Over the next 7 years, cars with software-enabled features will triple OEM revenues and double the market for automotive software and electronics suppliers.
The automotive world continues its transformation path, thanks to the transition from internal combustion engines to electric vehicles (EV), as well as the transition to increasingly complex and software-based systems. In fact, today we see how the boundary is increasingly blurred between two completely different industries, the automotive industry and the technological one, determining the most challenging transformation of the last hundred years for the sector.
Boston Consulting Group (BCG), in collaboration with the World Economic Forum, has closely studied the work of automotive, new mobility and technology leaders around the world by launching the Automotive in the Software-Driven Era initiative to encourage collaboration between different companies and between public and private. This project allowed BCG and WEF to measure the extent of the change affecting the sector today, the results of which are contained in the new report Rewriting the Rules of Software-Defined Vehicles.
Software Defined Vehicles (SDVs) , now in their infancy, will continue to evolve over the next decade, creating a potential value of more than $650 billion for the automotive industry by 2030, or 15% to 20% of its total value. In fact, OEM revenues from the automotive software and electronics sector will grow almost threefold between now and 2030, going from the current 87 billion dollars to 248 billion dollars. Automotive software and electronics suppliers will also see their market double from $236 billion to $411 billion.
“Software revenues in the coming years will depend on the degree of digital experience in driving compared to mechanical driving. In the coming years it will in fact be possible to update the vehicle or purchase packages for higher performance through subscriptions, improving the experience and without having to intervene on the hardware. Not only a way to make the models last longer, but also to give the customer the feeling of always having a new car, completely changing the paradigm of the sector.” Says Giuseppe Collino , Managing Director and Partner of BCG.
“The software component in cars will be increasingly crucial, but to make the leap in quality, various elements will be needed: from the vehicle, to the computational capacity, to the basic software, to the ability to update and connect remotely to a partnership ecosystem. All this is currently still complex, if not impossible, for traditional car manufacturers. On the other side we have the tech players, who in turn clash with the complexity of making cars, the “production hell” that Elon Musk talks about. The two souls must therefore coexist, for this reason it will be essential to start the right collaborations.” Collino concludes.
The 5 key elements of the SDV market that players will have to take into consideration are:
- To unlock the growth of SDVs, still obscured by the complexities related to their development, the different industries will have to collaborate in order to gain market volumes.
- The collaboration must start from a taxonomy of technologies that is common across the different industries.
- It will then be necessary to align the different sectors through the development of interoperable platforms, which will drive the profitability of the sector.
- Each geographical area has different speeds of innovation, different uses by users and different regulations, so it will be important to create collaboration clusters at a local level.
- To operate in a collaboration-oriented market, companies must develop their internal and external collaboration capabilities and include them in their operating model.
