Benchmarking Asian OEMs Software-defined Vehicle Strategies, 2024

The Impact of the Top 3 Strategic Imperatives on Benchmarking Asian OEMs’ SDV Strategies

Innovative Business Models

Why

• Consumer awareness of features such as safety and security has led to the development of decision parameters in vehicles and will increase demand for more connected car segments, including cybersecurity, usage-based insurance, telematics, vehicle data, and software platforms.

Frost Perspective

• New business models, including partnerships with and investments in start-ups, will allow OEMs to leverage the latest technological innovations in the automotive space and remain market leaders in the SDV sector.
• With the increasing implementation of cloud-based architectures, more OEMs will offer foreign object damage solutions in the coming years and increase their revenue between 2022 and 2025.

Industry Convergence

Why

• The software-oriented business approach is replacing the hardware approach and becoming the only viable model to generate revenue.
• Automakers, suppliers, and technology providers must establish stronger partnerships to develop vehicles with a software-oriented architecture.

Frost Perspective

• Recent partnerships in the SDV ecosystem reflect automakers’ willingness to expand their collaboration with players outside the traditional automotive industry.
• To succeed in this process, automakers must redefine their organization, infrastructure, and vehicle architecture and consider factors such as investment and costs of R&D and vehicles. Generating meaningful revenue will take at least 10 years.

Disruptive Technologies

Why

• To succeed in the SDV market, organizations must transition from a function-oriented to a platform development structure.
• A shortage of talented engineers with knowledge of hardware, automotive engineering, and software will occur.

Frost Perspective

• Some OEMs have started migrating from a function-oriented to a platform development structure by hiring interdisciplinary talent with expertise in cybersecurity, software stack development, AI, and the Internet of Things.
• Automotive players in the SDV market must implement recruitment and talent management strategies to acquire the best engineers for various domains.

Growth Drivers 

• Increasing Input Costs and Constant Efficiency Improvement Pressures The need to meet consumer demand, greater regulatory compliance requirements, and increasing technology sophistication have led to an increase in input costs for OEMs, negatively impacting their profit and loss statements. Migrating to SDVs will enable OEMs to better manage costs and drastically improve efficiency.

• Unlocking New Services Using Data Analytics Data analytics allows OEMs to unravel product/feature usage insights, which can be useful for optimizing functions and software. Additionally, predictive and personalized services, such as maintenance, insurance, and vehicle app stores, could be new avenues to generate revenue.
• Hardware and Software Decoupling Decoupling software and hardware enables the standardization of toolchains, making OEM development processes consistent across internal teams and external stakeholders. Additionally, it helps OEMs implement over-the-air (OTA) updates to realize new business models over the vehicle life cycle.

Growth Restraints 

• Advanced Hardware and Software Needed for SDVs The existing E/E architecture cannot meet increasing demands for computing power and increased communication efficiency and bandwidth. Vehicle E/E architecture must shift from a distributed to a centralized model to become compact and scalable.

• Limitations of the Traditional Software Development Model Traditional automotive software R&D employs a waterfall development model that caters to a linear R&D ecosystem in which product R&D ends when production starts. This process will need to transition to agile development to enable constant iteration to address changing market needs and reduce time to market.
• Organization Structure and Limited Talent Supply To succeed in SDVs, organizations must transition from a function-oriented to a platform-development structure. Additionally, talented engineers with knowledge of hardware, automotive engineering, and automotive software are in short supply. 

Key Competitors 

OEM Groups

• BYD
• Honda
• Hyundai
• Nio
• Toyota

Software Developers

• Vector Informatik
• Elektrobit
• Blackberry
• Wind River
• Red Hat
• Tata Elxsi
• Green Hills
• Enfochips

Domain-specific Suppliers

• Harman
• TTTech
• Apex AI
• NVIDIA
• OXA
• FIVE AI
• Snaap OS