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Benchmarking of European OEM Software-defined Vehicle Strategies, 2024
Transformative Megatrends Forcing European OEMs to Focus on Pre-competitive Collaboration at a Deeper Level Across their Ecosystem; Previously Unseen in the Automotive Industry
14-Aug-2024
Global
Market Research
Original equipment manufacturers (OEMs) used to differentiate their products based on mechanical features. Today, however, consumers are increasingly looking for features defined by software, such as driver assistance, connectivity, and comfort-convenience services. The convergence of technologies including electrification, autonomous driving, shared mobility, and connectivity is causing OEMs to migrate from the traditional hardpoint-defined architecture to a software-oriented architecture. Meanwhile, these trends are reshaping customer expectations and forcing OEMs to address them in new-generation vehicles, thereby turning vehicles into software on wheels.
Similar to the mobile phone industry, the automotive industry is experiencing a sort of rebirth. The traditional business models of generating revenue cyclically are being challenged by continuous cash flow generation throughout the vehicle life cycle. Beyond unlocking new safety, comfort, and convenience features, software-defined vehicles (SDVs) have several advantages compared to their hardware-defined counterpart. SDVs allow customers over-the-air (OTA) updates that cover firmware patches; infotainment to receive improvements; monitoring and tuning of core functional capabilities, such as powertrain and vehicle dynamics; and feature-on-demand comfort-convenience services. This allows OEMs the opportunity to improve and upgrade vehicles on the go throughout their life cycle while generating revenue from feature-on-demand services, which culminates in deeper, more connected relationships with customers.
SDVs are at the forefront of monumental changes in the automotive industry. This research service aims to benchmark European OEM SDV strategy. It discusses the impact of these trends on the growth and deployment strategies of different European OEMs in the market.
The Impact of the Top 3 Strategic Imperatives on the Benchmarking of European OEM Software-defined Vehicle Strategies
Disruptive Technologies
WHY
The increased proliferation of electronically driven features in modern vehicles has raised the complexity of in-vehicle electrical/electronic (E/E) platforms, adding weight and cost to vehicles.
Case convergence is leading to the growing addition of software (SW)-driven features, increasing processing, communication, and power requirements.
FROST PERSPECTIVE
With support from the automotive ecosystem, OEMs are addressing the challenges posed by E/E architecture by decoupling hardware (HW) from SW, using high-powered controllers, and redesigning HW architecture.
Working closely with semiconductor and SW companies, OEMs are developing processors, components, systems integration protocol, and SO to effectively manage growing requirements.
Internal Challenges
WHY
To ensure success in the SW-defined vehicle (SDV) space, organizations must transition from function-oriented to platform development structures.
The shortage of talented engineers with knowledge of HW and SW and automotive engineering is likely to continue.
FROST PERSPECTIVE
Some OEMs have started the migration, partly by hiring interdisciplinary talent with expertise in cybersecurity, SW stack development, artificial intelligence (AI), and the Internet of Things (IoT).
Automotive companies in the SDV sector must strategize their recruitment and talent management policies to get the best engineers for various domains.
Industry Convergence
WHY
The SW-oriented business approach is replacing the HW model and is the only viable means of revenue generation.
Therefore, automakers, suppliers, and technology providers must partner deeper to develop vehicles with SW-oriented architecture.
FROST PERSPECTIVE
Recent partnerships in the SDV ecosystem indicate that automakers are willing to expand their partnership status with companies not traditionally associated with the automotive industry.
To successfully emerge from this process, automakers must redefine their organization, infrastructure, and vehicle architecture and consider factors, such as investment, R&D costs, and vehicle costs. Realizing any meaningful revenue will take at least 10 years.
Research Scope
• The automotive industry is transforming from a hardware (HW) to a software (SW) approach to building vehicles.
• Vehicles are increasingly complex with more lines of SW code than the previous year.
• The concept of software-defined vehicles (SDVs) has gained traction in the industry, impacting product and feature development philosophies.
• This study investigates the strategies of European OEMs in the SDV space and benchmarks them against each other.
Definitions
| Distributed Architecture | A distributed E/E architecture is where one ECU represents one vehicle application. |
| Integrated Architecture | This is a variation of the distributed architecture where one or more vehicle functions are integrated into one ECU (e.g., a body control module that hosts a plethora of body functions in one ECU). |
| Hybrid/Partial Domain Controller Architecture | A hybrid domain controller architecture is an E/E architecture where one or more domains are carved out from the existing integrated architecture. In such an architecture the domain controller controls all control strategies of that particular domain (e.g., cockpit domain controller). |
| Full Domain Controller Architecture | In a full domain controller architecture, functional consolidation occurs in 4 to 7 domain controllers, such as powertrain, connectivity, ADAS and AD, body and comfort, infotainment, and in-vehicle experience. The domain controllers (DCs) manage the strategy of sensors and actuators and are physically isolated, communicating with each other through service-oriented gateways. |
| Hybrid/Partial Domain-Zonal Architecture | An E/E architecture in which one or more zones have been carved out from the full domain controller architecture based on geographic proximity and not on function. The remaining architecture represents domain controller architecture. |
| Zonal Architecture | In zonal architecture, modules are clustered based on geographic proximity and not on function. Zonal module interfaces between small microcontrollers and the central compute system, translating the language to be transmitted through Ethernet. |
Growth Drivers
| Driver |
|---|
| 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 statement. 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 SW. Additionally, predictive and personalized services, such as maintenance, insurance, and vehicle app stores, could be new avenues to generate revenue. |
| HW and SW Decoupling Decoupling SW and HW enables the standardization of toolchains, making OEM development processes consistent across internal teams and external stakeholders. Additionally, it helps OEMs implement OTA to realize new business models over the vehicle life cycle. |
Growth Restrains
SDV Strategies: Growth Restraints, Global, 2023–2030
| Restraint |
|---|
| SDVs Need Advanced HW and SW: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 SW Development Model: Traditional automotive SW 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 allow 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 functionoriented to a platform-development structure. Additionally, talented engineers with knowledge of HW, automotive engineering, and automotive SW are in short supply |
Key Competitors
OEM Groups
- BMW
- Mercedes-Benz
- Renault-Nissan-Mitsubishi Alliance
- Stellantis
- Volkswagen
- Volvo
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
- Snap OS
Key Findings
Key Findings (continued)
Comparative Analysis: OEM Hardware Strategy
Comparative Analysis: OEM Software Strategy
Comparative Analysis: SDV Strategy & Implementation
Why Is It Increasingly Difficult to Grow?
The Strategic Imperative 8™
The Impact of the Top 3 Strategic Imperatives on the Benchmarking of European OEM Software-defined Vehicle Strategies
Research Scope
Growth Drivers
Growth Restrains
Segmentation
Key Competitors
BMW Hardware Strategy
Potential List of BMW Models on New Architecture
BMW Software Development Strategy
BMW Software Platform
BMW Focus Areas, SDV Ecosystem, & Strategy
Mercedes-Benz Hardware Strategy
Potential List of Mercedes-Benz Models on New Architecture
Mercedes-Benz Software Development Strategy
Mercedes-Benz Software Strategy: MB.OS Platform
Mercedes-Benz Focus Areas, SDV Ecosystem & Strategy
Renault-Nissan-Mitsubishi Hardware Strategy*
Potential List of RNM Models on New Architecture
RNM Software Development Strategy
RNM Software Strategy: Software Platform
RNM Focus Areas, SDV Ecosystem & Strategy
Stellantis Hardware Strategy: STLA Architecture
Stellantis Hardware Strategy: STLA Architecture (continued)
Stellantis Software Development Strategy
Stellantis Software Strategy
Stellantis Focus Areas, SDV Ecosystem & Strategy
Volkswagen Hardware Strategy
Potential List of Volkswagen Models on New Architecture
Volkswagen Software Development Strategy
Volkswagen Software Strategy: VW.OS Software Platform
Volkswagen Focus Areas, SDV Ecosystem & Strategy
Volvo Hardware Strategy
Potential List of Volvo Models on New Architecture
Volvo Software Development Strategy
Volvo Software Strategy: VolvoCar.OS Software Platform
Volvo SDV Ecosystem & Strategy
Growth Opportunity 1: Evolving Ecosystem
Growth Opportunity 1: Evolving Ecosystem (continued)
Growth Opportunity 2: FoD Business Model
Growth Opportunity 2: FoD Business Model (continued)
Growth Opportunity 3: Pan-industry Collaboration
Growth Opportunity 3: Pan-industry Collaboration (continued)
Best Practices Recognition
Frost Radar
Benefits and Impacts of Growth Opportunities
Next Steps
Take the Next Step
List of Exhibits
Legal Disclaimer
List of Figures- SDV Strategies: Growth Drivers, Global, 2023–2030
- SDV Strategies: Growth Restraints, Global, 2023–2030
- In-vehicle SW Spending: Financial Metrics,1 BMW Group, Global, 2021–2023
- In-vehicle SW Spending: R&D Locations,2 BMW Group, Global, 2023
- In-vehicle SW Spending: Financial Metrics,1 Mercedes-Benz Group, Global, 2021–2023
- In-vehicle SW Spending: Financial Metrics,2 Mercedes-Benz Group, Global, 2021–2023
- In-vehicle SW Spending: Financial Metrics,1 RNM Alliance, Global, 2021–2023
- In-vehicle SW Spending: R&D Locations,2 RNM Alliance, Global, 2023
- In-vehicle SW Spending: Financial Metrics,1 Stellantis, Global, 2021–2023
- In-vehicle SW Spending: R&D Locations,2 Stellantis, Global, 2023
- In-vehicle SW Spending: Financial Metrics,1 Volkswagen, Global, 2021–2023
- In-vehicle SW Spending: R&D Locations,2 VW, Global, 2023
- In-vehicle SW Spending: Financial Metrics,1 Volvo Cars, Global, 2021–2023
- In-vehicle SW Spending: R&D Locations,2 Volvo Cars, Global, 2023
Purchase includes:
- Report download
- Growth Dialog™ with our experts
Growth Dialog™
A tailored session with you where we identify the:- Strategic Imperatives
- Growth Opportunities
- Best Practices
- Companies to Action
Impacting your company's future growth potential.
| Deliverable Type | Market Research |
|---|---|
| Author | Manish Menon |
| Industries | Automotive |
| No Index | No |
| Is Prebook | No |
| Keyword 1 | European Oems |
| Keyword 2 | Software-Defined Vehicles |
| Keyword 3 | Vehicle Software Market |
| List of Charts and Figures | SDV Strategies: Growth Drivers, Global, 2023–2030~ SDV Strategies: Growth Restraints, Global, 2023–2030~ In-vehicle SW Spending: Financial Metrics,1 BMW Group, Global, 2021–2023~ In-vehicle SW Spending: R&D Locations,2 BMW Group, Global, 2023~ In-vehicle SW Spending: Financial Metrics,1 Mercedes-Benz Group, Global, 2021–2023~ In-vehicle SW Spending: Financial Metrics,2 Mercedes-Benz Group, Global, 2021–2023~ In-vehicle SW Spending: Financial Metrics,1 RNM Alliance, Global, 2021–2023~ In-vehicle SW Spending: R&D Locations,2 RNM Alliance, Global, 2023~ In-vehicle SW Spending: Financial Metrics,1 Stellantis, Global, 2021–2023~ In-vehicle SW Spending: R&D Locations,2 Stellantis, Global, 2023~ In-vehicle SW Spending: Financial Metrics,1 Volkswagen, Global, 2021–2023~ In-vehicle SW Spending: R&D Locations,2 VW, Global, 2023~ In-vehicle SW Spending: Financial Metrics,1 Volvo Cars, Global, 2021–2023~ In-vehicle SW Spending: R&D Locations,2 Volvo Cars, Global, 2023~ |
| Podcast | No |
| WIP Number | PFM2-01-00-00-00 |