With rapid technological advancements, the automotive industry is experiencing a significant shift. In particular, the rise of electric vehicles (EVs) has fuelled the expectation among customers for a seamless digital experience. This has led to a transformation in the automotive value chain, shifting from a hardware-centric approach to a software-driven ecosystem.
The future of vehicles will be defined by Software Defined Vehicles (SDVs), where user experience, digital customisation and seamless ecosystem integration will take centre stage, transforming the traditional emphasis on mechanical and electrical engineering.
Every automotive player is adapting to a new software frontier. However, incumbents have to move away from rigid, “Tayloristic” organisational structures to unlock the full potential of creativity, empowerment and responsiveness in the software development process
Elmar Pritsch-Partner Deloitte
While SDVs hold tremendous promise and transformative potential for the future, as with any disruptive technology they also bring their fair share of challenges. From technological hurdles to regulatory frameworks and new structures in the industry, SDVs face a complex path towards widespread adoption. How can automakers, technology players and suppliers break out of rigid organisational structures to reimagine roles and business models?
This report analyses the pivotal position of the key market players, who are currently presented with both opportunities and potential risks. It also explores the significance of fostering cross-industry collaboration, establishing key differentiators and embracing new digital trends such as AI and IoT. These measures are crucial for addressing challenges, driving innovation and fully unlocking the potential of SDVs to achieve a successful transformative revolution in the automotive sector.
Top considerations for industry stakeholders:
Start with an SDV maturity self-assessment and define your vision for the future
Finding a unique value proposition in the software-led evolution of mobility is the first step in positioning the company for future success Assessing the company’s maturity level, including the current state of technology and core architecture, along with identifying key transformation challenges should be a priority for setting realistic targets.
Develop an SDV architecture blueprint
Modularity, scalability and flexibility need to be considered to accommodate future advancements and enable seamless integration of new features and updates in the shortest possible time. Traditional OEMs, who need to transition away from legacy software platforms, can focus on the development of a core architecture blueprint to provide a more efficient framework to scale vehicle software updates.
Identify the right SDV alliance partners
Traditionally, OEMs have struggled with the concept of collaborative partnerships in an ecosystem environment. However, establishing mutually beneficial strategic alliances and partnerships will be essential for success in an SDV future. In fact, these ecosystems can capitalise on the complementary strengths and resources of individual participants to accelerate the development of SDVs. Strong alliances can also generate a broad user base to achieve scale, while the inclusion of diverse stakeholders, such as legal entities and research facilities, can enable SDV ecosystems to navigate a complex and quickly evolving regulatory landscape.
Design a company-wide masterplan with a clear focus on execution
Building on the development of an architecture core blueprint, companies should design a comprehensive change management plan to align cross-functional transformations throughout the organisation. High-performance teams should also be set up with a focus on dedicating resource capacity to innovative future topics.
Embrace the journey toward a software-driven organisation
To succeed in the SDV market, it is crucial to transition into a software-led organisation that emphasises data-driven decision-making in an environment grounded in cross-functional collaboration and knowledge sharing. Companies can shift their organisational focus toward software development by investing in software engineering talent, training and tools. Companies should also adopt agile development methodologies to enable rapid iterations and continuous integration of software over a whole vehicle lifecycle. Lastly, software security and safety measures need to be taken to ensure reliable and compliant operations.
Realise efficiency gains
Breaking down traditional “Tayloristic” structures will result in simpler, faster development cycles, reducing complexity while increasing the potential for reusability. The implementation of new core architectures, AI, agile transformation, partnerships and process restructuring will also help to realise significant efficiency gains. Moreover, portfolio decisions need to be streamlined to focus on business cases that help to secure future viability.
Capitalise on new SDV revenue streams
New SDV-enabled revenue streams are emerging as large amounts of data are generated from increasing vehicle and fleet connectivity. These involve one-time purchases or recurring subscriptions for entertainment or personalisation services, security, mobility as a service and smart infrastructure solutions.
Harald is the Global/DCE/German Automotive Sector Leader. Harald brings more than 20 years of experience advising multinational companies. His work focuses on transformation programs in industrial manufacturing as well as consulting on the increasing digitization and networking of value chains. He has worked for various automotive OEMs and consumer goods industries including sanitary, food, and optical. In addition to Germany, he has also lived and worked in South Korea and Brazil. Before moving on to Deloitte, Harald was a partner for Manufacturing in the European Operations Practice at McKinsey. Since joining our firm in 2015, Harald has led the Operations Practice.
