{"id":64805,"date":"2023-12-19T04:12:22","date_gmt":"2023-12-19T04:12:22","guid":{"rendered":"http:\/\/www.spglobal.com\/mobility\/en\/research-analysis\/fuel-for-thought-connected-cars-and-the-automotive-revolution.html"},"modified":"2023-12-19T04:12:22","modified_gmt":"2023-12-19T04:12:22","slug":"fuel-for-thought-connected-cars-and-the-automotive-revolution","status":"publish","type":"post","link":"https:\/\/gamefootballmobileanimeiphone.com\/index.php\/2023\/12\/19\/fuel-for-thought-connected-cars-and-the-automotive-revolution\/","title":{"rendered":"Fuel for Thought: Connected cars and the automotive revolution"},"content":{"rendered":"

LISTEN TO THIS FUEL FOR
\nTHOUGHT PODCAST<\/strong><\/a><\/h4>\n

The automotive industry is reaching an
\ninflection point that will reshape its near-term future,
\nprecipitated by the connected car era – also known as software
\ndefined vehicles or “SDVs.” This will affect every aspect of future
\nmobility, from Generative AI implications in Level 2+ autonomy to
\nthe HMI of the cockpit domain software.<\/strong><\/h4>\n

On the eve of CES, automakers and suppliers are
\nclosely monitoring the evolution of connected cars – encapsulated
\nin the “CASE” acronym of Connected, Autonomous, Shared, and
\nElectric. This transition will be crucial to rebalancing the
\nautomotive value chain and to how OEMs exert control over the
\nvehicle assembly process. But this involves more than just the
\nbuilding of the software-defined vehicle. Automakers also will
\nattempt to extract more value from the service life of these
\nvehicles.<\/p>\n

OEMs are looking to wrest back control from
\ntier 1 and system-on-chip (SoC) suppliers involving revenue that
\ncan accrue over a vehicle's lifetime, including in-vehicle
\napplications and digitized services that SDVs facilitate with
\nease.<\/p>\n

The side effect will be a period of upheaval
\nand rebalancing in the supplier value chain, thus making the
\ntransition complex.<\/p>\n

This change threatens to upend the industry's
\nvalue chain, which has been taken for granted since Henry Ford's
\nfirst moving production line in 1913 at Highland Park, and the
\naccepted orthodoxy of the Toyota Production System that's shaped
\nthe industry's value chain through the 20th century and early part
\nof the 21st.<\/p>\n

Of course, such a reshaping of the automotive
\nvalue chain will be strewn with obstacles and opposition –
\ngeopolitical and practical – and OEMs will face opposition from
\nindustry participants reluctant to cede their place at the
\ntable.<\/p>\n

Historically, the automotive industry has
\nfocused on cost-optimizing hardware, such as with semiconductors.
\nSoftware was seen as necessary, but not as strategically important
\nas hardware. Tesla's unleashing of the software-defined vehicle –
\nwith its over-the-air updates – challenged the status quo. It's not
\nthat software wasn't strategically important, just that the
\nindustry simplified software to the cost of memory.<\/p>\n

Development of electronic functions was rooted
\nin both expediency and cost. The symbiosis between hardware and
\nsoftware was straightforward: More code simply translated to a more
\nexpensive microcontroller unit (MCU). Minimized hardware costs
\nminimized software size. This justified the proliferation of MCU
\nderivatives based on different memory sizes so long as smaller
\nmemory translated into lower hardware cost.<\/p>\n

This approach has dominated automotive R&amp;D
\nthinking for decades, with gentle evolution fitting comfortably
\nwithin the existing automotive value chain structures and
\ntraditional platform redesign cadences. OEMs orchestrated material
\nflows and wielded cost-down power.<\/p>\n

Electric
\nvehicles and the connected car opportunity<\/strong><\/p>\n

OEMs are emboldened by the new E\/E
\narchitectures and product development process shifts taking place.
\nThese changes will be evidenced in 2024 and 2025, when Level 2+
\nautomated vehicles, complete with the widespread adoption of
\nover-the-air (OTA) updates, will become more mainstream.<\/p>\n

OTA brings multiple
\nrevenue opportunities.<\/a> OTA updates also allow the vehicle to be
\nmaintained, updated, and have features added over its lifetime
\nwithout visiting a dealership. With OTA, the initial sale of the
\nvehicle becomes the start, rather than the end, of the
\nvalue-extraction process for the automaker.<\/p>\n

Within the current industry structure, there is
\nlittle incentive in terms of return on investment for automakers to
\nkeep the status quo. The current practice is for hardware suppliers
\nto embed their software in deliverables. A case in point is
\nMobileye's dominant position in the computer vision space, where
\nthey can leverage both their hardware and software stack. Where the
\nsoftware is embedded and there is a requirement for post-delivery
\ncustomization, there either is a cost implication for the OEM, or
\nthe revenue generated from the innovation is shared with the
\nvendor.<\/p>\n

With the Level 2+ rollout, OEMs are wary of
\nrepeating that experience and being bypassed. With an increasing
\nset of services being offered over a vehicle's usage life cycle –
\nall enabled by software – and knowing that service revenues come
\nwith two- to four times the margins of hardware, OEMs see an
\nopportunity not to be missed.<\/p>\n

Tesla as
\nharbinger of change<\/strong><\/p>\n

The early success that new-era OEMs like Tesla,
\nXpeng, and Nio have had in internalizing software development \u2014
\nand therefore revenues \u2014 has aroused envious glances from
\nlegacy automakers. And they have a point – up to a point. Tesla's
\nEBITDA margin continues to outpace its competitors. In 2022, Tesla
\nrecorded a margin of 21.4%, while a selection of 11 of its
\nestablished competitors managed an average of 12.6%. Tesla's margin
\nin 2022 was nearly 50% more than that of Honda, which was the
\nstrongest-performing competitor, according to S&amp;P Global Market
\nIntelligence<\/a>.<\/p>\n

Of course, Tesla's margins are not solely
\nattributable to its software approach, although it undoubtedly
\nhelps. It eschews advertising, and its platform range is narrow,
\nwhich slashes costs. Additionally, other strategies such as the
\none-piece gigacasting<\/a> will
\ncontribute to its bottom line.<\/p>\n

But Elon Musk sees the sale of a software
\ndefined vehicle as just the starting point of the consumer
\nrelationship. During Tesla's Q4 2022 earning call, Musk stated,
\n“We're the only ones making cars that, technically, we could sell
\nfor zero profit now and then yield tremendous economies in the
\nfuture through autonomy. No one else can do that.”<\/p>\n

Musk put that claim to work at the end of 2022,
\nwhen Tesla began deep price cuts to its models which lowered its
\nmargins – but still provided a greater return than its peers,
\ncausing jitters in competitors' electrification strategies.<\/p>\n

Tesla's SDVs also challenge vehicle development
\northodoxy. Rather than a vehicle undergoing costly minor physical
\nengineering changes every three years, then major architectural and
\nplatform redesigns every six years, the SDV allows for a different
\napproach via OTA updates. Legacy OEMs will dissent, however,
\nstating that adopting Tesla's practices will result in volume decay
\nfor vehicles that suffer long cycles between design changes.<\/p>\n

The chart below indexes sales of E-segment
\nvehicles that compete with the Tesla Model S globally over a period
\n– beginning with the Model S's launch year of 2012 through 2022.
\nOver the 10 years, competing models all underwent significant sheet
\nmetal changes, while the Model S's 2021 'Palladium' update was far
\nless involved on a material basis. Whether legacy OEMs will stomach
\nthe prospect of such pronounced sales decay is a moot point.<\/p>\n

\"\"<\/p>\n

Middleware and Connected Car development<\/strong><\/p>\n

The battleground for the SDV value chain is
\nalready developing – and the main clash involves middleware.<\/p>\n

Foundational components like operating systems
\nare not an area that OEMs will strategically invest in, but instead
\ntreat like a commodity by signing long-term contracts. The
\ndevelopment of a virtual software layer between hardware and
\nsoftware by automakers is another area of intense research. This
\nlayer would enable the translation of complex hardware and software
\nresources into a more straightforward format in the upper layer
\nsoftware stack.<\/p>\n

Achieving this objective allows the separation
\nof the hardware lifecycle from the software function development.
\nEach can then function independently, providing more options for
\nfuture collaboration with the new software supply chain.<\/p>\n

The commodity middleware link will have a
\ndegree of customization and there will be some collaborative
\ninvestment, but it will be with one eye on future infrastructure
\nrequirements for SDVs. Currently, this is where companies such as
\nMobileye and Nvidia exist.<\/p>\n

But automakers want to develop and own the
\nstrategic middleware space. Vendors would have to keep the vendor's
\ncode or its interfaces, leading to a cost for every customization
\nand, sometimes, a license fee payable on a per-vehicle basis.
\nSuppliers rebut this position, insisting that software is not a
\ncore OEM competency – pointing to VW's notoriously troubled CARIAD
\nsoftware development. Furthermore, vendors such as Mobileye have
\nbuilt a formidable power base that will prove challenging for OEMs
\nto separate responsibilities for software from hardware.<\/p>\n

Not all OEMs will have the wherewithal or
\ndesire to own this area of the value chain. Some automakers
\nactually see a turnkey middleware solution as attractive. This
\ncould be due to the OEMs lacking in-house software capability, not
\nactively developing SDVs or Level 3 vehicles, or a preference to be
\na fast follower rather than a first mover and take advantage of
\nlower development costs.<\/p>\n

The human-machine interface (HMI) and user
\nexperience (UX) is a key part of any OEM's core competency – and a
\nbrand differentiator in a world of increasingly homogenous vehicle
\ndesign. If control of the API and middleware is secured, this will
\nbe an area of 100% OEM participation.<\/p>\n

There also is the SDV's backend to consider.
\nSDVs need an instantaneous uplink and downlink cloud connection. As
\nlatency is essential in supporting the new business model, it is
\nlikely that OEMs will also seek to own the connection between cloud
\nplatform services and the middleware. This is a path that BMW, VW,
\nand Tesla have already embarked upon, and others are sure to
\nfollow.<\/p>\n

SDVs and
\nparallel value chains<\/strong><\/p>\n

The decoupling of the vehicle development
\nprocess from a vehicle's hardware and software integration under
\nthe SDV megatrend will see two value chains develop in tandem.
\nWhile the traditional view of the value chain will last, its focus
\nwill shift to what makes the vehicle move, change direction, and
\nstart and stop.<\/p>\n

Electrification will diminish the value that
\ntraditional mechanical components contribute to a bill of materials
\n(BOM), due to the battery and electric motors becoming bigger
\nconstituent components compared to internal combustion. Because of
\nthe E\/E and software revolution, traditional mechanical components
\nwill become increasingly commoditized, placing pressure on the
\nsupply base.<\/p>\n

Tier 1 suppliers hoping to use their automotive
\nsoftware expertise to cash in on SDVs and migrate from their role
\nas system integrators to software integrators face a battle. In an
\nidealized scenario, OEMs are reluctant to cede ground to either the
\nSoC vendors or the tier 1s. However, given the choice of who is
\nmore central to future business, they are likely to choose the SoC
\nvendors.<\/p>\n

\"\"<\/p>\n

OEMs will lead the
\ndecision<\/strong><\/p>\n

Automakers are essential in determining how the
\nSDV value chain develops. The extent of their involvement will boil
\ndown to the level of in-house software capability. This can be
\nshaped from a philosophical or strategic viewpoint, or it can be
\ndue to the availability of financial and human resources.<\/p>\n

Those without the financial capability to go it
\nalone will opt for development partnerships in commodity middleware
\nand foundational parts of the strategic middleware. Here, an OEM
\ncan then use the platform a partner supplies to develop their API.
\nThis allows an OEM to at least have some skin in the game.<\/p>\n

For the supplier of the middleware platform
\nsuch a partnership also offers a way forward \u2014 but relies upon
\nthe supplier having developed a solution set in-house (e.g., Bosch
\nand ETAS, ZF and Mediator) or acquiring the capability. Such an
\narrangement was formed in April 2023 by JLR with Elektrobit, which
\nis owned by Continental. From 2024, JLR's EVA Continuum platform
\nwill use Elektrobit's software platform and operating system.<\/p>\n

These new partnerships could portend the end of
\neras defined by often confrontational and adversarial supplier
\nrelations. The advent of the SDV could usher in a more
\ncollaborative era, allowing more industry participants to share in
\nthe spoils on offer from the SDV revolution.<\/p>\n

\n————————————————————–<\/p>\n

Dive deeper into these mobility insights:<\/strong><\/p>\n

MORE ON THE FUTURE OF MOBILITY AND
\nCONNECTED CARS<\/a><\/p>\n

MORE ON AUTONOMY, CAR SHARING AND
\nELECTRIFICATION<\/a><\/p>\n

AUTOMOTIVE PLANNING AND
\nFORECASTING<\/a><\/p>\n

TECHNOLOGY VEHICLES IN
\nOPERATION<\/a><\/p>\n

\n\n

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LISTEN TO THIS FUEL FOR
\nTHOUGHT PODCASTThe automotive industry is reaching an
\ninflection point that will reshape its near-term future,
\nprecipitated by the connected car era – also known as software
\ndefined vehicles or “SDVs.” This will affect every asp…<\/p>\n","protected":false},"author":1626,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"site-container-style":"default","site-container-layout":"default","site-sidebar-layout":"default","disable-article-header":"default","disable-site-header":"default","disable-site-footer":"default","disable-content-area-spacing":"default","footnotes":""},"categories":[3267],"tags":[61,122,127,129,124,128,125,132,131,133,126,130,123,66,94,88,97,56,64,65,60,3344,3351,3357,3360,3335,3340,3362,112,3353,40,75,95,3350,3352,3356,3343,3359,3339,3345,3334,3341,104,3354,33,120,3358,3349,3337,3348,105,101,98,115,30,29,41,86,3342,3361,70,69,68,72,71,26,118,108,87,3355,46,55,48,52,54,51,50,83,3338,62,58,57,3336,109,35,3346,59,63,85,79,82,96,80,27,81,114,44,42,43,45,38,39,110,117,100,111,116,3300,73,89,90,92,91,93,84,78,37,102,34,36,77,67,74,99,113,3347,119,28,121,32,47,49,53,103,31,76],"class_list":["post-64805","post","type-post","status-publish","format-standard","hentry","category-car-or-automobile","tag-airpods","tag-anime","tag-anime-characters","tag-anime-cosplay","tag-anime-edits","tag-anime-merchandise","tag-anime-movies","tag-anime-news","tag-anime-recommendations","tag-anime-reviews","tag-anime-series","tag-anime-streaming","tag-animes","tag-app-store","tag-app-store-samsung","tag-appgallery","tag-appgallery-oneplus","tag-apple","tag-apple-music","tag-apple-tv","tag-apple-watch","tag-auto-financing-guide","tag-automobile-industry-news","tag-automobile-laws-and-regulations","tag-automobile-shows-and-expos","tag-automobile-specifications","tag-automobile-technology","tag-autonomous-vehicles","tag-bbc-sport","tag-best-cars-for-long-drives","tag-best-mobile-games","tag-bixby","tag-bixby-xiaomi","tag-car-accessories","tag-car-comparison","tag-car-customization-ideas","tag-car-insurance-advice","tag-car-interior-design-ideas","tag-car-maintenance-tips","tag-car-resale-value","tag-car-reviews","tag-car-safety-features","tag-champions-league","tag-city-cars","tag-cyberpunk","tag-cyberpunk-2077","tag-driving-tips-and-tricks","tag-eco-friendly-cars","tag-electric-vehicles","tag-family-cars","tag-fantasy-football","tag-fifa","tag-football","tag-formula-1","tag-fortnite","tag-free-fire","tag-free-mobile-games","tag-freebuds-pro","tag-fuel-efficiency-tips","tag-future-of-automobiles","tag-galaxy-a52","tag-galaxy-note-20","tag-galaxy-s21","tag-galaxy-watch-4","tag-galaxy-z-fold-3","tag-game","tag-games","tag-golf","tag-harmonyos","tag-highway-cars","tag-how-to-backup-iphone","tag-how-to-factory-reset-iphone","tag-how-to-reset-iphone","tag-how-to-restore-iphone","tag-how-to-unlock-iphone","tag-how-to-unlock-iphone-5","tag-how-to-unlock-iphone-6","tag-huawei","tag-hybrid-cars","tag-ios","tag-ipad","tag-iphone","tag-latest-car-models","tag-live-soccer","tag-lol","tag-luxury-cars","tag-macbook","tag-macos","tag-mate-40-pro","tag-mi-11-lite","tag-mi-home-security-camera-basic-1080p","tag-mi-home-security-camera-basic-1080p-huawei","tag-mi-smart-band-6","tag-minecraft","tag-miui","tag-mlb-scores","tag-mobile-game-design","tag-mobile-game-development","tag-mobile-game-marketing","tag-mobile-game-monetization","tag-mobile-games","tag-mobile-gaming","tag-nba-scores","tag-nba-standings","tag-nfl","tag-nfl-scores","tag-nhl-scores","tag-off-road-vehicles","tag-one-ui","tag-oneplus","tag-oneplus-9-pro","tag-oneplus-buds-pro","tag-oneplus-nord-ce-5g","tag-oxygenos","tag-p40-pro-plus","tag-poco-x3-pro","tag-pokemon","tag-premier-league","tag-pubg","tag-pubg-mobile","tag-redmi-note-10-pro","tag-samsung","tag-samsung-pay","tag-soccer","tag-sports","tag-sports-cars","tag-steam","tag-steeam","tag-top-10-anime","tag-valorant","tag-when-do-the-iphone-7-come-out","tag-when-does-the-iphone-7-come-out","tag-when-is-the-iphone-7-coming-out","tag-world-cup","tag-xbox-series-x","tag-xiaomi"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/gamefootballmobileanimeiphone.com\/index.php\/wp-json\/wp\/v2\/posts\/64805","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gamefootballmobileanimeiphone.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gamefootballmobileanimeiphone.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gamefootballmobileanimeiphone.com\/index.php\/wp-json\/wp\/v2\/users\/1626"}],"replies":[{"embeddable":true,"href":"https:\/\/gamefootballmobileanimeiphone.com\/index.php\/wp-json\/wp\/v2\/comments?post=64805"}],"version-history":[{"count":1,"href":"https:\/\/gamefootballmobileanimeiphone.com\/index.php\/wp-json\/wp\/v2\/posts\/64805\/revisions"}],"predecessor-version":[{"id":64806,"href":"https:\/\/gamefootballmobileanimeiphone.com\/index.php\/wp-json\/wp\/v2\/posts\/64805\/revisions\/64806"}],"wp:attachment":[{"href":"https:\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