This article was originally included on Drive.
You’ve heard the stories: Irv Gordon’s Volvo of three million miles; Rachel Weich changes the oil in her Mercury Comet every 3,000 miles sandafter 1964; A 102-year-old man was driving the same car for 82 years. In the world of cars, we think of these rare owners as moral heroes. Whatever their reason – sentimentality? Yankees thrift? Obsessive compulsion? – they have sacrificed the novelty of the new for a lasting relationship. They have won a marathon, most of us do not bother to run.
I’ve been thinking a lot about long-distance car owners as we race for a technological intonation that will turn more than the age-old custom of car ownership. Instead of lovingly maintaining their cars for decades, Rachel Weichs and Irv Gordons of the not-so-distant future – if one still exists – will be forced to trade them for reasons that would be read as science fiction for car buyers in the past. .
In essence, it doesn’t make sense to connect to a vehicle that isn’t actually yours and works with software that someone else controls.
We have seen this coming. For four decades, modern cars – both internal and electric – have evolved from purely mechanical animals to wheeled computing networks. This is just the beginning. new, flexible hardware architectures Previously developed autonomous vehicle technology, together with software ecosystems built on fast connectivity, will enable the next phase of the automotive industry: the transition from a low-margin to high-margin manufacturing business software companies.
The motivation of car manufacturers to do this flashes every day on the NASDAQ. Tesla’s market capitalization, about $ 1 trillion, is now more than the next seven or eight of the world’s leading automakers combined. Technology giant Apple is probably still (even after many failures) is working on effort to produce carsand probably without a traditional partner in the car industry. Behind every manufacturer that fails to process itself as highly scalable, technological and destructive – while maintaining complex, regulated and high stakes. “hell“Car construction work – will be the CEO of the sliders. They, and more importantly, their shareholders, all want such an incredible appreciation that Tesla has.
This is what you would call a megatrend. Apple’s shares have risen in recent years as recurring revenue rose from zero to a quarter of its revenue, and the company plans to integrate subscription services even more widely into its hardware portfolio. In the automotive industry, such a shift from relying on one-off vehicle sales to successive, foreseeable after-sales profits that extend into the future will coincide with the emergence of “software defined car”
Like smartphones, game consoles and smart devices, cars are becoming software platforms and collecting valuable consumer data, giving carmakers a digital pipeline to their customers and allowing them to take advantage of the source of money after purchase. Soon Honda outlined its recurring revenue strategy as a technologically driven transformation of her business. “Honda will strive to transform its business portfolio,” the press release said, “shifting the focus from a one-off hardware sales business to a recurring business in which Honda continues to offer a variety of services and value for money. after-sales customers through Honda Products that combine hardware and software. ”
“It’s (like) the way you can think of your iPhone or Android,” said Alan Wexler, senior vice president of innovation and growth at General Motors. at a conference for electric car investors last yearas reported Detroit Free Press“We work to create experience and services using data in and out of vehicles.”
Wexler has specifically addressed EV, but upcoming internal combustion vehicles will be activated in a similar way. In an environment where the vehicle is just another node in Internet of Things (IoT), long-term car ownership can be cumbersome (or even breach of contract), depending on how the technology evolves. Imagine trying to use an iPhone 5 you bought in 2014 without Apple’s bug fixes and security fixes that it stopped providing in 2017. Now, instead of a phone, imagine a favorite SUV (which you are give a name), which suddenly becomes inconsistent.
Today there are two branches in the history of longevity of car ownership. One is Right to repair a movement that throws ingenious car owners (and more broadly, all kinds of consumer products) against companies that use software to block increasingly complex systems from independent mechanics and DIY technicians. This is a philosophical as well as a legal debate, as physical property rights oppose the limited rights granted through an intellectual property license (ie software). Although the team to rely on their own strength win this round, the industry is not done with them yet. The pressure on automakers to control every aspect of a new, software-focused operating environment will be significant.
The other fork includes vehicles that outlive the technologies that allow their functions. This includes digital aging in general and the recent decline of the 3G cellular network. There are now hundreds of thousands of car owners learning a difficult lesson on the limitations of end-user licenses, as some of the features for which they have paid a premium are literally disappearing in the air, and car manufacturers are not obliged to replace them in kind.
Unlike most goods, where the signing of the dotted line “mufflers“The rights of the seller, while providing them to the buyer, the right to use the software is granted to customers through a license. This long document in small print, along which we scroll and press the “I agree” button, describes exactly how, where and when the client can use some of the software. S 3G case as an example – emphasizing the importance of reading documents for conditions of use be careful – cars join the ranks of devices for which ownership does not guarantee the right to use all functions forever.
The basis of the new, software strategy of automakers is the transformation of functions into software upgradesselling them individually or in packages and install them wirelessly via over-the-air (OTA) updates. GM introduced OTA software updates through its OnStar telematics service in 2009 and is working to expand its offerings around new hardware infrastructure. In 2012, Tesla introduced extensive OTA integration that remains central to the functionality of its EVs, including Total self-government (FSD) software. Since then, more carmakers have released OTA features: BMW is updating its iDrive system wirelessly, and Volkswagen with its ID range of electric vehicles. Ford recently announced its goal of producing 33 million OTA-enabled vehicles by 2028, giving it a huge addressable market for digital products.
According to McKinsey and Company, 95 percent of cars sold in 2030 will have OTA capabilities. With the growth of this area of connected vehicles and with the adaptation of consumers to economics of related vehicles, the market will grow rapidly, with more applications and services coming online and more of the car’s features enabled (or disabled) by OTA. Although, in legal opinionthe courts probably would do not allow manufacturers to deactivate basic functions that affect the planned operation of the car – you know, like a car—Everything else can be a fair game of paid licensing: infotainment apps, comfort options like a heated steering wheel, or maybe even features that determine the dynamic nature of the model, such as horsepower and sports sedan torque, or suspension settings.
As the market evolves and software platform initiatives accelerate, new, shorter-term or flexible ownership schemes that emphasize stable, predictable post-purchase revenues will come into view. Automakers have already begun experimenting with separating ownership from use. There may be subscription services for cars that challenge traditional ownership hit the sliders during the pandemic, but their story is not over. Call it the Netflix model for the car’s features; even if that company has hit its own speed, the metaphor still works. Why should a customer pay once for a car feature when they are more and more used to subscribing to things and you can get a recurring source of revenue from them instead?
Enthusiasts who have owned modern cars for the past 20 years are used to battling aging: buy old laptops and jailbreak diagnostic software from eBay, watch YouTube for lessons on replacing bad capacitors and upgrading degraded modular chips. Will future owners be motivated to do the same with highly software-dependent connected cars? Will cars become more homogeneous as carmakers seek economies of scale or even leave production entirely to Magnas and Foxconns of the world? Will new models of production appear? At least, as with the devices, what lies ahead will set hackers apart from the rest of us.
The only questions left are how far consumers will go go to keep the traditional experience of owning and drivingwhat they will sacrifice to keep it, and when will be the turning point that will begin the widespread acceptance of the subscription, car sharingpartial ownership, shared mobility or other driving payment models?
However, it happens, perhaps paying the best dollar for the harvest, Porsche 911 with air cooling or a 1980 Chevrolet C-10 pickupor staying on this Corvair for another decade or two is not the worst idea. It may just be the best strategy for the future.