Transformation of Mobility : From Classic Cars to Software Defined Vehicle

My first memory of automobiles involves the black-and-yellow Ambassador taxis and blue-and-yellow buses on the roads of Shillong, India in the early 1980s. Some private Ambassadors had lace curtains. Oh, how cool and elegant those were!! In the early 90s, when two cute Maruti 800 taxis were introduced, we considered ourselves lucky if we could get one while visiting my aunt in another part of the hill station. Fast forward to 2024, in Germany, I experience cars from brands like Tesla, Mercedes Benz, BYD, Audi and BMW. These cars go beyond size, power, mileage, and safety. What were once merely means of transportation and status symbols are now transforming into a third living space, the first two being home and office. The entire mobility industry is currently undergoing one of the biggest transformations in the last hundred years. This transformation began when we started calling the "Automotive Industry" the "Mobility Business."

Let’s go back to the 80s. The automobile industry had a very well-defined value chain with clear divisions among distributors, automotive OEMs, Tier-1 and Tier-2 suppliers. Customers were primarily private owners or commercial fleet owners. The supply chains were well-defined, and industrial automation was making manufacturing more efficient and faster. We can call these cars Classical or Vehicle 0.0.

Come the 90s, there was rapid growth in embedded computing power with advancements in semiconductor technologies. The predecessors of the small chips we see today in our mobiles and smartwatches began invading cars as well. There was a rapid growth in electronic control units (ECUs) for key functions like fuel injection systems, brakes, and vehicle safety. We also saw the emergence of basic infotainment services beyond car radios. This was Vehicle 1.0.?

The 2000s saw further advancements where physics and software together enabled the realization of more complex functions. Software began enabling more innovations than ever imagined. Stricter emissions norms, safety norms, and the demand for better user experiences led to the inclusion of electronic stability programs, power steering, and navigation features in many mid-segment cars. In this phase, some subscription-based services and vehicle data-driven business models started emerging, but customers were still primarily retail customers and fleet owners. We can call this phase Vehicle 2.0.?

The period post the 2008 financial crisis saw rapid changes. The equations on the world economy were re-written. The emergence of China as an economic superpower became inevitable. There was a rapid rise of the middle class with higher disposable incomes in countries like China and India, leading to a growing demand for cars with better features. The Nano from Tata Motors, India had already created a new product segment, making cars more affordable. On the technology front, the penetration of the internet and the growth of cloud computing laid the foundation for many new business models, further strengthened by data-driven and artificial intelligence-enabled services. This phase marked the beginning of the shift from the automotive industry to the mobility business. The rules of the game were being re-written, and a new set of players began to emerge. These were technology companies like Google, Apple, and Facebook, aiming to redefine how the mobility business was conducted—from buying and selling to navigating. Talks of autonomous cars began, with technology companies leveraging their software prowess to challenge traditional business models. Another set of new players emerged, like Uber and Baidu. They introduced the concept of shared mobility, further disrupting the market. They offered users an unprecedented experience at a fraction of the cost and without owning a single car.?

Simultaneously, the concepts of manufacturing and after-sales customer engagement were also transforming. Data, connectivity, and artificial intelligence started integrating supply chains, manufacturing and logistics. After-sales services became well-integrated with insurance services. It became possible to have a more personalized car with differentiating features, paid services like maps and emergency support, and continuous Over-The-Air (OTA) updates for those willing to pay. This marked the era of Vehicle 3.0. We are currently in this phase.?

There is another aspect we have not yet touched. Innovations around four mega-trends in mobility —electrification, autonomous driving, shared mobility, and connected mobility — are happening simultaneously, leading to dramatic changes in the mobility landscape. Further amplifying this complexity are industry newcomers or startups, who are not just building top-quality cars but are specifically focusing on the digital-savvy consumer with their “smartphones on wheels”—vehicles equipped with large interactive screens, seamless connectivity, and frequent software updates. Customers now expect new features to be deployed in months, not years.?

At the same time, customers are expressing dissatisfaction because their vehicles lack the features and user-friendliness common in smartphones. Many are left wondering: why can’t my $50,000 car perform the same tasks as my $300 smartphone??

A typical example is Tesla, one of the world’s largest electric vehicle manufacturers. Tesla created a completely new business model enabled by connectivity, software, data, and artificial intelligence. Tesla identifies itself as Tesla.com , like a technology company. Tesla has created a completely new user experience, pushing traditional car manufacturers to rethink their strategies. For an example, traditional vehicle users used to a complex dashboard will be shocked to find a tablet inside the new age vehicles. Today customers can order a special ‘Advanced Driver Assistance (ADAS)’ feature for lane change warning or predictive maintenance or battery-in-the cloud if they are willing have a yearly subscription. What started as simple enabling or disabling of air conditioner has transformed into a completely different entity already. This trend is championed by mobility companies in China, with Shanghai already being hailed as the Silicon Valley for the automotive business.?

However, a reality check is also in order. Fully autonomous driving is still a distant goal. The scaling of electrification is slower than expected and not happening uniformly across all regions. COVID-19 has dealt a severe blow to the mobility sector. The total number of cars being sold every year remains stagnant, but the cost of development and manufacturing is increasing year by year. Mobility companies are looking for solutions to be agile, fast, and differentiating.?

There is a fundamental debate now. Can a car truly be treated like a smartphone? Should a car be controlled by an AI engine in a cloud server located in a different country? Who takes ownership of safety? What about cyber security and personal data protection? Who is responsible when a person dies in a car crash? Each country has its own regulations and safety norms. How can customers’ demand for an outstanding digital experience be balanced with requirements for safety, security, and regulatory compliance??

The debate is on, and that’s driving the idea of Vehicle 4.0 - a Software Defined Vehicle.?

So, what is a Software Defined Vehicle (SDV)? It is a manifestation of the convergence of electrification, high-performance computing, autonomous driving, digital integration, and connectivity that enables new opportunities for creating great customer experiences throughout the vehicle lifecycle, ensuring brand loyalty, opportunities for annual recurring revenue (ARR), and mitigating supply chain risks – all primarily enabled by software. An SDV is a car that’s fully programmable. New features can be developed and deployed within a matter of months, not years, with extra computational capacity for future updates delivered wirelessly. This is a car that keeps getting better, thanks to the continuous delivery of valuable new software features and updates throughout its lifetime. The Automotive DevOps is making fast software development and deployment a reality. An SDV does not undermine safety, security, and regulatory risks while creating a great customer experience.?

The entire mobility industry is working towards SDV collaboratively. As we witness new technological trends like Generative AI (e.g., ChatGPT), the emergence of new geopolitical orders, and severe environmental calamities, it remains to be seen whether this transformation will be a mere blip in the business spectrum or fundamentally change the way we connect and commute – in our third living space!

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References :?

1.???? The Software-Defined Vehicle - Dirk Slama , Achim Nonnenmacher , Thomas Irawan , O'Reilly Media, Inc., 2023