A Fundamental View of Software for

Vehicles

1 Objective of this document 2

2 Introduction 2
2.1 Value of Software 3
2.2 Challenges for the OEM 4
2.2.1 Disintegrated systems 4
2.2.2 New Operating Models 5
2.2.3 Speed / Agility 5
2.3 Software Landscape 6
3 Drilldown: What is a Software Defined Vehicle? 7
3.1 Vehicle Software - Control 7
3.2 Vehicle Software - Cockpit 8
3.3 Vehicle Software - Communications and Personalization 8
3.4 Mobile applications 8
3.5 Command center 8
3.6 Data analytics 8
3.7 Software Updates on vehicle 9
4 What are the businesses around Vehicle software? 10
4.1 Sample cost of ownership of a car in India 13
4.2 Opportunities for Software driven businesses 14
5 Next steps 14

Authors:
Aravind Doss (https://www.linkedin.com/in/aravinddoss/, https://twitter.com/aceAravind)
Saumil Kapadia (https://www.linkedin.com/in/saumilkapadia88)
Manoj Ashokkumar (https://www.linkedin.com/in/manoj-ashokkumar-mobilenumber9620592990)
Prashant Gupta (https://www.linkedin.com/in/prashantgupta-1986)

1
1 Objective of this document
Software is applied across the automotive industry in numerous aspects. In this document, we
introduce various aspects of software used in EVs and also cover the ecosystem around vehicles which
uses technology and software. This document is to level set on scope / breath of Software Defined
Vehicles. Further developments like AI, ADAS, ECU SW, power management are considered core of the
vehicle drive, not covered in depth here. The document ends with the next steps, which lead to
scoping the TAM, SOM based on the strategy that is yet to be defined for the software unit.

2 Introduction
“Software Defined Vehicles” are changing the automobile industry. “Software Defined” means our
ability to enhance the car features, personalizing the vehicle and to reduce the operating cost.
Software revenue in the automotive sector is projected to be more than $200B market by 2030 (Ref
Stellantis Software day). This review comes from enabling new services, enhancing capabilities and
installing new features to the vehicle. “Software Defined” is the key differentiating factor in a
customer's buying decision.
As an example, Stellantis is bringing in 4500 software engineers together to develop SW experiences
across their brands. They are targeting revenue of €20B by 2030 (€4B by 2026). Similarly,
Volkswagen has assembled all the SW assets across the company’s various brands to build a reusable
platform across product lines. On the Indian OEM front: Tata Motors has a team of less than 50 who
interface with the external agencies where the engineering development work is outsourced to other
software vendors.
Software is spread across many parts of the ecosystem, with value to many stakeholders as shown in
the picture below.

As the diagram depicts, the core is the software on the vehicle. The more information we gather from
the vehicle, the more value added services can be built around it. Largely the software can be
classified into 3 categories
2
 1. On Vehicle: Software that is residing on the vehicle, allowing the customization of the vehicle,
with support from new-age electronics, allows better control of the vehicle.
2. Vehicle Interaction software are the systems needed to interface into the vehicle. These
include the mobile applications that an OEM gives to the user, and all the maintenance systems
the OEM needs to keep the vehicle optimally functioning.
3. Eco system & partners are enabled by a connected vehicle to build additional value add
services. This includes customer facing services like toll services and B2B services like
charging infra management, traffic planning systems, etc.

2.1 Value of Software

The value that a vehicle owner places on software is very subjective. People are used to free apps on
the phone, and hence they expect the same experience to flow into the vehicle without extra costs.
The focus for vehicle software is to improve the experience of the vehicle usage and to reduce the
burdens / costs to the user. Below are a few key examples of software and their associated / perceived
user value.

Customer visible Features Willingness to Pay

Theft Protection Prevent and Notify tow, theft, and any undesired access (ex: teen-control) High

Maintenance / Service Predictive Diagnosis & Maintenance to reduce to the overall service cost High

Buy-back Value Based on usage & maintenance, accurate prediction of vehicle, in High
association with current market rate, supply and demand

Insurance Usage based insurance, product recommendations, extend to cover High

regular cleaning and maintenance.

Energy optimization Improve range by giving realtime suggestion Driving habit Mid
recommendations

Digital Experience Integrate the user’s digital world (calls, music, …) for preparing the Low
vehicle and keep an engaging experience with solutions like Voice
assistant.

The value of this software was usually measured from the perspective of the vehicle owner. However,
the complete ecosystem benefits from the software on the vehicle. There is a fundamental change in
the value of software as it shifts from “revenue at point of sale” to “revenue through the complete
lifecycle”. The vehicle used to be a complete “black box” after point of sale. The result of this “black
box” is”
1. Service quality based on “experience of the mechanic”.
2. Maintenance based on attentiveness of the owner.
3. Root cause analysis was time consuming, and complex.
4. Services offered were a “pull mode” from the owner, limited by the owner's knowledge.
5. Services purchased were not proactive.

In a SDV, there will be continued visibility of the asset through the lifecycle. The paradigm shifts to
how to use the information from the vehicle on an ongoing basis to improve every touchpoint with the
vehicle owner (service, maintenance, add-on, etc.). The OEM is the one creating the software on the
vehicle, so they would think they would have the first right of revenue in all the solutions built in the
ecosystem around the vehicle. This is forcing a great transformation that the OEMs are attempting to
move from a vehicle manufacturer to a vehicle-software-technology solution provider.

3
2.2 Challenges for the OEM
Software development is not natural to the OEMs. To achieve value from software, the OEMs need to
go through transformation in their product development lifecycles and product offerings. The
challenges that OEM’s face, when going through the transformation can be categorized to the below
1. Disintegrated systems: Currently the OEMs are dealing with and developing a fragmented set
of software solutions to build a SDV. They were created by different “Tier-1” suppliers for
each vehicle variant. There are multiple software solutions providing the same features, and
any new features which need to be built on existing features, will need to integrate across
multiple software subsystems, making cost of extension very high.
2. New business models: Software revenues need business models that are not familiar to
existing OEMs. These are beyond Point-of-sale revenues, these require incremental investment
mindset, and packaging of services across the ecosystem.
3. Speed/Agility: Auto Industry OEMs have had a multi-year lifecycle for each vehicle produced.
However, the rate of change of software in the vehicle is very different. Unfortunately, the
OEMs have dealt with software as part of the vehicle qualification, not independently. This is
inadvertently reducing the SW change rate / update rate to that of the rest of the vehicle.

2.2.1 Disintegrated systems

Below is a snapshot of the software ecosystem that a traditional OEM is dealing with. There will be
many parts of these software systems that exist with the OEM’s and they attempt to reuse them to
increase velocity. A new age OEM will implement most of the below solutions inhouse.

Reference: ECS-SRIA 2023

4
2.2.2 New Operating Models
Industry giants like Google and Apple are working to define the software experience in the vehicle.
Google is working on extending their software via Android Automotive OS (AAOS) and Google
Automotive Services (GAS).
As an example, Google is making consistent inroads into the automotive space. They have positioned
consumer products (Android Auto), and Android Automotive OS as an option for the OEM to use to
accelerate their development. They also provide ready to use services via GAS. This is making a
compelling case for OEMs to shift their development to the Android ecosystem. If Google chooses to
build all automotive services, it is likely that it will be positioned as a platform for OEMs and all the
data consumers to cooperate in. This will significantly challenge the opportunity for any other 3rd
party service providers. It remains unclear how the data privacy and monetization models will be
worked between OEMs, service requestors, users and Google.
Amazon has a similar offering via Amazon Web Services.
The big-tech provide a more complete software for OEMs, who integrate into their vehicles. However,
OEMs are unsure of the future implications of relying on big-tech companies. This also threatens
existing established OEMs with loss of revenue opportunity on data, and loss of control of (software)
experience in the vehicle.

OEM 2002 Telematics Partner* Current Technology Partner Cloud Technology Partner

Ford Wingcast ® Redtail ® Google Cloud, Maps, and OS

Lincoln ATX (badged as “TeleAid”) Google Cloud, Maps, and OS

Audi, Volkswagen OnStar ® Mojio Microsoft Cloud, Maps

Toyota, Lexus OnStar ® Twilio Flex Google Cloud, Maps

Honda, Acura OnStar ® Bright Box AWS(?) for Cloud, Maps TBD

GM OnStar ® OnStar ®, Octo ® Microsoft Cloud, Maps

BMW ATX, Cross Country Harman AWS Cloud, Google Maps

Mercedes-Benz ATX (badged as “TeleAid”) Targa Telematics AWS Cloud, Google Maps, Accenture
Dev

Stellantis/FCA - Targa Telematics (Mopar ® AWS Cloud, Google Maps

Connect)

Volvo - Geotab ® Drive + Fleet, Lyxt ® Google for Cloud, maps, and OS

Marelli - Sibros

* 2002 Reference is shown here to show the evolution of the stakeholders

The table above shows such a drastic change in the scope of a technology partner in the last decade,
and hence there is a strong consolidation of technology partnerships.

2.2.3 Speed / Agility

Speed has not been an alien concept to the auto OEMs. They have scaled factories to manufacture
10,000s of vehicles per day, and optimized every task for speed and cost. There have been many

5
efforts to speed up manufacturing. Efficiency has been a focus since Ford’s assembly line was created
in the 1920s, till in the late 1900s when Toyota’s factory efficiency principles were published.
However, when it comes to changes and change management, OEMs have associated “quality” with
“slow”. The change control processes are burdened with no-value-add reviews, stakeholders points-
of-views, etc. This fallout of lack of knowledge of the new tech ecosystem has driven the OEMs out of
phase with the customer’s expectations. Software change control comes with different levels of risks
for different kinds of software, and features. As an example, it takes 48 hours for Tesla to be developed
and be ready to deploy a minor software change. This kind of process doesn't even exist in many
legacy OEMs.

2.3 Software Landscape

With the above challenges, the current state of affairs in SW for OEMs is captured below. The US is the
leader of vehicle software, led by Tesla. Pulsing the US markets gives us a good indication of the rest of
the developed markets. The below is an analysis of the US market

Reference Strategy Analytics

 Customer Choice: Customers can pick and choose packages and bundles best suited to their
needs.
 Streamlined: Customers are given a predetermined feature set, usually at little or no cost.
 Big Bundle: Rich feature sets in bundled packages, but often expensive. Tech-Focused: High
emphasis on advanced features and functionality.
 Tech Focused: High emphasis on features showing the vehicle performance, health, features.
 Safety-Focused: High emphasis on features such as ACN, Live-agent assistance, vehicle
location.
 Convenience-Focused: High emphasis on features such as remote lock/unlock, remote start,
vehicle fuel level, climate controls

In India, the passenger vehicle products are largely focused on Vehicle Security, Passenger Safety and
Vehicle Health.

6
In an open survey conducted (1,078 responses), below are the recommendations for the most
requested features. The features are in 4 categorizes

 Vehicle security use cases (tracking, theft prevention, etc.)

 Vehicle health is about reducing the run cost and cost of servicing.
 Occupant safety such as speeding alerts, Tire pressure monitoring, a more comprehensive
driver assistance solution, easy roadside assistance.
 Convenience features like Navigation, integration of media, phone calls.

3 Drilldown: What is a Software Defined Vehicle?

In this section, we introduce the parts of Software in an automotive system.

In the automotive industry, software plays a crucial role in vehicle design, development, and operation.

3.1 Vehicle Software - Control

In-vehicle software controls the operation and functionality of electric vehicles. It is used to control the
electric motor and transmission, ensuring optimal performance and energy efficiency. The software also
monitors and controls the charging, discharging, and overall health of the EV's battery, to optimize its
performance and longevity. Additionally, in-vehicle software is used to estimate the vehicle's remaining
range, taking into account various factors such as weather, road conditions, and driving style, and to make
the vehicle more connected, efficient.

7
3.2 Vehicle Software - Cockpit
The complete HMI (Human Machine Interface) includes the basic / regulatory mandated instrument cluster
and the further extension into an infotainment system.

- Instrument cluster has the necessary indicators of vehicle status (like speedometer, fuel gauge,
odometer, trip meter, tire pressure), and health indicators (like engine health, faults, issues).

- Infotainment system has optional information like navigation, camera feed and entertainment like
music, radio, themes.

3.3 Vehicle Software - Communications and Personalization

This is a more recent new segment, which allows for the customer to personalize the control and cockpit
software. Personalization is build on a communication stack. This includes the ability to remember the
users preferences, previous settings, customize the vehicle power delivery profiles, and many more
features allow for the vehicle to feel like a “3rd living space” for the user (home and office being other 2).
Features like Over-The-Air updates, cloud communications, analytics, are built on the communications and
updatability of the software.

3.4 Mobile applications

Mobile applications are the primary consumption mode for users. They provide features to monitor the
performance of a vehicle's systems and provide real-time alerts if any issues are detected. It can also be
used to track a driver's behavior and provide feedback on how to improve their driving. It can also be used
to track the location and status of multiple vehicles, making it easier to manage and optimize the
performance of a fleet of vehicles. Additionally, it can be used to ensure compliance with regulations and
industry standards, such as electronic logging devices (ELD) for commercial vehicle compliance, fleet
management, and others. Mobile telematics applications provide a convenient and efficient way to
monitor and manage vehicles.

3.5 Command center

The command center is responsible for real-time monitoring of the entire fleet of vehicles, including their
location, status, and performance. It also aims to proactively identify and resolve any potential problems or
issues that may arise. The command center also enables remote management of vehicle systems, including
updates, upgrades, and maintenance. It also helps in the collection and analysis of data from vehicles to
improve performance, efficiency, and safety. It also facilitates communication with drivers, customers, and
other stakeholders, and coordination with other teams such as customer service, logistics, and
maintenance.

3.6 Data analytics

Automotive data analytics can be used to monitor the performance of a vehicle's systems, such as the
engine, transmission, and battery, and to identify any issues or inefficiencies. It can also be used to predict
when a vehicle will require maintenance, based on data such as mileage, usage patterns, and system
performance. Additionally, automotive data analytics can be used to collect and analyze data from the
vehicle and component testing, providing insights into the performance and durability of different parts
and systems. This can help to identify potential issues early on and make data-driven decisions for
maintenance, repairs, and even new product design, ensuring higher efficiency and safety, and reducing
costs.

8
3.7 Software Updates on vehicle
Software-defined vehicles use software and electronic systems to perform many of their functions and can
be continuously upgraded through over-the-air updates. These updates can improve the vehicle's
efficiency, safety, and convenience for the user. Additionally, the vehicles are pre-embedded with
advanced hardware before standard operating procedures (SOP) and the functions and value of the
hardware will be gradually activated and enhanced via the OTA (Over-The-Air update) systems throughout
the life cycle of the vehicle. This allows for the vehicle to adapt to new technologies and features as they
become available, making the vehicle more capable and useful over time.

Below graph shows the increasing depth of the Vehicle software over time.

Below is a View of all the Technology blocks in a Software Defined Vehicle

9
4 What are the businesses around Vehicle software?
The use of vehicle software has become increasingly important in the modern transportation industry.
With the growing adoption of connected cars, the development of autonomous vehicle technology, and
the need for more efficient and cost-effective energy management in vehicles, to fleet management
across vehicles, businesses are increasingly turning to software solutions to improve their operations
and enhance the experience of their customers. From predictive maintenance to electric vehicle
charging management, the range of businesses that can be created using vehicle software is vast and
constantly evolving. In this context, we will be discussing a few different businesses that can be
created using vehicle software, their potential and the future of these businesses in the below section.
Software skill utilization can be quantified along two dimensions.
1. X-axis: The engagement model can be a “service” on one end and “tech/IP” on the other. The
skills are utilized by OEM customers to build their own solution in the service mode. We employ
our skills in the tech/IP model to design solutions with our own unique IP/know-how that can
be integrated into the OEM's portfolio of products.
2. Y-axis: The offering can be “people” or “product”. On one extreme, the talents can be provided
on need by need base. On the other end of the spectrum, we will provide industry-specific
products and capabilities.

The above diagram captures the variety of opportunities to generate revenue from software in the
automotive industry, and scaling to adjacent industries (like service, support, insurance, etc.)
1. S4 has products built, certified and ready to launch. These would be ready to integrate
“emergency assistance”, “Software update”, “Vehicle Diagnosis” solutions that an OEM can
integrate and start using. These are hosted services that the OEM only uses. Taking an example
“Software Update” solution provided by us, the OEM would need to only give the software
module that needs to be deployed on to the vehicles, and we would manage the rollout to all
the vehicles.
2. S2 has products that will be “built to spec”. These would be similar to what a “Tier-1” would
offer in the automotive industry. The OEM would release requirement specifications / detailed
10
 requirements, and we would build the solution and transfer to the OEM, help integrate it as
needed by the OEM. Developing a custom “Software update” solution that integrates to the
OEM owned servers would be an example.
3. S3 has expertise in specific areas like AI/ML, Battery, energy management, etc. In this segment,
we would focus on building key expertise that we forecast as critical for the industry. These
experts will be high valued people who can help OEMs accelerate their digital journey.
4. S1 has general SW developers, who are integrated into the OEMs SW teams to augment OEM
capacity. These would be developers who have general software development skills in general
development tools/technologies like Java, Azure, AWS, React.JS, Web developer, embedded
developer, etc.
5. S5 are the automotive ecosystem industries which are built around the vehicle which benefits
from the vehicle being more digital. These include services like UBI, Toll management, Road-
side Assistance, and aggregators like GoMechanic, Park+ (Parking solution provider). These
usually have a company specializing in a segment, and they would want to scale from there.
6. S6 are the adjacent industries (beyond automotive) where we can also expand once we
stabilize in the rest of the segments.
The picture below takes a further drill down into the services / solutions offered

S4 Business Examples

Ready Telematics Vehicle health: Reducing the operating cost via predictive maintenance, diagnosis.
services Security: Detecting the theft, tow, fall etc and taking necessary actions
Safety: Enhanced features for occupant safety like, ADAS, fall detection and emergency calling
Convenient services: Increasing user experience and comfort by enabling features like
navigation, calling, streaming music

Testing & Support Test as a service (SIL, HIL, VIL)

Platform for Products All SaaS & PaaS offerings, for example play store and Data as service

Regulatory driven Services like mandatory GPS tracking for commercial vehicles, following AIS (automotive
service industry standards) etc

Integration of value-add The services like toll management, parking management, fleet management which are
services outsourced can be developed inhouse for internal consumption, invoicing

11
S2 Business Category Examples

White labeling Can offer the white labeled products once we have our own version of platform and other
internal value-added services

OEM spec-based Can offer the customized products once we have our own version of platform and other internal
development value-added services

S3 Business Category Examples

Analytics and Data Automotive analytics, Telematics services, Vehicle analytics

Specialized Engineering Specialized engineering services can be offered once we gain experience while developing the
services platform, Battery & motor optimization consulting, Training

Consulting Providing expertise and guidance to companies in the development, deployment, and
optimization of software systems for vehicles.

Business process Helping the organizations in adapting the new era of business processes, for example digital
transformation transformation

AI team AI/ML model developers and trainers who can dive into the OEM’s data lake and help generate
insights, recommendations.

S1 Business Category Examples

Generic Engineering Generic software development, test, and program management services can be offered as soon as
services the talent hiring starts

Training Training of software professionals to enhance their skills in developing cutting-edge vehicle
software solutions for the industry

OEM RFQ based delivery Offering the ready services to customers using the in-house resources

S5 Automotive Ecosystem Examples

solutions

Fleet Management Fleet management system, Navigation and route optimization, Fuel optimization, Vehicle
tracking and recovery, Smart traffic management, Smart Fleet Management, Telematics services.

The global fleet management market size was estimated at USD 22.6 billion in 2021 and it is
expected to hit around USD 55.10 billion by 2030.

Insurance and Safety Vehicle insurance, Driver safety and training, Road-safety solutions, Advanced driver-assistance
systems (ADAS), Automotive Cybersecurity

Indian motor insurance is projected to be ⅓ of $222B (~$75B) by FY26

Link + Link

Mobility and Parking solution, Toll management, Electric vehicle charging management, Smart Parking, Car-
Transportation sharing platforms, Ride-hailing and ride-sharing platforms, Autonomous vehicle services, Smart
City Mobility, Predictive maintenance, Remote vehicle diagnostics, Fuel optimization, Electric
vehicle charging management, Driver safety and training, Advanced driver-assistance systems
(ADAS), Connected car services, Digital footprints, Geo fencing.
The integrated vehicle health management market is estimated to be USD 11.3 billion in 2019
and is projected to reach USD 28.0 billion by 2027. Link

E-commerce and E-commerce delivery solutions, Vehicle rental and leasing, Vehicle-as-a-service
Logistics

Ecosystem offering Platform as a Service (PaaS) can be offered to the market

12
4.1 Sample cost of ownership of a car in India
Below is an example of a 5 year “Total Cost of Ownership” taking a reference of “Maruti Swift VXI”
vehicle. The purchase price is assumed at INR 7,00,000. Beyond the cost of purchase, below is the list of
expenses through the 5 years of ownership.

When estimating the cost of ownership of a car, it is important to consider various factors that can
affect the overall expenses associated with owning the vehicle. These factors include the IDV or the
insured declared value of the car, which is the maximum amount that can be claimed by the car owner
from the insurance company in case of theft or total loss of the vehicle. The fuel cost is another
important factor to consider as it can significantly impact the total cost of ownership over time. The
cost of insurance, which can vary depending on several factors such as the type of car, the age and
driving record of the driver, and the location, is another essential factor to consider.
Other factors that can impact the cost of ownership of a car include the cost of regular servicing and
maintenance, the cost of replacing the tires, the cost of towing or roadside assistance, and the risk of
theft of the vehicle. The mentioned total cost of ownership is estimated over a period of 5 years.
To reduce the cost of ownership, various approaches have been proposed, such as driver analytics,
which can help car owners optimize their driving habits to reduce fuel consumption and improve
safety. Vehicle analytics can help identify potential maintenance issues before they become major
problems, which can save money on repairs in the long run. Predictive maintenance can help predict
when the vehicle may need servicing or repairs, which can help reduce costs associated with
unexpected breakdowns.
Better discounting through telematics data can also help reduce the cost of insurance by providing
more accurate risk assessments based on actual driving data. 100% RSA coverage under a
subscription pack can help reduce the cost of towing or roadside assistance, while theft prevention
through telematics can help reduce the risk of theft and associated costs.
By implementing these approaches, the estimated savings over a 5-year period can be significant, as
seen in the example provided above, where the total cost of ownership was reduced by approximately
18% (around INR 128,771).

13
4.2 Opportunities for Software driven businesses
The global automotive software market in terms of revenue was estimated to be worth $21.7 billion in
2022 and is poised to reach $40.1 billion by 2027, growing at a CAGR of 13.1% from 2022 to 2027.
Link
Reference: Marketsandmarkets.com
Below data is as of Jan '22, used as reference only.
HUGE Market opportunity combining several different market adjacencies across lifecycle
1. After Sales Services/Repair & Spare Parts : $9 Bn industry growing 12% CAGR
2. Usage Based Motor Insurance : $10 Bn market at 11% CAGR
3. Motor Extended Warranty : $37 Bn market by ‘22 at 6% CAGR
4. Assured BuyBack programs & Used Car Market
5. RoadSide Assistance : $1.2 Bn with 4% CAGR
6. Telematics : $200 Bn by 2030

Monetization & Profitability:

1. As an OEM & dealer - given that 70% of market value is derived post-sales through
aftermarket repair, services, parts - this enables us to capture more value across the chain
2. Higher Monetization through revenue generating opportunities on actual sale or Addons
upsold using base Telematics capabilities

Deeper Telematics Adoption: Freemium subscriptions are a major hook in “Connecting the
Mobility landscape” through telematics
1. Ensures wider penetration & customer adoption due to tangible savings & services
2. Data accuracy improves with more users
3. Cross-combination of traffic, accident, user, vehicle data creates a more powerful
4. Ensures that our proprietary Telematics capabilities becomes the dominant norm in India &
the world - by defining the protocols, database, accuracy levels, hardware/software &
reducing costs at scale
5. The efficiency & accuracy improves with scale & ML models utilizing this data for predictions.
If one already has captive access to drivers, OE, OC businesses - it has a greater potential for
optimization & hence leading the industry
6. Adds a unique IP to the core mobility business model that has a higher valuation multiple

5 Next steps
This document introduced the different aspects of Software on and around the vehicles, and the
adjacent ecosystem. It introduced the scale of revenue opportunity. However, the revenue
quantifications are not recent, and the opportunities were global.
To translate this to a business proposal document, we need to take the following next steps:
1. Separate the TAM for consumer and productivity segments, for global and India Region.
2. Update the TAM for each segment.
3. Target specific opportunities in each segment based on the strategy for the company.

14