DETROIT, March 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 ( F ) 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% 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% and the margins are over 50%,"

Farley told analysts in January. He said 12% 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 percentage 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.

FORD'S FERRARI

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.

Morgan Stanley analyst Adam Jonas has called Ford Pro

"Ford's 'Ferrari ( RACE ).'" But he also asked "How long can Ford Pro

fund losses in the vertically integrated EV strategy?"

In 2023, Ford Pro earned $7.2 billion in pre-tax profits and

had a 12.4% pre-tax profit margin. By comparison, Ford's overall

pre-tax profit margin was just 5.9%, reflecting the cost of

United Auto Workers strikes at key U.S. factories and a $4.7

billion pre-tax loss on electric-vehicle operations.

Ford Pro's above-average profit margins have prompted rivals

to counter.

Stellantis ( STLA ) last year grouped its commercial

vehicle operations under a new name: Stellantis Pro One. Beyond

emulating Ford's use of the word "Pro," Stellantis ( STLA ) said it aims

to generate 5 billion euros annually from sales of connected

services.

General Motors ( GM ) last year reorganized its North

American commercial vehicle business to sharpen competition with

Ford Pro.

Another challenge for Ford Pro will be to make paid

subscribers out of customers who currently get software and

telematics services for free.

Fize Electrique, an electrical contractor in Quebec, is

using Ford Pro software during a one-year free trial to monitor

12 Ford EVs it purchased for battery charge levels. That is

crucial because EV batteries lose driving range faster in

Quebec's cold winter weather.

"When we got the first E-Transits, I was watching the

numbers all the time," said Alain Fiset, who oversees the

company's fleet. Data pulled from the vehicles "helped us

understand what's the state of the battery."

That in turn convinced Fize to accelerate the move to an

all-electric fleet, taking advantage of Quebec's relatively

stable power rates.

Ford Pro is experimenting with new ideas for software

services, and not all the projects work out, Dave Prusinski,

chief revenue officer for Ford Pro's software operations, said

in an interview.

In 2021, Ford and business software company Salesforce ( CRM )

announced plans to develop a subscription software

service called VIIZR that would automate work orders for

contractors. But that project has been wound down, Prusinski

said.

"Realistically it was not our core," he said. "There were

some great solutions on the market. We were seeing traction, we

couldn't catch up fast enough."