It is evident that car makers are going the subscription route with numerous capabilities that will be included with a car depending on the monthly subscription, writes Louis Fourie.
OPINION: Louis Fourie
EACH industrial revolution had a major impact on transportation, progressing from horse-drawn carts to trains and, eventually, cars and planes.
The Fourth Industrial Revolution is no exception, with a change from hardware-defined cars to software-enabled transportation platforms.
As with many other 21st century products, software is transforming the capabilities of our cars. More and more automotive innovations, such as advanced driver-assistance, intuitive infotainment, high-end onboard assistants, automated and self-driving abilities, intelligent body and comfort control, programmable ambient lighting, mapping, car and energy performance, and telematics are software-driven rather than hardware-designed.
Typically, new-generation vehicle software consists of several domains with hundreds of functional components in the car and in the cloud. The various modules, like infotainment, advanced driver assistance system (ADAS) and mapping, are developed by multiple software providers and seamlessly stitched together into a proprietary platform.
But the development also comprises the integration of vehicles with a globally networked, cloud-based system that will be important to ensure downloads of wireless software updates.
New business model
However, this change requires a new subscription business model. For instance, owners of the new Porsche Taycan can pay a subscription of about R168 a month for the remote enablement of the “intelligent range manager,” an over-the-air software update that restricts the maximum speed and fine-tunes the car’s navigation system. Other luxury car makers have decided to implement digital experience choices and upgrades in their flagship vehicles.
Tesla first introduced software-centric innovations, like extending the battery range through over-the-air updates. This has increased the devotion to the brand, as well as increased the value of Tesla shares.
It is evident that car makers are going the subscription route with numerous capabilities that will be included with a car depending on the monthly subscription. However, the subscription path in the auto industry is new and uncertain.
Focus on non-standard features Automakers will have to do the same if they want consumers’ attention. Perhaps the way forward is to focus the software upselling on non-standard features not normally expected in a vehicle, and features that personalise the driving experience.
Huge revenue potential
The digital subscription business model could mean huge business for the auto industry, which, according to Morgan Stanley, can easily be three times a company’s current market capitalisation.
Ford for example could earn an extra R126 billion a year from charging the 75 million Fords on the road R140 per month.
In future, the software-defined dream car will be a customer-centric vehicle personalised with numerous apps and updated like a smartphone. We will see outstanding integration of consumers’ digital life and exceptional intelligent assistance together with innovative technologies such as smart surfaces, holograms, and multi-sensory entertainment experiences.
The main challenge to the the subscription model will entail the reworking of relationships in the supply chain; reskilling the automotive engineering community to deal with more advanced software tools and processes; redesigning the development flow to actively manage security, safety, and integration; and transforming the ways cars are produced. In short, the automotive sector will have to become a software industry.
* Professor Louis Fourie is a technology strategist
– BUSINESS REPORT