SDV (Software Defined Vehicle)

In 2018 "Software-defined vehicles" became a industry hot topic; in 2019, Volkswagen CEO Herbert Diess said that Volkswagen would become a software-driven car company1 , marking the beginning of software-oriented industrial transformation. Since then, many interpretations of softwaredefined vehicles appeared on the market, including discussions on OTA (Over-The-Air) system construction and self-developed operating systems, as well as detailed analysis of electrical/ electronic architecture and basic software platforms. Based on these interpretations, Deloitte seeks to have a more comprehensive and in-depth understanding: "software-defined vehicles" apparently refers to the state that the quantity and value of software (including electronic hardware2 ) in a vehicle which exceeds that of the mechanical hardware; furthermore, it reflects the gradual transformation of automobiles from highly electromechanical terminals to intelligent, expandable mobile electronic terminals that can be continuously upgraded. To become such intelligent terminals, vehicles are pre-embedded with advanced hardware before standard operating procedures (SOP)—the functions and value of the hardware will be gradually activated and enhanced via the OTA systems throughout the life cycle. 1. Understanding "Software-Defined Vehicles" 1 Source: Volkswagen official website, Christian Senger becomes Brand Board of Management Member for new Digital Car & Services function, https://www. volkswagen-newsroom.com/en/press-releases/christian-senger-becomes-brand-board-of-management-member-for-new-digital-car-and-services-function-4664, February 25, 2019. 2 Electronic hardware includes AI chips, microprocessors, domain controllers, etc. Consequently, the core capabilities of OEMs will shift from mechanical hardware to electronic hardware and software; the industry value chain will also change from one-off hardware sales to continuous software and service premiums. First, software and automotive electronics account for increasingly more vehicle R&D costs. The value of in-vehicle software and electronic hardware is expected to exceed that of hardware to become the core value of a vehicle. Software cost currently accounts for less than 10% of vehicle BOM (Bill of Material) costs, which is expected to increase to 50% by 2030—the software includes application development software, AI algorithms, operating systems, as well as the software-hardware integrated controllers, chips and other electronic hardware. Second, software and the corresponding improvement in performance and functions will determine the differentiation of future vehicles. Software maintenance and upgrading will be the most economical, convenient, and efficient way for future OEMs to provide differentiated experience and improve customer satisfaction. Software iteration will be achieved on the basis of hardware redundancy. Last, enterprises on the industry chain, including OEMs and parts manufacturers, will strengthen their software capability and embark on "software-defined vehicles"-centered internal reform in product development, organizational structure, personnel structure, and operation system. In addition, emerging software companies will capitalize on the software-hardware synergy to satisfy the needs of various upstream and downstream enterprises and become the new Tier-1 companies on the automotive industry chain.