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How software-driven revolution will redefine the automotive industry
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EY-Parthenon India New Age Mobility Partner
Passionate automotive professional with a keen interest in technology and a perpetual learner; A sports enthusiast who can watch NBA games endlessly; Loves spending time with his twin boys and wife
In brief
Current software-related challenges in the automotive industry
Driven by this new demand, OEMs, automotive suppliers, and new entrants are charting their own unique paths to align with the software-driven agenda. However, there is not a straightforward approach for transitioning to software-driven vehicles. One of the key drawbacks is meeting the requirements of running complex software on a vehicle developed with a hardware-first approach and the current distributed vehicle electrical/electronic (E/E) architectures.
A distributed E/E vehicle architecture features several Electronic Control Units (ECUs) distributed across its length, each connected to a network to control various subsystems. A distributed E/E architecture leads to lack of integration, which becomes a fundamental problem when trying to reduce software complexity. Other disadvantages include low compatibility with a centralized software platform, lack of true connectivity, and cybersecurity concerns.
One reason why a distributed architecture is prevalent today is because OEMs typically source black-box systems, running software closely coupled with the hardware components, directly from automotive suppliers. Integrating, updating, and scaling the software of systems sourced from multiple vendors requires a significant development effort.
This also results in the inability to implement true connectivity. Lack of integrated ECUs leads to a complex network of communication protocols between the various ECUs, resulting in higher latency and increased effort and resources expended to connect the multiple ECUs to cloud-based applications and smart infrastructure. Lack of connectivity makes it challenging to continuously develop and improve the software in vehicles through Over-the-Air (OTA) updates.
Distributed E/E architectures in the automotive industry are also prone to higher cybersecurity risks. There are more potential points of entry for malicious actors to exploit. This can make it harder to keep the system updated with the latest security patches, and to detect and respond to security breaches.
Shifting technology landscape
To overcome these challenges, OEMs have significantly increased their budget allocation towards R&D for automotive software, starting with a consolidated and centralized E/E architecture. A consolidated E/E architecture is characterized by a centralized high processing computing unit (HPCU) managing domain-specific and function-specific ECUs connected via high-speed automotive ethernet. This architecture is better suited to cater to cross-functional features that require close integration of components, such as advanced driver systems, vehicle connectivity, and Over-the-Air (OTA) updates.
Consolidated E/E architecture will also allow the development of centralized software platforms. Software platforms allow horizontal integration and abstraction of lower hardware-dependent software layers, enabling development of high-level application software independent of the hardware that it is running on. With the next-generation consolidated vehicle architectures and software platforms, OEMs can also leverage true connectivity, allowing for real-time vehicle connections with surrounding infrastructure (V2I), other vehicles (V2V), cloud computing, faster software updates, etc.
Since there are reduced entry points of attack with a consolidated E/E architecture, cybersecurity risks are minimized. Additionally, a centralized architecture enables an easier rollout of timely security updates to patch vulnerabilities while also allowing for easier implementation of fail-safes and redundancies, further alleviating cybersecurity concerns.
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Resulting shift in the automotive value chain
The transition to SDVs will disrupt the automotive industry across the value chain. With redefined software architectures, the hardware is abstracted away, reducing the barrier to entry for new entrants and disrupting the current value chain.
Traditionally, the relationship of OEM with suppliers is straightforward and hierarchical, with OEMs sourcing and interacting with Tier 1s directly, and Tier 1s acquiring raw material/subcomponents from Tier 2s and 3s. Tier 1s would play the role of integrators. However, with software becoming independent and a key cost driver, OEMs have the option to bypass Tier 1s and directly engage Tier 2s, or pure play software players. To maintain relevance, Tier 1s are repositioning themselves in the value chain by transitioning to Tier 0.5s, who work collaboratively with OEMs, acting as innovation partners across the development lifecycle of a vehicle.
Key takeaways for OEMs and automotive suppliers
To meet consumer demands and capitalize on the software-driven opportunity, OEMs need to invest in developing a consolidated and scalable E/E architectures which would be a key enabler for centralized software platforms, high-speed connectivity, and increased cybersecurity solutions.
With shifting OEM strategies, suppliers and automobile software companies should consolidate their capabilities for in-vehicle software and computing to offer cross-functional products and services that suit SDVs. Overhauling their existing business models, where they manufacture and sell hardware and software products, suppliers will need to closely collaborate with OEMs and provide specialized software engineering management services. To quickly ramp up and scale software capabilities, suppliers must evaluate partnerships, tie-ups, and acquisitions of other companies.
Conclusion
Observing the current market trends, players face the certainty that software will play an ever-larger role in the automobiles of tomorrow. To stay competitive in the market going forward, automotive software will have to be a part of product offerings across the value chain. EY-P’s future mobility team is helping clients navigate the complex strategic decisions required and can help your business be successful in the era of SDVs.
Organizations must consider foundational transformation rather than quick fixes and ad hoc investments to give them the agility to adapt.
How the roles of different players in the automotive software space will shape out in the future is still highly fluid. New entrants, traditional suppliers and automakers are trying to grab a dominant position in this race.
About this article
EY-Parthenon India New Age Mobility Partner
Passionate automotive professional with a keen interest in technology and a perpetual learner; A sports enthusiast who can watch NBA games endlessly; Loves spending time with his twin boys and wife
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EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
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