OTA upgrades viewed as post-sales revenue generators for automakers
Over-the-air (OTA) software updates are seen by virtually all automakers as a critical avenue to high margin revenue generation.
However, so far, only Tesla has fully exploited the capability for its customers, although others are slowly catching up. These OTA updates will help give automakers the chance to establish a deeper, longer lasting relationship with their customers but it will require companies to rethink business models and the way their vehicles are made.
“Tesla has been doing this for years and that’s because of the way they were set up differently,” said Jefferies analyst Philippe Houchois. “Cars, until recently, were results of layers of technology that were added to the vehicle, whereas Tesla was a complete software driven vehicle from the beginning.”
The multiple computing hardware and software layers of today’s vehicles pose a challenge for automakers looking to move more fully into OTA updates, he said. “When you try to do OTA updates for different functions, you’ve got to get through firewalls and the information gets lost,” he said. “The layering of different apps means the software architecture is just not streamlined.”
In order to keep cars fresher and up to date, software updates will need to move to the fore for automakers, Houchois said. “Potentially, automakers will create their own app store that will be approved by them to sell apps and they will take a cut,” he said. “Either it happens that way, or automakers will purchase the content of the app – that part still needs to be worked out.”
The key point for carmakers is how they will develop and keep a captive customer base, he said. “That’s one of the most interesting changes in the business model,” he explained. “As soon as your car can help you read your email to you or power your house, the function of the car goes up significantly because it’s useful more of the time. That’s one of the most interesting changes in the business model. It’s not just about transport, it’s about much more.”
For Mike Ramsey, analyst with Gartner, the basic answer to the automaker push to OTA updates is cost savings and content generation.
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