Software is already a key driver of value in the automotive market, with more automakers turning to software updates to monetize the software in their vehicles.
“This is an enormous shift in the automotive industry, as OEMs are traditionally more hardware oriented and are often unprepared for the demands of developing and updating safety critical software quickly,” AIMotive’s head of product management for aiSim, Szabolcs Janky, told TU-Automotive.
He believes purpose-built security operations centers (Soc) will be the future of automotive hardware, overcoming the limitations of the graphics processing unit (GPU)-based and generic development platforms. “While calculating the exact performance required to deploy increasingly advanced ADAS and AD functions is extremely difficult, we have already seen examples of an OEM offering hardware updates for vehicles on the road,” he noted. “Tesla was again the first OEM to develop its own processing platform, and we expect this to be a lot more common in the future.”
Janky noted continuous integration, which focuses on integrating new features into a software base, without compromising existing functionalities, is a key methodology to help monetize software-driven vehicles. “The mobile industry could be the leading example in this question,” he said. “OEMs will likely provide a digital store for users to download different applications or even automated driving functionalities to their vehicles over the air.”
Similar to how Google and Apple collect revenue from third-party apps sold through their platforms, automakers will also take their own cut. One example Janky, pointed to would be purchasing the vehicle with a highway driving system and later augmenting that with an automated valet parking solution when the function becomes available.
Sam Barker, lead analyst with Juniper Research, also pointed to OTA updates as way to let carmakers update existing services or add new services to vehicles with minimal effort. While these services can then be monetized via subscription services, he said automaker should also take a strategy of bundling these services into a single subscription service in order to maximize the value proposition, rather than have a disparate selection of differing subscription services.
“OEMs have historically been less agile in technology than those who specialize in technology, however partnerships have often been limited to vehicle functionality that does not impact safety,” he noted. “This means that automotive OEMs must find a balance between enabling third parties who specialize in technology into the vehicles, and increasing the capabilities of their in-vehicle technology.”
Chipmaker Nvidia announced a partnership with German auto giant Daimler to develop a computing infrastructure that will allow the central brain to control many aspects of the vehicles from an ultra powerful processor. “There’s a huge amount of potential in the future for this kind of setup,” Nvidia senior director of automotive Danny Shapiro explained. “When you look at most car companies today, there’s a lot of software, but they’re not software upgradable.”
The ability to charge the owner of the vehicle for additional services that come online over time could lead to entirely new business models, he said. “There’s an infinite number of things you could create in the future that consumers would pay for,” Shapiro noted. “When you apply that updatable software model to a company that has global scale, the potential for revenue is enormous.”
From Shapiro’s perspective, carmakers should be making that software architecture available on ever model in the fleet, so that you reach the largest population possible. “It’s all about volume. If you make this platform available to every single one of your customers, you increase your reach,” he said. “Some upgradable features may be free of charge, some may be a fixed fee, some may be subscription models. There is a lot of flexibility, so you can address different groups of customers, with different pricing models.”
With an eye on the announcement from Nvidia and Daimler, Mike Ramsey, vice-president, analyst automotive and smart mobility for research firm Gartner, said this could allow for a dramatic change to the vehicle as it becomes a platform that is updateable over time, creating additional value to the consumer over its lifetime. “The importance of software developed for this powerful platform will be very high, but also companies will be able to do more with less,” Ransey said. “By more, I mean truly changing a vehicle’s capabilities through software instead of only hardware.”
He explained data from such vehicles would be more useful because a lot of the insights will be realized onboard rather than sent to the cloud in disparate formats, aggregated and plumbed for insights. “These compute-driven vehicles will be able to send better insights to the cloud and make new decisions on the ground,” Ramsey said. “This will allow for the creation of new services around the vehicle, from intelligent financing and servicing and new ownership models, as well as better cost reduction efforts from predictive analytics and early fault detection.”
Shapiro also noted automakers will have the ability to determine return on investment based on the data streaming back to them from the use of software and applications inside the vehicle. “Through the software, you can actually understand the features and functions they’re using by allowing users to opt in and improve the user experience by sending data back,” he said. “The carmakers can see what buttons they’re touching, what features are being activated. There’s a feedback loop that can help the car learn and get better and better.”
Shapiro believes that’s the best way for automakers to understand what’s getting used, how much they’re paying for them and factors like the effectiveness of trial times. “These are the kinds of things we will be able to see, and it will be very easy, once every car is connected, to measure that,” he said. “Today there’s no feedback loop. “You have this intelligent vehicle that’s connected, but it has to be a two-way conversation.”