How Software-Defined Vehicles are Reshaping the Auto Industry
On September 1, 2000, Nokia introduced the iconic 3310 mobile phone. In its time, it was considered the industry’s best-in-class mobile phone. Designed to make mobile calls, it could also support texting through an awkward interface that appeared to be mostly an afterthought. If I recall correctly, a few very basic preinstalled games could also be played. In its time, the Nokia 3310 was considered the “must-have” mobile phone.
Seven years later, Apple introduced the iPhone, which forever transformed the mobile phone industry – ultimately creating the new smartphone market segment, which ultimately led to the demise of Nokia and the “fixed function” mobile phone market.
iPhone introduced many changes. Notably, the smartphone was more than just a purpose-built device for placing and receiving calls – it was a platform that supported a wide variety of capabilities and functions with an ecosystem of applications and application developers. These developers provided an ever-expanding library of applications, and more importantly, recurring revenue streams, for both Apple and the developers.
This open platform which supported a recurring revenue stream vaulted Apple to become one of the most valuable companies on the planet. Another lesser, but important detail, is that the same IOS and application can be downloaded via Over-The-Air (OTA) updates regardless of the level of the iPhone or the capabilities associated with a given model (more on the importance of that later).
So what does the transformation of cellular phones to smartphones have to do with the Software Defined Vehicles (SDVs)? Ultimately, it is the same transformation that the automotive industry is aggressively embracing. More specifically, constructing vehicles that are purpose-built for driving – where each model is uniquely designed for low-end to high-end – will quickly become a thing of the past. More importantly, from an automotive OEM perspective, there is a spellbinding allure associated with building a platform that ultimately has lower R&D costs while allowing for after-market revenues.
Tesla has already demonstrated that single-digit billions of dollars can be generated annually in after-market, subscription-based services. In this case, this is to enable ADAS capabilities which Tesla deems “full self-driving” (FSD). Market analysts project that the automotive industry as a whole can realize upwards of $150 billion annually in subscription-based revenues in less than 10 years. This is a game changer for an industry that typically operates on low-digit profit margins relying on dealership revenues coming from service and maintenance to provide some relief on profitability.
Subscription-based services like OnStar, which is offered by GM and provides in-vehicle security, emergency services, and remote diagnostics, have seen nominal traction as the industry grapples with determining exactly which services will be the winning app until vehicles with true SDV architectures come to market. Other notable failed attempts from auto OEMs include heated seats as a service – pay a monthly fee to turn on your seat warmer and remote start as a service – pay a monthly fee to start your car remotely.
As discussed in an earlier blog “From Chaos to Control: The Future of Automotive E/E Architecture,” the centralized E/E architecture is required to enable the vision of the SDV to be fully realized. As mentioned in that blog, for the incumbent OEMs, the transition from a legacy architecture to a centralized architecture is a complex, extended process that will take years to unfold. That said, the promise of large, profitable aftermarket revenues provides very meaningful motivation and tailwinds.
Because a common hardware platform can be used from a high-end through low-end vehicle, the overall R&D costs will be reduced in addition to a reduction in the time to a minimum viable product. It may be, that the “perfect” full-featured vehicle may not be available upon vehicle introduction, but over time and through Over-The-Air (OTA) upgrades, this can be addressed in time.
What has changed is that the personality and the capabilities of the vehicle are now defined via software – hence the term Software-Defined Vehicle. Similar to the IOS of an iPhone, one common software footprint will be deployed across all platforms and the specific capabilities of each model will be determined based on model type and associated population of vehicle sensors.
To that extent, personalization will be possible on a vehicle-by-vehicle basis and based on user preference. Furthermore, the capabilities of the vehicle can be upgraded over time by simply adding sensors that enable additional capabilities that weren’t present, for example, in a low-end vehicle. These sensors can be purchased later by the car owner and quickly installed like adding an add-on card in a personal computer. Again, these are all new business models and opportunities for new revenues that were previously not possible with older E/E architectures. With this vision in mind, there are industry efforts underway to support “programmable exterior paint” so the car owner can change the color of the vehicle at any time over the lifetime of the vehicle, or, daily, or hourly – for a price, of course.
Not only can external capabilities and various features be upgraded or enabled over time, the interior, or cockpit, of the vehicle can be tailored to the desires of the vehicle owner. There was a popular term referred to as software-defined cockpits (new terms go in and out of vogue quickly) and not only reflects the ability to tune the cockpit to the owner’s desires but the cockpit can be modified based on the individual driving the vehicle at the time. Furthermore, when coupled with AI, these changes can be made automatically based on recognizing the driver’s mood and tuning the cockpit accordingly. The range of possibilities is endless – from user-defined lighting styles, vehicle temperature, and music selection based upon a measure of the driver’s biometrics, an understanding of their calendar, their habits, traffic conditions – the list goes on and on. It’s very safe to expect that there will be many failed and crazy ideas, but the opportunity cost will be nominal since it’s all mostly software.
But it is a LOT of software. The modern car is projected to grow from 100 million lines of code to 1 billion lines of code within roughly a decade. With Windows 11 at 50 million lines of code, the automobile already contains the most lines of code of any application and that is about ready to explode. Seamless orchestration of software updates with appropriate levels of security and safety will be paramount to success. As the overall control of so much of the vehicle will be under the control of software, the importance of cybersecurity at this point can’t be overemphasized.
Will this vision of the future resonate with every car owner? Probably not. There will be those who probably want to go back to the good-old days when they had their Nokia 3310 that simply just placed calls and texts and had a game where the snake chased its tail.
On September 1, 2000, Nokia introduced the iconic 3310 mobile phone. In its time, it was considered the industry’s best-in-class mobile phone. Designed to make mobile calls, it could also support texting through an awkward interface that appeared to be mostly an afterthought. If I recall correctly, a few very basic preinstalled games could also be played. In its time, the Nokia 3310 was considered the “must-have” mobile phone.
Seven years later, Apple introduced the iPhone, which forever transformed the mobile phone industry – ultimately creating the new smartphone market segment, which ultimately led to the demise of Nokia and the “fixed function” mobile phone market.
iPhone introduced many changes. Notably, the smartphone was more than just a purpose-built device for placing and receiving calls – it was a platform that supported a wide variety of capabilities and functions with an ecosystem of applications and application developers. These developers provided an ever-expanding library of applications, and more importantly, recurring revenue streams, for both Apple and the developers.
This open platform which supported a recurring revenue stream vaulted Apple to become one of the most valuable companies on the planet. Another lesser, but important detail, is that the same IOS and application can be downloaded via Over-The-Air (OTA) updates regardless of the level of the iPhone or the capabilities associated with a given model (more on the importance of that later).
So what does the transformation of cellular phones to smartphones have to do with the Software Defined Vehicles (SDVs)? Ultimately, it is the same transformation that the automotive industry is aggressively embracing. More specifically, constructing vehicles that are purpose-built for driving – where each model is uniquely designed for low-end to high-end – will quickly become a thing of the past. More importantly, from an automotive OEM perspective, there is a spellbinding allure associated with building a platform that ultimately has lower R&D costs while allowing for after-market revenues.
Tesla has already demonstrated that single-digit billions of dollars can be generated annually in after-market, subscription-based services. In this case, this is to enable ADAS capabilities which Tesla deems “full self-driving” (FSD). Market analysts project that the automotive industry as a whole can realize upwards of $150 billion annually in subscription-based revenues in less than 10 years. This is a game changer for an industry that typically operates on low-digit profit margins relying on dealership revenues coming from service and maintenance to provide some relief on profitability.
Subscription-based services like OnStar, which is offered by GM and provides in-vehicle security, emergency services, and remote diagnostics, have seen nominal traction as the industry grapples with determining exactly which services will be the winning app until vehicles with true SDV architectures come to market. Other notable failed attempts from auto OEMs include heated seats as a service – pay a monthly fee to turn on your seat warmer and remote start as a service – pay a monthly fee to start your car remotely.
As discussed in an earlier blog “From Chaos to Control: The Future of Automotive E/E Architecture,” the centralized E/E architecture is required to enable the vision of the SDV to be fully realized. As mentioned in that blog, for the incumbent OEMs, the transition from a legacy architecture to a centralized architecture is a complex, extended process that will take years to unfold. That said, the promise of large, profitable aftermarket revenues provides very meaningful motivation and tailwinds.
Because a common hardware platform can be used from a high-end through low-end vehicle, the overall R&D costs will be reduced in addition to a reduction in the time to a minimum viable product. It may be, that the “perfect” full-featured vehicle may not be available upon vehicle introduction, but over time and through Over-The-Air (OTA) upgrades, this can be addressed in time.
What has changed is that the personality and the capabilities of the vehicle are now defined via software – hence the term Software-Defined Vehicle. Similar to the IOS of an iPhone, one common software footprint will be deployed across all platforms and the specific capabilities of each model will be determined based on model type and associated population of vehicle sensors.
To that extent, personalization will be possible on a vehicle-by-vehicle basis and based on user preference. Furthermore, the capabilities of the vehicle can be upgraded over time by simply adding sensors that enable additional capabilities that weren’t present, for example, in a low-end vehicle. These sensors can be purchased later by the car owner and quickly installed like adding an add-on card in a personal computer. Again, these are all new business models and opportunities for new revenues that were previously not possible with older E/E architectures. With this vision in mind, there are industry efforts underway to support “programmable exterior paint” so the car owner can change the color of the vehicle at any time over the lifetime of the vehicle, or, daily, or hourly – for a price, of course.
Not only can external capabilities and various features be upgraded or enabled over time, the interior, or cockpit, of the vehicle can be tailored to the desires of the vehicle owner. There was a popular term referred to as software-defined cockpits (new terms go in and out of vogue quickly) and not only reflects the ability to tune the cockpit to the owner’s desires but the cockpit can be modified based on the individual driving the vehicle at the time. Furthermore, when coupled with AI, these changes can be made automatically based on recognizing the driver’s mood and tuning the cockpit accordingly. The range of possibilities is endless – from user-defined lighting styles, vehicle temperature, and music selection based upon a measure of the driver’s biometrics, an understanding of their calendar, their habits, traffic conditions – the list goes on and on. It’s very safe to expect that there will be many failed and crazy ideas, but the opportunity cost will be nominal since it’s all mostly software.
But it is a LOT of software. The modern car is projected to grow from 100 million lines of code to 1 billion lines of code within roughly a decade. With Windows 11 at 50 million lines of code, the automobile already contains the most lines of code of any application and that is about ready to explode. Seamless orchestration of software updates with appropriate levels of security and safety will be paramount to success. As the overall control of so much of the vehicle will be under the control of software, the importance of cybersecurity at this point can’t be overemphasized.
Will this vision of the future resonate with every car owner? Probably not. There will be those who probably want to go back to the good-old days when they had their Nokia 3310 that simply just placed calls and texts and had a game where the snake chased its tail.
