Reinventing the wheel – how software is driving change in the automotive industry

Reinventing the wheel – how software is driving change in the automotive industry

08 Nov 2023

This informal CPD article, ‘Reinventing the wheel – how software is driving change in the automotive industry‘, was provided by Cambashi, a global market research, industry analysis, consulting & training firm, focused on engineering and industrial software markets.

The automotive industry is undergoing a radical shift that is fundamentally changing how we perceive and interact with vehicles. The once-dominant Internal Combustion Engine (ICE), which powered automobiles for over a century, is gradually giving way to a new era of Electric Vehicles (EVs).

This shift represents more than just a change in propulsion - it embraces sustainability and environmental consciousness. Concerns about climate change and depleting fossil fuel reserves are driving the need for greener and more efficient modes of transportation. EVs have emerged as a promising solution, offering lower emissions, reduced reliance on non-renewable resources and improved energy efficiency. One of the primary consequences of the shift to EVs is the integral role that software plays in the design, manufacture, and operation of a vehicle. Unlike traditional vehicles with mechanical systems largely driven by engines and transmissions, EVs rely heavily on sophisticated software to manage intricate components, such as lithium-ion batteries, electric motors, regenerative braking systems and power distribution units.

The Problem

According to Ford’s CEO, Jim Farley: “It’s so difficult for car companies to get software right. We have about 150 modules across the car, developed by 150 different companies, written in more than 100 different languages, that don’t talk to one another.” Historically, OEMs (Original Equipment Manufacturer) (1) leaned on a familiar model, outsourcing their software needs to tier one suppliers, aiming to secure competitive bids through market-driven competition.

However, software-intensive EVs have altered the industry's landscape. Vehicles are no longer just mechanical entities, but complex software-driven platforms that require seamless integration of hardware and software. As a result, the traditional outsourcing model has encountered limitations in terms of agility, responsiveness, and control over the software development process.

The ecosystem of modern vehicle manufacturing is incredibly intricate. Despite a vehicle carrying a singular manufacturer's logo, its functionalities are carried out by a collection of modules from a diverse range of suppliers who provide their proprietary software and intellectual property, resulting in a decentralized framework. This approach, while fostering diversity, presents a considerable challenge due to the amalgamation of conflicting programming languages and disparate software structures. Consequently, the once straightforward tasks of software have transformed into a development, upkeep, and improvement nightmare.

The Solution

Recognizing the need for greater autonomy and flexibility, an increasing number of automakers are pivoting toward in-house software development. This strategic shift allows them to establish direct control over the design, development, and implementation of critical software components. By developing their own software expertise, OEMs gain the capacity to tailor solutions to their unique needs, accelerate innovation cycles and swiftly adapt to rapidly changing technological trends.

Establishing dedicated teams of software engineers allows automakers to mirror the vertical integration (2) model that has proven successful for players such as Tesla, ensuring greater cohesion between software and vehicle design and ultimately enhancing their competitiveness.

Embracing a model of vertical integration will be a pivotal strategy for legacy automakers aiming to thrive in the EV market. A similar strategy has been implemented by Chinese ICE automakers, who identified EVs as a distinct product category and consequently established separate entities for their EV operations, an approach which has led to remarkable success.

Automakers pivoting toward in-house software development


The transition from outsourced software to in-house development is not without its obstacles, as the industry must now navigate the uncharted waters of attracting and retaining software engineering talent. This transition reflects a seismic shift in the industry's employment landscape, where traditional mechanical engineering expertise must now harmonize with cutting-edge software prowess. The sector now finds itself in direct competition with the tech industry, renowned for its dynamic work environments and the promise of shaping the digital future.

Central to this challenge is the stark contrast in compensation expectations between the two sectors. Software engineers are lured by the siren call of Silicon Valley's tech giants, where six-figure starting salaries, stock options and flexible work arrangements form a compelling package. These enticing offerings often dwarf the more conservative compensation structures historically prevalent within the automotive industry.

As the industry strives to bridge this compensation gap, Chief Financial and HR Officers must work together to form creative new solutions. Some automakers are diversifying their benefits packages, offering perks that cater to a new generation of professionals, such as work-life balance initiatives, hybrid work models and opportunities for cross-disciplinary collaboration. Additionally, partnerships with educational institutions, coding bootcamps and tech accelerators are becoming more prevalent, nurturing a pipeline of skilled software talent tailored to the automotive domain. Moreover, the promise of contributing to sustainable transportation solutions, and having a tangible impact on global challenges, holds intrinsic value that the industry can leverage.

The shift toward in-house software development is a delicate balancing act. On the one hand, automakers recognize the urgency of bringing software expertise in-house, but on the other, the sector must grapple with the realities of its deep-rooted heritage of manufacturing and engineering. Maintaining a mix of traditional workers and new software engineers will be crucial, and retaining traditional industry know-how is still important. Acquiring a skilled software expert does not necessarily translate to expertise in safety-critical systems. For example, it is crucial to avoid a scenario where essential functions, such as deploying airbags, are reliant on cloud-based operations.

We hope this article was helpful. For more information from Cambashi, please visit their CPD Member Directory page. Alternatively, you can go to the CPD Industry Hubs for more articles, courses and events relevant to your Continuing Professional Development requirements.





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