Industry set to see cost savings of $35 Billion in 2022, new
report finds
While quite common in smartphones and personal computers, remote
over-the-air (OTA) software updates are still only in their infancy
in the automotive space, according to a new report from IHS
Automotive, the leading global source of critical information and
insight to the automotive industry and part of IHS Inc. (NYSE:
IHS).
The report finds that over-the-air (OTA) software updates will
eventually be a big boon for the automotive industry due to their
capacity to reduce warranty costs, potentially increase overall
completion rates for software-related recalls, improve customer
satisfaction by eliminating trips to the dealership for software
upgrades or fixes, and provide the ability to upgrade functionality
and add features to automotive infotainment systems over a
vehicle’s lifetime.
According to IHS Automotive estimates, total worldwide OEM cost
savings from OTA software update events will grow from $2.7 billion
in 2015 (primarily from savings related to updating telematics
systems) to more than $35 billion in 2022 (with telematics and
infotainment system updates comprising most of the savings).
“It is clear that OEM cost savings from OTA software updates
will be the most valuable part of this technology—by far,” said
Egil Juliussen, Ph.D., director and principal analyst, automotive
technology at IHS Automotive, and one of the report’s
co-authors.
IHS segmentation for remote over-the-air software updates (SOTA)
or firmware over-the-air (FOTA) updates include multiple OTA
segments: Map SOTA, Apps SOTA, Infotainment SOTA, Telematics
Control Unit (TCU) FOTA and Electronic Control Unit (ECU) FOTA.
Japanese OEMs have been pioneers in navigation map updates in
Japan via their telematics systems. BMW, VW and Tesla have all
recently announced OTA procedures for updating navigation maps.
Hyundai and Ford both have proof of concept systems for OTA map
updates, and will also likely deploy such systems in the near term.
Total vehicles in operations that are enabled with map OTA updates
are projected to grow from approximately 1.2 million units in 2015
to nearly 32 million units by 2022, according to IHS forecasts.
App OTA updates are embedded applications or feature-driven
software that is part of infotainment systems such as head-units or
telematics systems. This segment is furthest along, with remote
software upgrades having been available for several years. The
software programs are relatively small in total memory and there
are limited associated safety issues; therefore, it is the easiest
segment to implement.
Toyota is a leader in this segment using Nuance Dragon Drive,
which Nuance acquired from UIEvolution. Both FCA and Nissan have
OTA platforms for app updates. IHS expects all major OEMs to
introduce app OTA updates by 2019. App OTA update-enabled vehicles
in operation total approximately nearly 3 million vehicles in 2015;
by 2022, IHS expects that to increase to 53.8 million vehicles.
Infotainment software OTA updates are more complex than software
app updates because the programs can be quite large—especially if
parts of the OS software need to be updated. Large infotainment
software OTA updates may occur over Wi-Fi rather than through LTE
4G service due to mobile network limitations. This category is
emerging and will be a growth segment in the next five years, with
players like Ford, Chrysler and GM expected to adopt these systems.
Infotainment software updates, such as updates to the infotainment
OS and user interface, will grow quickly over the next six years,
starting from just over 200,000 units in 2015. According to IHS
estimates, vehicles equipped with infotainment software OTA
capabilities will increase to more than 96.4 million enabled
vehicles by 2022.
Telematics control units (TCU) software OTA updates are
currently being implemented via telematics systems. OnStar has been
updating its latest telematics systems in this manner. Verizon
telematics-based systems also have OTA capabilities as this was a
core feature in Hughes Telematics’ system architecture that Verizon
acquired in mid-2012.
IHS Automotive believes Mercedes-Benz has started using OTA in
its latest telematics systems. Other OEMs using Verizon telematics
systems are likely to deploy OTA in the near future. The companies
using embedded app updates are also expected to have TCU updates,
as a tethered smartphone can be used as a telematics system. TCU
OTA updates is the largest segment in this industry: IHS forecasts
nearly 14.5 million TCU OTA enabled vehicles will be on the road in
2015, with an estimated total of nearly 160 million vehicles on the
road with TCU OTA capabilities by 2022.
Deployment for OTA updates in the core electronic control unit
(ECU) segment is rare and only Tesla has publicly said it is
updating core auto ECUs. Tesla has designed its system and ECU
architecture with experienced staff from the PC and consumer
electronics (CE) industries and has included OTA features in the
basic design. It certainly helped that Tesla did not have legacy
systems and could start the system architecture with a clean sheet.
IHS predicts that there will be about 86,000 vehicles on the road
by the end of 2015 with core ECU OTA update support. That is very
low but is expected to grow to approximately 25.7 million vehicles
in total by 2022.
“Software expertise is becoming a core competency for auto OEMs
and it starts with a good software platform strategy, followed by
strong software development and execution," said Colin Bird, senior
analyst of software, apps and services at IHS Automotive. “The OEMs
that use software platforms most effectively will be able to save
development, maintenance and other costs and will use more reliable
software code. In fact, OTA updates have the ability to
fundamentally transform the sales and customer retention models for
OEMs by allowing these companies to maintain their relationship
with customers directly throughout the lifecycle of ownership.”
Expanded OEM software expertise could have a significant impact
on sales retention, customer satisfaction, brand equity and on
franchise dealer networks. However, IHS anticipates the ramp up to
firmware over-the-air recall based fixes (the service segment in
which car dealers could lose substantial revenue) will be slow,
giving car dealers and OEMs time to adjust their business
models.
####
About IHS Automotive
(www.ihs.com/automotive)
IHS Automotive, part of IHS Inc. (NYSE: IHS), offers clients the
most comprehensive content and deepest expertise and insight on the
automotive industry available anywhere in the world today. With the
integration of Polk in 2013, IHS Automotive provides expertise and
predictive insight across the entire automotive value chain from
product inception—across design and production—to the sales and
marketing efforts used to maximize potential in the marketplace. No
other source provides a more complete picture of the global
automotive industry. IHS is the leading source of information,
insight and analytics in critical areas that shape today’s business
landscape. IHS has been in business since 1959 and became a
publicly traded company on the New York Stock Exchange in 2005.
Headquartered in Englewood, Colorado, USA, IHS is committed to
sustainable, profitable growth and employs about 8,800 people in 32
countries around the world.
IHS is a registered trademark of IHS Inc. All other company and
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IHS Inc. All rights reserved.
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