from 3% to 30% in only three years, collapsing Toyota dealership valuations in half.
Recently, President Donald Trump said he would consider allowing a Chinese automaker to manufacture EVs in the U.S. as long as it hired American workers, which is a decision that has the potential to upend the U.S. market.
What it all means
The biggest concerns for investors might be the uncertainty of how, when, and what Chinese brands could pounce on the opportunity — and if there is one thing Wall Street hates, it’s uncertainty. Ford and GM will need to be ready, and investors will need to understand the situation fully.
Despite that growing threat, it’s also true that Ford and GM are far, far better companies than they were two decades ago. And as the amount of software and digital technology in vehicles increases, it gives high hopes for tapping into new business at margins automotive investors have dreamed of.
These could be two of the most important developments facing automakers, and they must be on investors’ radar, even if the picture is early for the positive news and uncertain for the negative news.
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Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.
2 Revolutionary Developments That Should Change Your Investing Thesis on Ford and General Motors was originally published by The Motley Fool