SoftwareDefined Vehicles: There’s a new update, darling,

… let’s go!” Software-defined vehicles (SDVs) are basically like smartphones on wheels. But then again not. The automotive industry is just preparing for a brand-new business model.

Cylinders, engine size, cool design. Those are the terms that we used to discuss cars in. Today, it’s not so much the physical features that make out a car – it’s the software. Like smartphones, SDVs (Software Defined Vehicles) evolve from update to update. Overnight and “over-the-air” (OTA), vehicles update themselves, if not already today, then certainly tomorrow.

The main functions and features of an SDV are defined by software control. The vehicles are based on algorithms and IT platforms. The software controls the driving behaviour, the safety functions, the infotainment system that brings video conferencing and YouTube videos to the car’s display – and, in the future, even the car’s appearance. The options for bodywork range from digitally changing colours to varying headlight designs. Those who often drive on dark country roads, for instance, can ramp up their car’s basic light setup via download. This also opens up new perspectives for the used car market, as the buyer is no longer limited to the previous owner’s choice.

The closest we have to a real SDV today are Tesla models, where assistance systems such as Autopilot can be activated via a software update. Mercedes-Benz, Porsche, and Audi also offer the option of activating individual functions after purchase for a fee – from seat heating to matrix lighting, keyless entry, remote diagnostics, and battery pre-heating. In each case, the necessary hardware must already be fitted ex works. Mercedes-Benz rear-wheel steering can already be unlocked to increase from four to ten degrees – if the customer wants to pay for even smoother cornering. And by 2024, 19.5 percent of all cars sold worldwide will be SDVs – that’s 12 million cars! 

Big data in the car

The industry expects new revenue models from SDV. Estimates of how much can be earned by monetising features-on-demand and data over the lifecycle of a car are so high that it is possible to speak of a new business model for car manufacturers. The value chain is expected to be significantly extended, opening the way for carmakers to a data business that adds value to every car sold, which is actualised during its lifetime.

According to an international survey of executives conducted by consulting firm Deloitte in 2024, two-thirds of companies want to use the data they generate to work with third parties to provide personalised and enhanced services to their customers – and generate average annual revenues of up to $720 million over the next five years through monetising services. However, the studies also acknowledge that it may take some time before a sufficient number of monetisation models and pricing strategies are established. In the future, it may be possible to save on development costs by launching only basic models that can be customised into new models according to the driver’s wishes – and which will eventually drive autonomously, which would be the logical end point of the evolution, at least for now.

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