2024: Key Trends for Software-defined Vehicles

The Device Chronicle interviews Augustin Friedel, Senior Manager for Mobility Transformation at MHP - a Porsche Company. 

Augustine covers Automotive & Mobility Transformation, Shared Mobility Services, Autonomous Mobility. He is also a leading expert for B2B and B2G mobility services and assists OEMs and tier service providers with business case modeling for mobility platforms and trend and strategy workshops. He worked on the Accelerate 2030 digital transformation strategy at Volkswagen earlier in his career. He is a mechanical engineer by training.

Augustin is well positioned to assess how the various OEMs around the globe are approaching software-defined vehicle (SDV) development and innovation. 

Chapter 1 - Interesting projects in software-defined vehicles

Augustin begins by saying that identifying the most interesting projects is challenging because so much is happening in the industry. “The traditional OEMs have all realized that they need to do something (with software), that there's a gap they need to close.” He cites the recent “Selected Building Blocks of Software-defined Vehicles” provided by MHP as a great market trends overview.  

Credit: MHP - A Porsche Company

Augstin continues to say that it is awe-inspiring to see the level of software development partnerships we have there, such as Stellantis with Amazon. In China, Volkswagen’s CARIAD software unit is investing in partnerships for the SDV such as its infotainment systems development with Thundersoft. If we look at the challenger brands: Tesla, Rivian, Lucid and NIO are leading with innovations. NIO has moved beyond the vehicle; it's like the smartphone, integrating it into one software platform for a more significant impact on the customer. 

Augustin advocates that it is helpful to separate out the layers and technology areas from In-vehicle Infotainment (IVI) and advanced driver assistance system (ADAS) down to the Electrical Electronic (E/E) architecture level. ADAS developments for safer and more comfortable automated driving are the most interesting for customers. Mercedes Benz was the first to be approved to launch level 3 ADAS in production models in the United States, and BMW has partnered with Amazon and Qualcomm with its Snapdragon hardware to develop and deliver its next-generation (ADAS). Also, what's more exciting and innovative is what's happening in China. Information technology brands such as Huawei, synonymous with smartphones or network antennas in Europe or the US, are also leading the pack for ADAS systems in China that go beyond traditional OEMs' capabilities. These kinds of surprising moves and developments are noteworthy.

Chapter 2 - SDV innovation and the 4 US OEMs: Ford, GM, Stellantis, Tesla

Augustin describes how Tesla follows a vertical approach, where they have high levels of in-house value creation linked to the software. Tesla is a different player than GM and Ford. Tesla is leading the pack, not only in the US but it is also setting the pace globally. Also, the most impressive part of Tesla is how they set up their organization and the processes to ship the new releases of software to have a high level of automation. The traditional OEMs like Ford and GM and the European ones would like to understand and see how they could adopt what Tesla has done so well. “If you look towards the two traditional American OEMs, I would also add the Stellantis brands in the U.S. They follow different approaches. All of them have recognized that they need to close the gap and that there is a massive problem that they need to solve.” 

The traditional OEMs (Ford and GM) are trying different approaches. 

Ford has separated their business into three units: 

1. ICE business, where they try to create enough cash to fund the transformation
2. New BEVs and software-defined vehicles in a dedicated unit
3. Commercial vehicle business. 

If you look at GM, they build the SDV infrastructure within the existing organizations and follow platform approaches such as this Ultifi platform. Both GM and Ford are following a horizontal approach, where they work with partners like Google or then also with chip providers for the high-performance compute units, and so on to go the path towards SDV. 

In summary, Augustin says that not everything is perfect for the US OEMs: There have been some hiccups, he notes that GM had to stop the sales of some vehicles because of software issues in December 2023. Still, these OEMs are making impressive progress. MHP surveyed 5000 people globally about which automotive brands from which areas have the capabilities to deliver customer-focused vehicles with new features. A key survey insight is that the image of US auto brands is quite good. They are leading them in terms of the new features they offer today, and what they are capable of providing within the next five years. “If you look at domain experts and media perceptions of the US brands, Ford, Stellantis, and GM have quite a good image regarding innovations and software.” And then, if you look into the traditional brands, what Ford and GM are communicating around the ADAS features with Super Cruise and Ford Blue Cruise is impressing the market and driving confidence. There are also partnerships with Amazon, for example, to provide video content and Amazon Fire TV on the screens in the back of the vehicles. That's linked to good communication, good brand building, and Ford and the GM brands.

Stellantis has a high complexity of brands within the organizational structure, development structure, etc. Its main focus is the US market. Stellantis follows a horizontal partner approach partnering with Amazon, for example. It's quite a challenge, but they're making progress, and that's key. They need partners for that, for software development, for hardware development, for implementation, testing, etc. But there is much optimism that they will make good progress. 

Chapter 3 - SDV innovation and the big 5 European OEMs

Augustine describes how BMW is taking a two-pronged approach to SDV development: the first prong is to close the gap on existing platforms by implementing content services such as BMW i7 with Amazon Fire TV and then enabling the new BMW i5 with ADAS systems. They use Qualcomm compute units to do this. The second prong at BMW is launching the CLAR cluster in 2025. This promises to be a more flexible and cost-efficient cluster architecture. BMW has decided to do everything from scratch. “They want to communicate that it is “our software-defined vehicle” and they're trying to build up that narrative around that.” It will be interesting to see the performance and perception of this new vehicle platform. 

Mercedes is very innovative with its new MB OS software platform, showcased at the CES in Las Vegas this year. “Mercedes is moving quickly and launching the new software platform and architecture with partners like Nvidia and Qualcomm to move them closer towards best-in-class software-defined vehicles.” 

BMW and Mercedes enjoy two clear advantages: One is that they are both premium brands operating in the luxury segment. So then, the prices they can command from customers are generally higher. As a result, they have more room for implementing services based on advanced software and hardware. Two, they are also smaller and less complex than Volkswagen Group or Stellantis and this makes them more nimble. “They often have a single brand they need to maintain and then push towards SDVs. They can move faster because they're smaller and less complex.”

Volkswagen and Stellantis, on the other hand, have a high complexity of brands within the organizational and development structure. So there, if you look at the two groups from the outside, they are progressing with different approaches. Volkswagen has the CARIAD unit that's the core of the SDV movement there. 

Chapter 4 - SDV innovation and the big 3 Japanese and South Korean OEMs

Augustin argues that Honda is something of a “black box” in terms of what and how they are doing in SDV development. Honda recently ended a partnership with GM for developing less expensive next generation vehicles. They wanted to use common software, battery, and EV platforms to decrease costs but this didn’t work out. At CES 202marks4, Honda showcased a vision of a new vehicle generation based on two Saloon and Space Hub vehicle models. Augustin says “They realized that they need to show the market something. It’s unclear how they will progress and if they will now do it alone or with partnerships, it leaves some question marks there". 

If you look at Toyota, we have seen many activities at Toyota last year where they said they need to invest more in software. Regarding software, different vehicles and software have two essential parts. One is all the activities around the re-in software platform development. They build it in-house software platform, comparable to CARIAD at Volkswagen. Second, Toyota has an entity called Woven Planet. It started as an innovation hub, but now Woven Planet has restructured the organization to make it a core part of the SDV development. “Toyota has realized again that there's a gap in their SDV innovation program. They need to do something. And we know Toyota. So if they decide, okay, they do something, they will go all in. I'm also quite optimistic there.”

Hyundai Motor Group operates a house of brands like Hyundai, Kia, and Genesis. This group has made some exciting announcements. Kia is entering the commercial vehicle business and is working on a purpose-built “platform beyond the vehicle platform”, which will be an utterly software-defined vehicle setup. Augustin believes that this will be challenging for Kia but very interesting to follow. 

The broader Hyundai Motor Group has invested heavily in a company called 42 dot in 2023. Augustin states this is becoming the centerpiece of Hynundai’s SDV and ADAS development. At CES, they announced that 42 dot will be in charge of AI development. They announced a partnership with Samsung for high-performance computing chips for vehicles starting in 2025. Overall, the Hyundai Group is doing a lot to accelerate ahead in the market. Hyundai's performance is impressive. The Hyundai and Kia brands are doing quite well across the different markets in Europe and in the US. “The software and UI UX design of the Hyundai infotainment entertainment systems are perceived quite well by customers.” 

Chapter 5 - SDV innovation and the Chinese OEMs

Augustin concludes with an assessment of the Chinese OEMs: BYD commands global scale and has surpassed Tesla in total market share. Geely and SAIC are expanding globally out of China. While SDV is giving these Chinese OEMs differentiation and innovation, it is not the core driver for their market expansion strategy. BYD software is not an industry leading benchmark. Reasonable prices with an excellent price-quality ratio, drive BYD’s expansion strategy. They also have a leading battery technology and pure scale that they have built up in recent years. BYD does realize that software is becoming more critical. At the beginning of this year, they announced that they would invest heavily in software development and ADAS and AI development. So they are becoming one of the global leaders. 

The really strong SDV brands in China are NIO, Xiaopeng, and HiPhi. They participate in the premium and top-of-volume segments there. 

Augustine includes Volvo as part of the Chinese OEM group by virtue of the fact that Geely owns them. “Volvo benefits from the activities around platform software and software-defined vehicles in the Geely group.” Augustine continues to say that when you look into Geely, you see different approaches being taken. They have international brands - Volvo, Polestar, Lotus and Smart - to build credibility. “Geely takes the existing Western brands and uses those brands or the credibility of the brands to build and offer EVs or hybrids in some cases.” But they also focus their growth strategy on developing their Chinese brands such as Zeekr. 

Geely is making three big bets:  One is making their presence felt by leveraging established international brands, two is building up their own brands like Zeekr and using their in-house capabilities in SDV and supply chain sourcing for competitive advantage; and third is partnering with Baidu and other tech players to develop really advanced vehicles based on AI.

Geely has two approaches for SDV development. Volvo Polestar leverages Android automotive, at least for the customer experience. Smart, Lotus and Zeekr leverage solutions developed in-house by Geely. 

For competitive advantage in a very tight global supply chain, Geely has also set up a group supplier called the E-CarX Group for the delivery of components - hardware such as displays and compute units, the software running on the display and infotainment units. Augustine advises to watch out for what E-CarX will do as a components supplier on the international market. “Suppliers like E-CarX will start competing with the traditional European and US tier one suppliers on the parts listed above. This could help differentiate Chinese OEMs versus traditional OEMs from Europe, the US or tier-one suppliers.” 

Geely’s partnership with Baidu is also noteworthy. With Baidu, they have developed the Ji Yue 01 brand, one of the most advanced SDVs on the market, linked into the built-in sensor stack for ADAS features they have.

Augustin concludes by saying that SAIC is not seen as a leader in software-defined vehicles. SAIC is expanding internationally, primarily based on the MG brand which they acquired 10 years ago. And now they are scaling operations in Europe. It's the best-selling Chinese EV brand in Europe at the moment. “SAIC’s differentiator is not software. Instead SAIC focuses on attractive prices and leveraging the established sales organization they have set up over the years.”

Conclusion

Augustin summarizes that the automotive industry and SDV are highly dynamic, with many different initiatives in play across the OEMs and the ecosystem. Tesla is a clear leader in SDV innovation based on vertical integration; Ford, GM, and Stellantis are impressing consumers and analysts alike with their software-centered customer experiences, but there have been some blips along the way with SDV. The exciting opportunities are horizontal partnerships with hyper scalers like Amazon and Google and leveraging advanced AI hardware from Qualcomm and Nvidia for attractive areas such as Level 2 and Level 3 ADAS. BMW and Mercedes are prospering around the latter. The Japanese OEMs are a work in progress for SDVs. Honda's programs are shrouded in mystery. We must not underestimate Toyota. Hyundai has progressed as an SDV company and is impressing global markets with its software systems. The Chinese OEMs feature innovative SDV companies such as NIO, Xiaopeng, and Hi-Phi. Then, the global expanders such as BYD and Geely, who are leveraging supply chain, scale, and a house of Western brands to grow, while SDV innovation is not a primary catalyst for them, is becoming more critical. 

For more reports on the Automotive and smart mobility markets, visit https://www.mhp.com/en/insights/what-we-think/the-software-race-are-chinese-automakers-leading-the-pack-in-the-software-race 

Get in touch with Augustin on LinkedIn or email him on: augustin.friedel@mhp.com