How Automakers Are Shifting Towards A Software Approach
Over the past 20 years, technology has penetrated so much of every aspect of daily life, and its corresponding industries. In this age of connectivity, products are created to be increasingly integrated in consumers’ daily lives, from homes, workplaces, entertainment and yes, even transportation.
Through software updates or learning patterns of user behaviour, most devices now can be improved over time, which makes the software the one defining feature that people rely on the most. However, the automotive industry is one that is much more reluctant to embrace a software-first approach to improving the products and user experience of the industry.
Image from: The Economic Times (How Automakers Are Shifting Towards A Software Approach)
It can be argued that Tesla, for one, has been the first to bring a software-first approach to the auto industry, altering the playing field and getting competitors to play catchup and innovate their products. It cannot be denied that the car’s brain will soon be one of the most sought after aspects in your vehicle. And to succeed in innovation, automakers will have to correctly choose how they invest in meeting increasing user demand for interconnected vehicles as well as avoid losing their unique position in the marketplace.
Image from: The Software Report (How Automakers Are Shifting Towards A Software Approach)
In an automotive market that more greatly prioritises software and tech integration, one of the biggest decisions that automakers face is determining the operating system for their vehicles. For example, American players like GM and Ford have partnered with big tech, collaborating with Microsoft or Google respectively on cloud infrastructure and other tech solutions. Conversely, major German and Japanese companies like Volkswagen and Toyota are aiming to become software companies themselves through entities and products like Cariad and Toyota Connect.
However, each approach carries potential benefits and challenges, though legacy auto brand paths appear behind Tesla’s pace regardless of which path they’ve chosen. A 2020 analysis revealed Tesla’s electronics technology was six years ahead of competitors like Volkswagen and Toyota.
Those automakers who adopt an existing operating system gain a head start in the race to market and access to a deep pool of product development talent compared to those building their own software. Another plus side is that interconnected systems already in place, such as Android compatibility, will allow for fewer barriers to compatibility compared to a system that is built from the ground up.
Image from: The World Economic Forum (How Automakers Are Shifting Towards A Software Approach)
Furthermore, automakers also worry that developing computers in-house and moving toward ownership of those technologies, like Tesla’s model, will freeze out and decimate existing supply chains upon which they currently rely. Further, if automakers develop proprietary systems, they’ll be launching brand-new products, and unfamiliarity and barriers to compatibility are potential disincentives to adoption unto themselves.
However, if these challenges can be successfully navigated, the rewards will be huge. Auto companies would not only retain ownership and control of their industry but command a new mode of value creation.
Image from: BetaNews (How Automakers Are Shifting Towards A Software Approach)
Automotive companies that are aiming to climb up the industry power curve by retaining ownership and control over the increasingly critical software space within vehicle manufacturing are likely better positioned to thrive in the evolving mobility space than those looking to leverage external expertise, unless the partnership is structured to enable mutual learning and ownership.
What do you think about this shift in technology? Perhaps this will be the start of automakers coming up with their own systems and allowing users to better utilize their vehicles in a new age of connectivity.
What do you think? Let us know in the comments below!
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