The Automotive Industry’s Future Depends On a Software-driven Business Model

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Over the previous decade, the automotive industry has significantly transformed. Original equipment manufacturers’ (OEMs) future direction has become synonymous with electrification and autonomous driving. However, both of these sectors are already causing major disruption in the traditional value chain in this decade, with several OEMs vying to be the leader in this sector. Several companies in the automotive value chain have reimagined solutions to serve new-age audiences. Electrification, for example, is already rendering exhaust systems and internal combustion engines and their components obsolete. Furthermore, many features that support automobiles’ basic combustion systems will no longer be required, affecting component manufacturers’ operations.



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It’s time to discard the old belief that a car loses its value the moment it’s driven off a dealer’s lot.

With today’s technology breakthroughs, automobiles may become more desirable. This shift is being fueled by the increasing presence of software in cars and the ability to upgrade that software over a period of time to provide new functions. When the software underpins crucial hardware components that allow ongoing updates, it is easy to envision where auto firms may go. Consumers will reconsider swarming to auto dealerships to purchase a newer model every few years instead favoring creative longer-term subscriptions.

Many of the services will be centered on safety. For example, consider highway autopilot, purchased as a one-time or monthly subscription. Alternatively, drivers could improve an existing safety feature, such as adding lidar (light detection and range) redundancy to a lane-centering application, which may qualify for an insurance discount. The variety of novel services that can be supplied expands as software-defined hardware absorbs new technical developments.

Software-defined vehicle

Many car owners anticipate that their vehicles will be completely interwoven with their digital lives. In addition, the software will increasingly incorporate new connection, automation and personalization features in the future. While hardware used to be the primary determinant of a customer’s automotive experience, the software is now playing a much more significant role. The “software-defined vehicle” (SwDV) refers to a movement in which software shapes the consumer experience and, in some circumstances, even the hardware specifications. This evolution has ramifications for development and operation as well as new economic models and collaborations that maximize the output.

The benefits of the software-defined vehicle

New functions will be able to be included independently based on the driver’s demands in the future. Temporary services, features, and apps are examples. As a result, software upgrades enable contract and pricing structures to deliver new features as a service, and individually or as part of a subscription.

The car can interact with its surroundings, collect data while in use, and send it to the cloud. Features and services can be continuously improved and re-uploaded to the car utilizing over-the-air upgrades using this data. E-mobility, automated driving and mobility services, for example, are all made feasible by software. Drivers want new features to be accessible for their automobiles on a regular basis, just as they do for their smartphones. This problem also presents possibilities: the value of a vehicle can be maintained and even increased throughout the course of its life cycle with frequent modifications.

A radical shift in consumer behaviour

As autonomous technology improves, a significant shift in customer behaviour will affect the industry’s revenue model and value chain. While the nature of these changes will be complex, we may divide them into two categories at a high level – the customer’s wants and the driver’s needs.

Customers have always chosen a single vehicle to meet their needs. The decision was mostly based on transportation requirements, such as commuting, business trips and family errands. On the other hand, drivers with means might choose a model that is more enjoyable to drive and gives them social standing.

The bulk of people in the future will be ‘mobilists’, who merely want to go from point A to point B and are unattached to automobiles. They might want to go from a distant city’s station or airport to a business conference, buy furnishings and transport children or take a trip to the beach or mountains on occasion. 

Though a driver in the past may have picked a model that could meet each of these requirements, the car user of the future will look for the most appropriate answer for each task. That may mean a ride-hailing service, a taxi, a rental car, a car-sharing service or public transportation or, of course, their automobile, depending on the local alternatives.

Keeping this in mind, deep supply chains and intricate interdependencies have long been a part of auto production. This is true, with software at the heart of car manufacturing. Technology partners become an important part of the user’s overall experience. Automotive businesses will achieve the distinctive wows that will establish them as builders of software-defined dream automobiles by letting go of tradition and welcoming change.

https://www.entrepreneur.com/article/422271

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