If you are asked to name the big technological transformation taking place in the auto industry today, you will most likely say ‘electrification’. Some may say ‘connected cars’. But there is an even more fundamental change in vehicle design that serves as the bedrock, upon which edifices of electrification and connected vehicles are being built — software defined vehicle or SDV.
Under this paradigm, automakers are replacing purely mechanical systems in vehicles with electronic systems driven by software. Increasingly, a vehicle’s functions and features are being driven by software rather than traditional mechanical systems—including powertrain, infotainment, advanced driver assistance systems (ADAS), and even core driving functions.
The use of software-controlled systems enables greater flexibility, updateability, and customisation of both vehicle performance and capabilities and facilitates over-the-air (OTA) updates. This allows manufacturers to improve vehicle performance, add new features, and address issues without requiring physical servicing. Cars will feel like new for longer, thanks to software updates. Instead of taking years to implement new functions in existing vehicles, they can be rolled out in a matter of days.
SDVs allow vehicles to evolve with the latest features and technologies, points out a company official from Mercedes-Benz Research & Development India. “For consumers, this translates to a more tailored and upto-date driving experience, with the added benefit of potentially increased vehicle longevity and value,” he points out.
This also means that OEMs can shorten their product development cycles, respond to market feedback quicker, as well as leverage economies of scale to offer vehicles at competitive prices amidst cut-throat market competition. No wonder then, that McKinsey & Company predicts that the global automotive software and electronics market will touch USD 462 billion or around Rs 38.49 lakh crore by 2030, growing at 5.5% CAGR between 2019 and 2030.
“We are standing at the dawn of the SDV age,” says Dr Markus Heyn, Board Member, and Chairman for its Mobility business segment at the world’s largest auto components maker Bosch. The company expects SDVs to be introduced at a broad scale from CY2025 and plans to have solutions for vehicle categories, starting from e-bikes, to motorbikes, cars, and heavy-commercial vehicles. “There are very few SDVs on the road right now. We expect them to be adopted at a broader scale from CY2025, and as they become more common, the share of software in vehicles will triple.”
Out of the 48,000 software engineers working at Bosch, more than 42,000 are developing software for current, and future vehicles. Heyn says there will be close collaboration between OEMs and suppliers to develop the vehicle software of the future.
He explains that for an SDV to be updateable, its E/E architecture must not be complex, and as a result, Bosch aims to reduce the number of ECUs in a vehicle to 10, by CY2030, thereby also reducing the cost. While the company has already developed an integrated ADAS and infotainment chip with Qualcomm that lowers cost by up to 30%, it even aims to merge various classical ECUs into centrally-, and zonally-located high-performance computers (HPCs).
“We believe that in this architecture of less than 10 ECUs, there might be up to 5 HPCs that could be central computers, also located centrally, while there will be other high-performance computers — christened zonal computers – and located in specific zones, thereby reducing the number of cables inside vehicles. This is how these computers will distribute various tasks among themselves,” Dr Heyn notes.
Bosch Chairman Dr Stefan Hartung even goes as far as calling software “the driving force,” behind all of the company’s business verticals.
“While software is not new, our focus so far was on small software products such as airbag modules. But we are now going to grow software with standalone software development. We want software sales to run into billions of euros by CY2030,” he says. Bosch estimates the global automotive software market to touch 200 billion euros by 2030, a three-fold increase over 2020, and led by software, the company targets to clock 80 billion euros in annual revenues from its Mobility sector by CY2029. “No vehicle in the future will be rolled off without Bosch’s software,” Dr Hartung adds.
Technological Triggers
The biggest driver for the adoption of SDV architectures are two major technological shifts taking place in the automotive industry – electric vehicles and connected vehicles. EVs are driving the adoption of SDVs, because unlike traditional ICE vehicles, EVs have to depend on software for basic vehicle operations. For instance, right from the basic battery management system (BMS) that optimises battery performance and its lifespan in an EV, to the more advanced safety technologies such as ADAS or advanced driver-assistance systems that enhance safety and driving comfort, software is driving the industry towards more futuristic solutions.
“The advent of SDVs is particularly transformative within the EV sector,” says Naveen Kalappa, Global Practice Head, Embedded and Electronics, Tata Technologies. “It was driven initially by technology companies pioneering EV innovations but also by customers demanding performance and connected vehicle experiences. This trend has prompted traditional OEMs to integrate SDV functionalities into their EV offerings.”
As Kalappa indicates, the second major technological driver of greater software adoption is the move towards connected vehicle technologies. Connected vehicles are further set to offer endless possibilities to enhance the vehicle’s safety, as well as functionality with vehicleto-vehicle (V2V) and vehicle-to-everything (V2X) communication systems that are also powered by software, and will build the foundation for intelligent transportation systems of the future. These vehicles can communicate with one another as well as the road infrastructure, leading to improved traffic management, reduced congestion, and ultimately, increased safety. In fact, even today’s internal-combustion-enginepowered vehicle is laden with over four dozen ECUs or electronic control units – all running millions of lines of sophisticated software codes – to enable desired functions across the vehicle powertrain, lighting, infotainment, or safety systems, among others. Furthermore, software is also redefining the user experience in cars with intuitive user interfaces or UIs powering infotainment systems that pair with smartphones, seamlessly allowing occupants to carry their digital lifestyles with them.
Kalappa says the SDV concept will transform vehicles into highly customisable interfaces as customers look at their vehicles as extended workplaces and living rooms. Software, therefore, is inherently transforming the vehicle as the third living space which is safe, connected, and is also headed towards being driven autonomously.
It facilitates access to a myriad of apps on edge-to-edge screens, high-definition navigation, voiceactivated controls, and other personalised settings. And it does not stop there. With over-the-air (OTA) updates, automakers further strive to continually improvise the features offered in their products, and elevate the user experience consistently, even without the need for calling the vehicle to the service centre.
“SDVs facilitate over-theair (OTA) updates, allowing for continuous improvement of the EV drivetrain, battery management systems and overall EV performance, a key enabler as EV technology is still relatively new and companies are continuously learning how to deliver better performance. This also helps OEMs proactively identify issues from vehicles in operation, address them in the next iteration and continuously help deliver better performance and customer satisfaction,” adds Kalappa.
Business Drivers
However, it is not just technological changes that are leading to the adoption of SDVs. New business models are also emerging that are providing an impetus to software-powered vehicles. One such is the move from the one-time, vehicle salebased model to a subscription-based model, wherein automakers would offer software-based services as extras, including enhanced safety options, entertainment packages, connectivity features, as well as predictive service indicators.
“Traditionally, revenue models relied on one-time vehicle sales and subsequent maintenance services. However, software defined vehicles (SDVs) will enable a shift towards continuous revenue models such as subscription services, in-vehicle services, data monetisation, connected services among others,” said Shaveta Wadhera Jain, MD – Industrial and Mobility, Accenture India. “As consumers re-evaluate their driving experience, the auto industry is witnessing a shift from being hardware-first to softwarefirst,” she says.
According to a study by Accenture Research, revenue from digitally-enabled services in the automotive ecosystem are likely to register a ten-fold increase to USD 3.5 trillion by 2040, and comprise more than 40% of the industry’s entire revenue. Mobility services, connected ecosystems and digital features within cars are going to be some of these emerging revenue streams, which also boast high profit margins, comparable to those in the smartphone industry. As vehicle technology continues to advance, software is likely to become the key differentiator, setting apart comparable products, and empowering automakers to stay ahead of the curve, be competitive, and win customers. However, it would have to weave through certain challenges, such as cybersecurity.
Jain points out that with software becoming key to product development, OEMs need to ensure seamless integration of complex software systems with hardware components, while maintaining reliability and cybersecurity. “This would need higher investments in R&D, forging collaborations with technology companies, and infrastructure development amongst others,” she explained.
“OEMs also face the challenge of balancing the desirability, viability, and feasibility of software-led services with that of consumer willingness to pay for connected car functionalities and features. Some other challenges include — acquiring and retaining skilled software engineers, data privacy concerns, and need of a cultural shift to adopt modern engineering practices like agile cloud-native development,” she added.
This feature was first published in Autocar Professional’s July 15, 2024 issue.