The current economic environment has made affordability one of the hottest topics in the automotive sector. Most headlines have focused on the pain felt by consumers, who between January 2021 and January 2022 saw new-vehicle prices increase 12.8% and used-vehicle prices jump 40.5%. Remarkably, manufacturers have borne an even greater burden. From March 2020 to May 2022, raw-material costs for ICE vehicles rose 106%, while EV costs skyrocketed 144% during the same period. While the supply chain issues are now slowly coming to an end and showrooms are filling with new models, interest rates have raced to more than 7 percent for new-car financing and more than 11 percent for used cars, bringing the average US car payment in Q3 to $700+, an unprecedented level.
Whether viewing this data through a consumer or manufacturer lens, these increases have far exceeded the pace of income growth. Creating vehicles in affordable segments has always been critical. Many global OEMs have successful offerings in entry segments B and C, typically priced below $30,000. Moving to EV, creating an all-electric vehicle for less than $25,000 remains difficult as battery costs escalate alongside consumers’ high range expectations. Now more than ever, maintaining affordability is a key motivator – and a key challenge.
From an engineering standpoint, two main solutions enable OEMs to successfully address affordability. First is enabling the transition to a widely available network of charge point solutions. Inherently embedded into policy and governance programs, this should include a strong stimulus for EV home charging and a dense mesh of metro, urban and long-distance fast-charging solutions leveraging 800 volt DC rapid-charge platforms.
The second solution is to create a sustainable digital product as quickly as possible that can be updated for at least 10 years. Such digitally “evergreen” cars have higher residual values, leading to lower car-finance rates and improved affordability. In addition, features on demand allow OEMs to flexibly address the unique needs of different owners during the vehicle’s lifecycle, to the point where perhaps even the paint color can be changed using “digital ink,” as envisioned by BMW at CES 2022.
Automotive manufacturers strive to balance innovation, safety and affordability. Safety regulations in most countries have mandated the use of advanced drivers assistance solutions (ADAS), meaning new cars have a required minimum set of such digital assistants and their respective sensors built in. Carmakers now increasingly consolidate the vehicle software for ADAS and digital cockpit on a high-performance computer (HPC) as a central computer platform in each vehicle. These platforms are built to the same principles as modern cloud-native platforms, allowing continuous delivery of new software in containerized microservices.
As part of a proactive model, more and more OEMs take a bolder step to “overprovision” the computer hardware in their cars. The result is a car that has room for software to grow over time, as more features and functionalities get developed and delivered via over-the-air updates. This has never been the case in this industry, though it has been the norm for decades in personal and enterprise computing.
The new breed of vehicle HPC will allow increasingly sophisticated services, such as the use of AI in the car to better understand user intent, and contribute to improving the use of batteries or ADAS solutions by learning from daily use. The use of cloud services like those in Wipro’s Cloud Car ecosystem further allows software over time to leverage cloud’s near-infinite scalability to deliver new features and functionalities that will be created over time.
Using the cloud to create a long-term scalable vehicle computer platform serves the mutual interests of owners and manufacturers. Ideally one would never have to trade a car in order to get a better set of electronics.
Such a platform enables manufacturers to deploy a car that gets better every day. And by rolling out new infotainment features, safety features and core functionality updates without costly recalls, they will again discover cost improvements and potential revenue gains through new business models.
Software is a key component of the modern automobile, and it will grow even more important over time. While manufacturers often view software as an enabler of innovative features and new revenue streams, it can also play a key role in reducing costs. Considering the importance that consumers and manufacturers alike put on affordability, these software-defined contributions cannot be overlooked.