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What will be the first big market success for SDVs?

Industry stakeholders weigh in on what will shape early success in the emerging software-defined vehicle market. By Will Girling

Software-defined vehicles (SDVs) have the potential to redefine automotive. From enhanced connectivity and compute power to new driving experiences and business models, mobility is undergoing a substantial merger with the tech industry. Year after year, momentum continues to build, and the global value of SDVs could reach US$1.24tr by 2030—up from US$213.5bn in 2024, according to MarketsandMarkets.

But while the future possibilities seem almost limitless, discussions of promise and potential largely overshadow the near-term commercial reality. As automakers debut concepts and establish release timelines, customers want to know exactly what SDVs are, how the ownership experience differs from older vehicles, and what extra value these products will bring.

Automotive World spoke to stakeholders from across the industry to determine what early SDV market success might look like, how the technology could generate new revenues, and where the challenges still lie.

Spotlight on personalisation

The phrase ‘a smartphone on wheels’ goes back to at least 2011, when Akio Toyoda used it at that year’s Tokyo Motor Show to describe a vehicle with customisable displays. Konstantin Shirokinskiy, Partner at Roland Berger, believes this industry cliché still indicates where SDV developers should channel their efforts. “When consumer expectations from a vehicle are the same as a smartphone—meaning continuous updateability and access to novel features—automakers will have achieved their first big market success.”

In this scenario, SDVs will integrate with a wider digital ecosystem that smooths the transitions between life, travel, work, and fun. Smart devices will create the continuity, with cars providing a liminal space that can entertain and enrich the user as they desire. “The move towards customisable and intuitive interfaces will redefine the way users interact with their vehicles, making them more user-friendly and adaptable to personal preferences,” says Chiara Delporto, Vice President of Sales, SDV and North America, at Marelli. “SDV consumers will notice a revolution in their experience, based on evolved human-machine interfaces.”

The flexibility of SDVs enables [fleet managers] to customise exactly how they operate

Henry Bzeih, Chief Software Officer at Renault Group subsidiary Ampere, notes that advanced personalisation and incorporation of “surprise and delight features” will mark a clear division between SDVs and previous-generation vehicles. Beyond passenger models, Ampere also finds a lot of synergy between software-defined mobility and the commercial segment. The first three models built on its SDV architecture—Trafic, Estafette, and Goelette—will be light commercial vehicles, reflecting Renault’s confidence in this early market for the technology.

Ampere’s centralised software architecture and a connected, intelligent operating system will allow operators and drivers to control, analyse, and upgrade vehicle functions quickly and reliably. Greater access to data across the vehicle also allows for optimal maintenance planning and recharge schedules for electric models. Although perhaps not immediately obvious, Bzeih states that personalisation is still the driving force here: “Every fleet manager has their own rules and way of doing business. The flexibility of SDVs enables them to customise exactly how they operate.”

Is the market ready?

Tesla’s control over in-vehicle hardware and software—particularly its ability to augment system performance using over-the-air updates—indicates what shape a software-defined automotive industry might take. The company’s approach has also generated significant enthusiasm for SDV concepts among other brands—Delporto notes that many OEMs are preparing new software-first vehicle architectures for 2026/27, particularly in China.

But even though automakers have been publicly investing in vehicle software for years, few SDV success stories have materialised so far, according to Mattias Eriksson, President of Blackberry QNX. “Working out the current share of SDVs on the road today depends on how you’re qualifying them, but it’s very small when considering expert definitions and significantly behind the industry’s original plan.”

Back in 2021, brands like Stellantis estimated that SDV activities would generate €4bn (US$4.6bn) in new value by 2026 and €20bn by 2030. However, Shirokinskiy states that expectations of additional recurring revenues associated with SDVs have become increasingly muted among automakers. “I’m not discounting the idea outright, but the unfortunate reality is that we’ve seen a lot of bad examples.” If next-gen personalisation and upgradeability are the segment’s best near-term hope for creating new revenue opportunities, these haven’t been what customers have generally received.

BMW’s subscription for heated seats drew criticism from consumers, who didn’t see it as customisation but charging extra for standard features

Previously, BMW introduced subscriptions for heated seat functionality and Apple CarPlay, both of which were met by a swift backlash from consumers, who felt they were being charged extra for previously free features. Elsewhere, Shirokinskiy relates that software monetisation efforts have failed due to lack of a viable business model, protracted development timelines, and poor feature integration and execution that discourages use. These have led many features that were convenient and profitable in concept to become costly, impractical, and unpopular in reality. “For many, the discussion around SDVs has become one of cost mitigation rather than revenue generation.”

Based on his own observations and conversations with industry players around the world, Eriksson concludes that genuine SDVs are at least five to ten years away from reaching the global market. Although no one has fully met the desire for software-driven personalisation, most companies would agree the opportunity still exists. The challenge is figuring out how to do so in a cost-effective manner while software development, testing, and validation remain expensive. “Customers want new features, but they don’t really want to pay for them beyond free trial periods,” says Shirokinskiy.

Keep it new

So, how can automakers work towards achieving their first big SDV market success? First, Eriksson states, “more work is needed on basic topics like true hardware and software separation, software- and cloud-first principles, truly holistic toolchain integration, and effective orchestration of mixed stacks across the software platform lifecycle.” He notes that the journey will be complex, featuring both technical and non-technical (meaning cultural) aspects, but addressing these foundational issues is necessary for reducing software development costs and delivery timelines.

Delporto agrees, highlighting that the SDV value proposition rests on three elements: zonal architectures to simplify vehicle electronics, decoupled software that isn’t reliant on iterating hardware, and cloud-based digital twin technology for virtual feature development. “From an OEM’s point of view, these innovations allow cost efficiencies and faster time-to-market by reducing the complexity and quantity of hardware required.” Ultimately, increased speed and flexibility from the onset will enable brands to meet consumer expectations more accurately and desirably than before.

In terms of how updateability can then be leveraged most profitably, both Shirokinskiy and Bzeih state that a balance must be struck. A degree of free personalisation must first be standardised to provide a true ‘smartphone on wheels’ experience. Subsequently, a handful of targeted opportunities for monetising novel, differentiating, and impactful features can be explored. Exact strategies for doing so will vary according to brand image and values, such as performance boosts for high-spec models or additional security functions in family cars.

More work is needed on basic topics

Fundamentally, Shirokinskiy concludes, SDV value should be derived from keeping products new, not narrow considerations of personalisation that restrict access to pre-existing features. “The end goal needs to be a vehicle that’s always up-to-date, even years after it was first purchased. When OEMs can deliver on that expectation, I would consider SDVs to be a market success.”

https://www.automotiveworld.com/articles/what-will-be-the-first-big-market-success-for-sdvs/

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