OTA updates open up new revenue streams for automotive OEMs

Market news |
By Christoph Hammerschmidt

A large proportion of car buyers are willing to pay for additional features even after the car has been purchased.

This is the result of a survey conducted by the provider of vehicle software intelligence Aurora Labs together with the market researcher Strategy Analystics. More than 200 experts worldwide from the automotive and supplier industry as well as from the software industry took part in the survey.

The core message of the survey contains good news for vehicle OEMs, as a large proportion of respondents would pay for additional features after buying a car. This means that a large proportion of consumers are willing to pay for upgrades via OTA Update – either as a one-off purchase or as part of a subscription model.

44.4% of respondents would spend up to $20 per month for additional features, with 14% even willing to pay up to $50. These results suggest that consumers are open to new business models that can provide automakers with additional and recurring revenue through software sales. Another finding strengthens this conclusion: 62% of automotive experts expect vehicle manufacturers to generate up to 10% of their revenue by selling additional features via OTA updates as early as model year 2027.

Study: Software increasingly invades business models for car OEMs

The study has further positive news in store for suppliers of electric vehicles: These vehicles are becoming increasingly popular. While 11% of respondents still owned an e-car in 2021, the number has already risen to 15% within one year. In addition, 76 % said they plan to buy an electric car in the future – 38 % even plan to do so within the next three years.

The Automotive Software Survey paints a picture of an industry whose OTA update solutions are becoming increasingly sophisticated. At the same time, automotive manufacturers recognise that they need to work with other companies to overcome the challenges of software-defined vehicles and develop advanced E/E architectures. This is necessary so that OTA updates can be installed ad hoc – the authors of the study assume a time span for downloading and updating the software of ten minutes. However, only 9% of respondents were very confident that car manufacturers will have the necessary software development expertise in-house to develop advanced E/E architectures by 2025 – as many as 48% said they were “somewhat confident” on this issue.

“Having the necessary expertise – in-house or through collaboration with software companies – is critical to providing drivers with an exceptional customer experience. Artificial intelligence enables automakers to significantly improve the quality of vehicle software by ensuring a unique experience and providing deep insights into software behaviour,” says Roger Ordman, EVP Marketing & Business Development at Aurora Labs.

Vehicle software intelligence a prerequisite for efficient software development

Meanwhile, car manufacturers are implementing new standards for type approvals proposed by the World Forum for Harmonisation of Vehicle Regulations (UNECE WP.29). Therefore, the Automotive Software Survey also asked whether the current procedures for regulating and type-approving software updates are sufficient. 84% of respondents believe that a more flexible approach is needed to approve regular and frequent updates.

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“The current type-approval procedures were developed for the regulation of vehicles where the hardware played the most important role, i.e. which were not software-defined. This has become a challenge. Today, software changes more frequently and this can have unintended consequences, unlike changes to hardware. The automotive industry needs new agile Continuous Integration (CI) and Continuous Deployment (CD) processes. These should enable effective regulation that does not stifle innovation while ensuring driver safety,” explains Ian Riches, VP Automotive Practice and Director at Strategy Analytics.

With constantly evolving software come new challenges. In this context, 92% of respondents from the automotive value chain stated that they find it difficult or even very difficult to clearly understand the software dependencies in the development, integration and quality management process. One possible solution for automotive manufacturers may be to rely on partnerships to realise the necessary innovations for the software-defined vehicle. Solutions such as Vehicle Software Intelligence can help automakers understand the software dependencies to ensure a safe driving experience. 85% of experts surveyed also agree that it is important or very important to predict software anomalies, rather than just react to them, to avoid recalls. This, according to the experts, underlines the need for AI-based solutions that provide car manufacturers with deep insights into software behaviour.

Related articles:

Aurora Labs gets funding of $63 million to realise AI in software-defined vehicles

KPIT shifts up a gear in race for software-defined car

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