Demand for personalisation, connectivity driving shift towards SDVs

Software Defined Vehicles or SDVs are the next megatrend in the global automotive industry, which is already witnessing a major transformation with the increasing foray of electric vehicles or EVs. While the EV transition is bringing about major changes in the automotive value chain that is getting reconfigured globally, the advent of SDVs will herald a colossal shift.

With SDVs, the automotive ecosystem will expand significantly with more stakeholders, including telecom operators, software, and technology companies, and hardware providers joining the space, where vehicle manufacturers, and component makers, have so far been the key pillars of this globally-intertwined industry.

SDVs, which would see a vehicle getting designed around the software, will mark the shift of a vehicle’s core architecture, away from a mechanical entity. According to Satish Sundaresan, Managing Director, Elektrobit India, “Instead of designing the vehicle around a mechanical setup, SDVs will reimagine the vehicle, which would now be designed around the software, with a platform concept in mind.”

“OEMs will define the respective features to be offered on different models, and connect them with a common software platform. It is then a matter of making changes to the software to extend or expand the vehicle functionalities,” he explained.

As per Sundaresan, the growing consumer demand for personalisation and connectivity is the key driver of this mammoth shift towards SDVs, which perfectly complement the consumer needs, and allow them to seamlessly carry their digital lifestyles into their vehicles. “SDVs will be completely consumer focused, and allow for an unprecedented technology evolution in the automotive industry.

“The vehicle will transform into a digital device in such a way that it will allow consumers to seamlessly move between their cars, phones, and homes, while carrying the same digital life experience,” Sundaresan added.

Chip makers get control 

While the automotive industry has traditionally been an OEM-driven industry with several global players making their own engines, and chassis, and having a control over the supply chain, the foray of SDVs is likely to see the control shift away from automotive OEMs.

With heightened levels of electronics and semiconductors inside an SDV, the chip manufacturers are going to emerge as the key determiners of the industry’s trajectory in the future. According to Sundaresan, “Automakers, Tier-1 suppliers, telecom players, and chip manufacturers are going to be the key stakeholders of this transition, and the chip manufacturers are going to determine what chips are going to be used inside vehicles. So, the control is slowly shifting from automotive OEMs to the chip manufacturers, and the balance of the game is changing.”

He further explained that economies of scale, which plays a huge role in the traditional automotive ecosystem, will no longer remain as crucial in the SDV world, wherein the role of Tier-1 suppliers is likely to be redefined from being systems suppliers, to now offer engineering, or built-to-print services.

Sundaresan said that with the inclusion of more players, including telecom companies and software players in the automotive value chain, the OEM margins are likely to shrink dramatically, pushing them to devise other avenues of revenue. “This is where the end-consumer behaviour will see an evolution towards paying for various services and subscriptions that make sense for them,” he said.

Emergence of subscription services

With SDVs primarily catering to the consumer’s needs, they will also bring a huge shift in the relationships that vehicle owners share with their priced possessions. Customers will be slowly driven towards paying for the activation of a certain feature in the vehicle, which comes pre-equipped with the desired hardware for the same.

“With SDVs, functionalities like predictive maintenance are possible, and are likely to see a big uptake. Consumers will be willing to pay to enable such features and others like online maps for live traffic, or a range calculator on an EV when going outside the city. The space will evolve significantly,” said Sundaresan.

“However, with customers paying for a feature over a period of 3-5 years, the bigger challenge for the automotive industry will lie in recovering the upfront investments made into technology, particularly the software of these vehicles,” he added.

“As the software in an SDV will be updated rather frequently, “From the smartphone industry’s experience, a hardware is only able to support such changes for a maximum of 5-6 years. And that springs another underlying challenge for the automotive industry with SDVs, which would also need to serve a 15-year service life,” Sundaresan explained.

However, while the automotive industry is expected to find answers to all these questions as the SDV space evolves, Sundaresan believes India has a tremendous opportunity to become the global hub of SDV development with its prowess in software and manufacturing. "As we talk about local electronics manufacturing in the country, India will not just play a crucial role in the software development of SDVs, but also in the manufacturing of these systems, including components as well as complete vehicles.

“India will be the fulcrum of the global SDV transformation and emerge as a global hub for SDVs in the future,” Sundaresan signed off.

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