DETROIT, Mar 14 (Reuters): HomeTown Services, a heating and cooling repair company in Tulsa, Oklahoma, is getting ready to install driver monitoring cameras in some of its trucks, and already uses streamed data to remind drivers not to sit too long in idle vehicles, wasting gasoline.
"People will sit in a vehicle for an hour or two," said Del Underwood, vice president for purchasing and fleets for the company. Now, technicians get a text message instructing them to either turn off their trucks or move to the next assignment.
That may annoy some employees, but it is good news for Ford Motor Co's commercial vehicle unit, Ford Pro, which has placed a big bet on software-related services. Ford Pro hopes selling connected-vehicle services such as driver monitoring systems to small and medium sized fleet operators will help generate as much as $1.8 billion in annual profit within two years.
Ford CEO Jim Farley has urged investors to think of Ford Pro's bundle of software and vehicle sales, not Tesla, as the "future of the automotive industry."
Companies including Geotab and units of Verizon dominate the market for telematics services provided to large vehicle fleets, said Mike Ramsey, vice president at technology consultancy Gartner.
But Ford "can get all the guys buying Ford Transits for their plumbing business," Ramsey said.
Small and medium-sized business fleets in North America and Europe constitute a large enough market that Farley has told investors Ford Pro could earn 20 per cent of its pre-tax profit from selling software and services within two years.
Farley has forecast Ford Pro pre-tax profits at $8 billion to $9 billion this year. He has promised investors Pro can earn fatter margins than its consumer businesses, partly due to services and maintenance business driven by telematics connections to vehicles and data.
In 2023, Ford Pro had 500,000 paid subscriptions for software services. "It's up 46 per cent and the margins are over 50 per cent," Farley told analysts in January. He said 12 per cent of vehicles Ford Pro sells have software subscriptions attached and he wants to triple that.
Ford Pro Chief Ted Cannis told investors last May that software subscriptions could bring in $2,000 a vehicle in revenue per year, and by adding on services such as insurance, Ford could boost that revenue per vehicle to $4,000 to $5,000.
Ford uses telematics connections to prompt commercial vehicle owners to get parts replaced before they break. Boosting the rate of service subscriptions by one per centage point can "add about $30 million of incremental EBIT to the business," Ford Pro Chief Financial Officer Navin Kumar said last month.
Ford is also selling data from its vehicles to large fleets that subscribe to rival telematics services.
While Farley sees big dollars, investors so far have not boosted Ford's share valuation to anywhere near Tesla's level. The Silicon Valley electric vehicle company is worth more than 10 times Ford's market capitalization.
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