September 30, 2023

In the past decade, the automobile industry has seen a significant transformation. OEMs’ (OEMs) future direction is now synonymous with the electrification of vehicles and autonomous driving. Yet, both industries are already creating substantial disruptions to the conventional value chain of the coming years, with various OEMs competing to become the top players in this field. Many companies within the value chain of automotive have reinvented ways to cater to the new age of consumers. Electricity, for instance, has already rendered exhaust systems, internal combustion engines, and the components that go with them obsolete. Additionally, many of the features used to support the basic combustion system of automobiles are no longer required, which will affect component manufacturers and their operations.

It’s time to put aside the outdated notion that a car loses value when taken off the dealer’s lot.

With technological advances today, vehicles are likely to become more attractive. This trend is fueled by the growing use of software in automobiles and the possibility of upgrading the software over a long period to add new features. If the software is a critical component of hardware components that can be updated regularly, it’s easy to see what direction auto manufacturers might take. People will think twice about going to auto dealerships to buy a newer model every couple of years, instead opting for more creative long-term subscriptions.

Many of these services will focus on security. For instance, think about highway autopilot, which can be purchased as a monthly or one-time subscription. Or, they could upgrade an existing safety feature like adding lidar (light detection and range) redundancy to a lane-centering program and possibly qualify for a discount from insurance. Innovative options grow when software-defined hardware incorporates the latest technological advancements.

software-defined car

Many car owners anticipate their cars being connected to their online lives. Furthermore, the software will integrate new connectivity, automation, and personalization options shortly. Although hardware was once the most critical factor in determining an automobile’s customer experience, software now plays a more vital function. “Software-defined vehicle “software-defined vehicle” (SwDV) refers to a trend where software is shaping the user experience and, in some cases, even the specifications for hardware. This is a significant change that will impact operations and development and also new models of economics and collaborations that maximize output.

The advantages of the software-defined car

The new functions will be able to be added separately based on the driver’s needs shortly. Features, services, and apps are a few examples. Software updates allow contracts and pricing models to provide new features as a service, a series of installments, or as part of subscriptions.

The car can be connected to its environment rec, record information while in use, and transmit data directly to the cloud. Services and features can be constantly improved and added to the vehicle using over-the-air updates with this information. Automated driving, e-mobility, or mobility features can all be made possible through software. Drivers are looking for innovative features available to their vehicles regularly, as they do for smartphones. This issue also opens up options: regular modifications can preserve a car’s worth and possibly enhance its lifespan.

A fundamental shift in consumer behavior

As the advancement of autonomous technology increases, it will bring about a shift in customer behavior that could impact the business’s profit model and value chain. Although the exact characteristics of this change are complex, we could categorize them into two groups at a high level: the needs of the customer and the drivers’ needs.

Customers have always picked one vehicle that meets their requirements. The choice was primarily dependent on transportation needs for commutes, business trips, and family-related run-throughs. However, those with money might opt for a more fun option to drive and enhance their status as a socialite.

Most people shortly will be “mobilists who need to get from one point to B and do not need vehicles. They may wish to travel from an airport or station to a conference or business meeting, purchase furniture, transport their children, or even take trips to the mountains or beach at times.

While a driver in the past might have selected one that met all of these needs, the driver will search for the best solution for each situation shortly. It could be an app for ride-hailing, a taxi or a rental vehicle, a car-sharing service, public transportation, or their car, depending on their local options.

Supply chains are highly complex, and complex interdependencies have long been integral to the automobile production process. This is especially true with software at the center of the manufacturing process. Technology partners will become an essential element of the overall experience. Automotive companies will be able to achieve the unique wow factor that will make them the builders of software-defined dream cars by moving away from traditions and welcoming changes.

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