In-Vehicle Software and Services Are Transforming the Industry
New connected-vehicle technologies are driving a potential gold rush for OEMs.
The auto industry is undergoing its most dramatic transformation in more than a century, and tomorrow’s vehicles will not only be electrified but as directly linked to the outside world as today’s smartphones. And that is opening a world of opportunity – and revenue streams. Software and data services alone are forecast to generate revenues of 4 billion euros, or $4.5 billion, by 2026, according to Stellantis CEO Carlos Tavares, jumping to 20 billion euros, or $22 billion, by 2030.
And the Euro-American automaker, formed by last year’s merger of Fiat Chrysler Automobiles and the PSA Group, isn’t alone in its optimism. Domestically, General Motors and Ford have outlined similar aspirations in recent months, as have global brands Mercedes-Benz, Hyundai and Toyota. By decade’s end, virtually every new vehicle on the road will be “connected,” able to communicate with each other, as well as a highway infrastructure.
They’ll share information on traffic and weather, among other things. Several Audi models already can alert drivers when a traffic signal is about to change in Las Vegas, thanks to a pilot connected car program. Various Stellantis products, including the all-new 2022 Jeep Grand Cherokee, feature a system called EVAS. Short for “emergency vehicle alert system,” it can flag motorists when ambulances, fire trucks and other emergency vehicles are approaching.
The evolution of the infotainment system is a key element in the connectivity trend. The new Mercedes-Benz Hyperscreen in the EQS battery-electric sedan covers the entire instrument panel. The 2022 Jeep Grand Wagoneer (top) has an optional screen for the front passenger featuring Amazon’s Fire TV. And the driver can operate most vehicle functions using a mobile version of Amazon’s Alexa voice assistant.
Continental Automotive is among Tier-1 electronics suppliers bringing fresh thinking to infotainment display technologies, aiming to minimize driver distraction while expanding features. While it’s unclear whether start-up Byton will make it into production, its business model is based on the idea that it will make more money delivering software-based features, services and subscriptions than on selling vehicles.
Introducing smartphone-style over-the-air (OTA) update capabilities has been a critical step in making this possible. Most new vehicles now can tap into the 4G smartphone network. In February, Audi became one of the first to announce it will soon upgrade to the significantly faster 5G system. Manufacturers have also begun redesigning their vehicle electrical architectures to make it possible, among other things, to update onboard software. GM’s UltiFi platform “opens up a whole lot of growth for us,” said Steve Carlisle, the automaker’s president of North American operations, during a Wolfe Research seminar in February 2022.
Being able to remotely update software has numerous advantages, according to Dave Sargent, head of automotive research for J.D. Power. Tech glitches, such as balky navigation systems, are today the single biggest source of owner complaints, he noted. Fixing them by OTA can improve customer satisfaction. That also true for the growing number of software-related recalls, Sargent said. Tesla has made that point clear several times in recent months, since owners didn’t need to take their vehicles in for repairs.
Tesla was an early pioneer of connectivity and has made use of it in many ways. Buyers of some early versions of the Model S sedan and Model X SUV could upgrade their vehicles’ range simply by paying Tesla to effectively unlock an unused part of the battery pack. (It also remotely activated the added range for owners during several natural disasters.) The automaker also has introduced “fun” features like a megaphone mode. It ran into criticism with a remote update letting motorists play games while driving but then deactivated that feature remotely.
Looking ahead, automakers expect to turn this into a serious business. “You might choose a feature that will improve your car’s performance, or increase the range of your electric vehicle,” said Yves Bonnefont, CTO at Stellantis, while ordering pay-per-view videos or a subscription-based service. The concept isn’t entirely new. It’s been nearly a quarter-century since GM introduced its OnStar service. The original technology was primitive and limited in scope, but it proved motorists would consider paying for safety, security and other features on a regular basis.
If anything, industry leaders see greater opportunities now that consumers are used to paying for subscriptions for just about everything. During her own ‘fireside chat’ in February, GM CEO Mary Barra cited company research showing buyers ready to spend an average $135 a month, including $85 for subscription and other services, the rest for the necessary hardware. Like Stellantis, GM is targeting revenues of as much as $25 billion annually by 2030.
One of the downloadable features that could be on the list is GM’s SAE Level 2 Super Cruise system and the next-gen Ultra Cruise technology. Ford plans to use OTA technology to make available its own Blue Cruise software to buyers of the Mustang Mach-E and F-150 Lightning once it’s available later this year. And Kia will use this approach with its AutoDrive system and other software through its new Feature on Demand service. Further ahead, automakers could sell new trail guides for off-roaders and “soundscapes” to BEV buyers who don’t want to drive in silence.
It isn’t just new car buyers who automakers are targeting. Bonnefort suggested that those who purchase previously owned models could update their infotainment systems and even add features that weren’t available – or ordered – when the vehicle was new.
By going beyond the mechanical, automakers have the opportunity to “redefine mobility,” said Kenichiro Yoshida, the CEO of Sony. The electronics giant now plans to launch its own line of battery-electric vehicles in a partnership with Honda. The first is expected to reach market in 2025. Such products will change what we do when we drive, industry officials promise, while also providing revenue opportunities OEMs have never had before.