Digital Automotive – Update issues

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A 238,000 recall that should cost nothing.

• Daimler has been ordered to recall 238,000 vehicles to fix engine control software that is related to the VW emissions scandal from 2015 which further highlights the importance of enabling over the air software updates.
• There is a good chance that the recall will be expanded to other EU states meaning a recall of up to 774,000 vehicles.
• Although there is no admission of wrong doing on Daimler’s part, the recall will still cost around $100m.
• Commentators see this as a good outcome for Daimler as they expected much worse, but I see no reason why this recall should have costed anything at all.
• Vehicles are increasingly becoming computerised meaning that the real control points in these vehicles is in software rather than hardware.
• This means that very much like desktop PCs, most of the problems will be software related with only a small percentage being related to hardware.
• Furthermore, software can also be used to determine performance of the vehicle as well as deliver new features without the vehicle ever having to go near the dealership.
• This is something that Tesla does very well and it represents an incremental revenue opportunity as well as the possibility to reduce costs.
• Typically, vehicles are sold with a range of optional extras, a number of which could be enabled through software.
• An example of this could be heated seats.
• The vehicle maker could put heating into every seat that it makes for a certain model but only when paid for as an upgrade is the feature enabled.
• This would reduce costs as only one type of seat would need to be designed and made and it would also improve the user experience by the user being able to purchase the option at a later date if required.
• In the case of this recall, Daimler should be able to redesign the software as required and then simply push the update to all of the affected vehicles at almost zero cost.
• The number of recalls for software related issues is only going to increase over time and given the uncertain outlook that the OEMs face, everything to reduce costs and increase differentiation needs to be done.
• Part of the problem is that the user would need to opt-in to over-the-air updates but I think that this is reasonably easy to achieve simply by offering the right incentives (free features) when the vehicle is sold.
• The net result is that automakers should be prioritising the enablement of over-the-air software updates but, as ever, progress is slow.
• I still think that the OEMs have a window of opportunity to make the most of the critical digital sensor data that the vehicle generates.
• This data could become the enabler of a range of unique digital services that could be used to replace revenues lost from weakening vehicle shipments.
• The digital ecosystems have also come to this realisation and have a much better idea of what to do with this data although they have been unable to get their hands on it yet.
• This is why the OEMs need to move quickly before the digital ecosystems work out how to circumvent them turning them into handsets on wheels.