WTF is a 'software-defined vehicle?'

Like any good buzz phrase, “software-defined vehicle” is as straightforward as it is obtuse. If you’re trying to figure out what automakers and suppliers mean by this term — which was all over CES 2024 — you’re in the right place.

A software-defined vehicle is a vehicle defined by software — okay, sorry, I can do better than that. 

The term “software-defined vehicle” (often irritatingly condensed to “SDV”) isn’t new; it gained ground in the mid-to-late 2010s to describe the evolution of cars from mechanical devices to largely software-run devices. Often, automakers and industry watchers compare this transformation to that of the smartphone. You might recall automakers talking about turning your car into a “smartphone on wheels” as far back as 2014 or so.

Why? Ages ago, phones came in many shapes and sizes, with a range of features. Now, they’re all pocketable rectangles differentiated by the underlying operating system and regularly updated software. People who talk about software-defined vehicles argue a similar transformation is happening with cars. That’s why consultants like to say that cars are becoming “smartphones on wheels.” Certainly, this hasn’t happened just yet.

Industry analysts, Tier 1 supplier execs and top leadership at automakers have all told TechCrunch the same thing: The industry is working on it, but most automakers, particularly those in North America and Europe, just aren’t there yet. 

The metaphor is apt, but don’t take it too seriously. For one, the rise of foldables, and the enduring love for mobile keyboards and standalone cameras tell us that software isn’t everything. But more to the point, smartphones aren’t known for longevity; a few years go by and they seem to lag after the latest big update. Automakers, on the other hand, are aiming to create software-defined vehicles that improve over time even as critical hardware ages. Bless their hearts; they have so much to prove.

Software-defined vehicles defined

Let’s start with what it doesn’t mean. It’s not about adding in a touchscreen or a voice assistant.

At its core, a software-defined vehicle is any car, truck or SUV with “capabilities that can be upgraded over time, fundamentally by software, instead of having to change physical parts,” said Gartner automotive analyst Mike Ramsey in a call with TechCrunch.

Another expert offered a similar definition: Software-defined means “you can actually introduce new functions into a vehicle that haven’t been there before,” said Moritz Neukirchner, a senior director at automotive software company Elektrobit. Neukirchner, whose formal title includes the buzz phrase, conceded that software-defined vehicle is an “awfully overused buzzword these days.” He argued that software-defined vehicles aren’t just about updates, “but actually introducing new value into a car.”

Getting to that level of capability, however is where automakers and suppliers have struggled, largely because it requires a complete change in the underlying electronic architecture of the vehicle. 

“Big part of SDV is not necessarily consumer facing,” said Dan Cauchy, who oversees automotive software at the nonprofit Linux Foundation. Instead, Cauchy said a vehicle is software-defined when the underlying tech enables automakers to build, deploy and manage software themselves across multiple car models, whether they’re older, newer, entry- or luxury-level. 

The starting point

According to Stefan Buerkle, who leads cross domain computing at Bosch, a software-defined vehicle has two key elements — the software running in the car and the electronic architecture behind it. 

Today, a well-equipped car has around 100 different electronic control units (ECUs), each with a specific purpose — think: power steering, activating airbags, locking doors and so on. This way of doing things has worked because “you developed it once, you defined the interfaces — who communicates with whom, and in which standard,” said Buerkle. When the electronic systems in the car are working and stable, “you bring it in the field and you sell it for the next five years,” Buerkle explained. “And in those five years, you do the next car.”

That’s business as usual, but the architecture in a software-defined vehicle should be way different, per Buerkle. “It is almost impossible to manage 90 to 100 different ECUs and ensure that when you update the one it still works with the other one,” he said. Instead, a software-defined vehicle needs a “streamlined architecture,” Buerkle said, to bring together all the functions “into one to two maximum ECUs.”

According to Buerkle, that’s how you “turn the car into something as updatable as your smartphone.”

What can software-defined vehicles do?

Already, touchscreens in vehicles are absorbing physical buttons, knobs, switches and dials, but the software-defined vehicle trend is supposed to be more than that. When automakers and analysts use the term, they tend to talk about big wireless software updates that introduce new functionality. The software-defined vehicle also comes up when automakers allude to all the money they hope to make by charging drivers subscription fees (see: BMW’s heated seats fiasco, Ford’s hands-off driving subscription and Rivian’s theoretical augmented reality upcharges).

Ramsey believes firms like GM and Stellantis are looking to Apple’s wildly profitable services business for inspiration. Apple users cough up subscription fees in exchange for everything from music streaming and game downloads to file storage and technical support. If smartphones are any indication, we may see automakers sell, or otherwise enable, a wide range of car-focused subscriptions in the future. Unlike Apple, however, “I do not expect any of those companies will achieve really high levels of revenue and profit from this,” Ramsey cautioned, “But they’ll probably achieve something that will be reasonably profitable,” he said.

This more or less jibes with what Hyundai software boss Chang Song said during the company’s press conference at CES 2024. The executive argued that “cars have evolved beyond their traditional role as a means of transportation. They’re not just for getting around anymore,” he said.

Song added, “We’re talking about cars that will work with your phone’s services for catching a ride or sharing a car, and managing big fleets for businesses.” According to song, “the heart of these solutions is software.”

Can I buy a software-defined vehicle yet?

Companies typically invoke the software-defined vehicle term in a forward-looking and aspirational way. Yet, there are a few automakers that produce software-defined vehicles today. However, that number varies depending on your definition.

Tesla vehicles are software-defined, according to Buerkle, Ramsey and a number of other automotive experts TechCrunch spoke to on the ground at CES 2024. Tesla has the ability to not only add new features via over-the-air software updates, like video games or pothole detection, it also can issue updates that can change how the vehicle performs and even its battery management.

Yet, you could try to argue otherwise. Last we heard, Tesla doesn’t push software to all of its cars at once, nor has it launched an in-car app store — though it appears to be laying the groundwork for one. This doesn’t sound quite like a smartphone on wheels, does it? 

By his own definition, Cauchy estimated that true software-defined vehicles are “maybe a couple of years” away. Neukirchner responded similarly, “I think we’re getting there, but no one is there completely yet.” 

Neukirchner elaborated, “When I look at the core technology, you need to speed up development practices. You need to speed up testing. You need to speed up integration. You need to be able to adapt your business models to this new world.” The Elektrobit director added, however, that he sees “progress throughout the entire supply chain.”

So, maybe it’s just not fully baked. Still, the software-defined trend is clearly underway.

Software-defined profits

Suppliers certainly want in on the software-defined hype. At CES, MotorTrend announced an “awards gala” for software-defined vehicle “innovators,” while LG pitched its “future mobility platform” and in-car displays in an SDV-laden press release. As I wrote this blog, Intel said it bought a chip maker to shore up its automotive business, and BlackBerry announced an audio and acoustics platform for software-defined vehicles. 

Neukirchner highlighted some business use-cases around software-defined vehicles, including fleet management and optimization tools. He also pointed to the role startups can play as automotive suppliers, by selling stuff like cloud-based testing tools, as well as the current limitations of automotive app stores.

“The problem we see these days is we are currently counting 15 different automotive OSes (operating systems) — so in the end,” Neukirchner warned, “you’re going to see quite a bit of fragmentation of that market, and this is something that may hinder success” for third-party software developers.

Is this all bullshit?

Yes and no. The auto industry loves buzzwords and acronyms; godless terms like “infotainment” and “PHEVs” abound. Luckily, the phrase “software-defined vehicles” seems too clunky to catch on beyond press releases and analyst reports. Still, it’s a very real trend behind the scenes.

Automakers are throwing billions of dollars into the software-defined vehicle effort in hopes of getting some return on that investment. Once unique to Tesla, built-in tablets now look pretty ordinary on new car and truck dashboards, and major automakers are gradually embracing over-the-air updates (albeit many have limited capability), driver-assist software and specialized app stores. As CES reminds us each year, basically everything is getting “smart” anyways — phones, TVs, watches, refrigerators and so on. A similar phenomenon is happening with cars, too; it’s just happening slower, in part because cars have way more moving parts than, say, a smart thermostat.

According to Buerkle, drivers’ expectations are changing, but this trend isn’t simply about giving consumers what they want.

As high prices push folks to keep vehicles longer, car companies want to make up for selling fewer cars by charging software subscription fees. GM, for example, wants its services revenue to top $25 billion per year by 2030, while Stellantis set its bar just slightly lower — $22.5 billion by the end of the decade. This isn’t quite Apple territory — the company’s services business brings in about that much in a single quarter. But still, these automakers aim to make a ton of revenue from software and related services.

The real test is whether customers ultimately derive meaningful value from software-defined vehicles, as well as if that value warrants the fees that come along with it.