How to master the Transformation of the Automotive Industry

The motto of the 26th Automobil-Elektronik Kongress (AEK) – “The Automotive Industry on its Way to the Software-Defined Car” – already expresses this central theme of change. And so this idea was also found in numerous presentations and lectures.

For example, Joachim Langenwalter (Stellantis): Referring to Stellantis' STLA X platform, the car manufacturer's SVP Engineering said: "Some regard us as a dinosaur, so this (this platform) is a transformation." Suppliers such as Harman Automotive and ZF also see themselves “at the core of a massive transformation” in which they need to find the right way to deal with it.

ZF’s head of development Dirk Walliser presented his company's data and software platform OZEAN as the "heart of our transformation". Christian Sobottka from the Automotive Division of Harman International described the magnitude of this challenge: "Our industry is in a massive transformation," he said in his presentation "Consumer Experiences – Automotive Grade". End customers' view of cars has changed massively, he emphasized. Instead of powertrain, user experience is now the most important criterion for buyers. But "this transformation is not a threat, it is a massive opportunity," the Harman manager explained. Christoph Hartung, head of the Bosch subsidiary ETAS, also saw the upcoming change in the industry as an opportunity. "To sum it up: If we want to drive this transformation, we need to start now," Hartung said in his presentation, on the topic "Let ́s Build an Ecosystem to Enable the Software-defined Vehicle!"

Christof Horn, head of the Automotive & Transformation (sic!) department of the consulting firm Accenture, had placed the transformation topic right at the centre of his presentation. His aim was to present a guideline with practical examples for the ideal change of the industry towards the software-defined car. To this end, he first clarified the magnitude of the task for OEMs and Tier 1 suppliers.

A comparison with the smartphone is obvious, since in connection with the upcoming transformation there is always talk of the "smartphone on wheels," which the software-defined car is supposed to represent. "If you compare it with the smartphone," says Horn, "you realize that the ecosystem of the latter is very mature, it offers many functions and services for free.” – "It is quite conceivable to transfer all this to the car," Horn added. "The question is: how fast are we? The time-to-market is still too long."

20 years of Autosar is a success for the car industry, but a comparison with Android is sobering. "We have (in the car industry) about 60 different operating systems, and they are all incompatible,” Horn reported. “We are still in the process of orchestrating and scaling all that." He noted that Android is scalable, portable (as it is decoupled from the hardware) and efficient to implement (SDKs and test libraries are available), but it is also fast due to its reduced complexity, and it has a broad community. However, with regard to the various operating systems in the development labs of the OEMs there are still numerous aspects to be clarified. For example, it is still unclear whether the industry prefers the use of legacy software or better scalability. Furthermore, it is unclear whether portability or cost optimization will be given priority in the development of this software. In addition, Horn says, OEM-specific frameworks dominate the scene.

Revenue streams resulting from digital car offerings are still too far away, Horn stated. "The truth is: what we deliver to the customer is not attractive enough." These digital revenue streams are not really used intensively by OEMs today, but they will gain importance in the next decade – provided the industry does its homework.

The Accenture expert had compiled a series of transformation tasks from a management point of view that are of great importance for the realization of the software-defined vehicle. A good example are profit pools: "The profit pools we are used to come from technology. OEMs have to learn that success comes from business models as well," Horn warned. “What do we need to control to get there?” Should the car industry position itself more like the big digital corporations? Or like its competitor Tesla, which, as we know, already relies on digital business models to a greater extent? Neither – nor is the expert's advice. "OEMs should choose their relevant checkpoints carefully, and those checkpoints should be consistent," Horn advised. The term “control points” in this context includes assets such as mobility services, vehicles, financing, but also user interface or digital content, to name just a few. In this context, he said, there needs to be a change in the way carmakers look at how they make profits. "All of us think the vehicle is the center of the universe and there are some add-ons circling around it. This is not true anymore.” Horn said. But in redefining the car as a product there is (embedded) perhaps the biggest task in the transformation ahead, he said. Instead of a vehicle with some extras, the industry will sell a "system of systems" in the future.

In the same context falls the redesign of the architecture of the vehicles – not on a technical level, but from a business point of view. According to Horn's analysis, this involves moving from the vertically structured silos prevailing today to a horizontal layering – this is the only way to achieve the necessary scalability. "There is too much legacy," the expert complained. "Building block systems and modular strategies need to be re-evaluated." The same applies to software development in the automotive industry, he said. The familiar waterfall models must be replaced by modern processes such as continuous delivery. Last but not least, development management must be readjusted – from the currently dominant idea of "vehicle first" to "scalability first", is written on his list of homework for a successful transformation. "To bring all this together, we need a kind of master plan," Horn summarized.