How Automakers Will Save $35 Billion by 2022 With Over-The-Air Software Updates

Over-the-Air Software Updates Gaining Popularity

Over-the-Air Software Updates Gaining Popularity

Automakers are starting to act like tech firms, as cars increasingly resemble digital devices—and that will save them billions a year. Automakers could save $35 billion by 2022 with Over-the-air software updates, but ruin auto dealerships, after-market parts and tuning companies and under-the-hood tinkerers in the process.

An IHS study predicts that over-the-air software (OTA) updates, which allow automakers to wirelessly improve the car’s performance or make repairs, will save automakers $2.7 billion this year and $35 billion by 2022.

Most of the updates will be to telematics and infotainment systems

Over-the-air software updates will help reduce warranty costs, possibly increase completion rates for software-related recalls, and add features to infotainment systems over a vehicle’s lifetime—all of which should improve customer satisfaction. Another benefit is proper maintenance also improves a car’s resale value.

A Brief History Of Over-the-Air Updates

Over-the-air updates are not new, but they are in their infancy. Tesla, BMW, and Volkswagen are already using over-the-air software updates to improve navigation maps and other features.

Over-the-Air software updates

Over-the-Air software updates

For automakers that use the OTA strategically, it has the potential to not only save money, but to add value. Tesla wirelessly upgraded the software in the Model S to add a number of features, including a location-based air suspension, traffic-based navigation, a calendar that syncs with a driver’s smartphone, remote start, power management, and the ability to “name” your car.

Two Types Of Over-the-Air Updates

There are several kinds of OTA updates, some more complex than others. Over-the-air updates are being adopted at different rates accordingly. There are the over-the-air software updates to infotainment systems and to telematics. The software programs for infotainment systems are relatively small in total memory and there are limited associated safety issues, making this the easiest segment to implement.

Over-the-air software updates to telematics systems, however, are more difficult. They face the challenge of making software compatible with internal combustion engines. There are about 70 different computers in every modern car; each has software to managed.

Over-the-Air software update diagram

Over-the-Air software update diagram

Then, there are the security concerns. The recent hacking of a Jeep Cherokee through its telematics system has highlighted security vulnerabilities as cars add more digital technology. However, auto experts say OTAs are the best way to minimize breaches because vulnerabilities can be repaired quickly. For these reasons telematics software updates done over the air will grow at a much slower rate than software fixes.

By 2022, IHS estimates 160 million vehicles globally will have the capability to upgrade their telematics systems over the air, up from 14.5 million in 2015. Over-the-air infotainment system upgrades will be available in 96.4 million vehicles by 2022, up from about 200,000 in 2015.

Over-the-Air Updates Not Pleasing Everyone

Not everyone is happy with this development though. The move to over-the air updates could fundamentally alter the relationship between dealerships, drivers, and automakers.

Challenges lie ahead for dealers’ service revenue. Dealerships could gradually see their business models upended over the next decade as over-the-air updates become commonplace, thus cutting into dealers’ revenue streams. Up to half of warranty repair issues and recalls are correctable through OTAs, robbing dealers of that revenue.

One dealer put it succinctly. “When it’s daylight savings time and the clock changes, I have customers lining up out the door!” That revenue will disappear for dealers with over-the-air updates.

It’s not in carmakers’ interest to annoy the dealer, but it looks as though a showdown is coming between the automakers and the dealers with over-the-air maintenance.

Over-the-Air software updates threaten under-the-hood tinkerers

Over-the-Air software updates threaten under-the-hood tinkerers

Automakers are taking aim at Gear Heads with over-the-air software updates. You may think you own your car, but tinkering with its software might violate the manufacturer’s copyright. At least that’s what automakers are asserting to the U.S. Copyright Office. They’re referring to the Digital Millennium Copyright Act (DMCA) of 1998 to protect the investment they’ve made in telematics software. Their argument is that a car buyer merely licenses that software code from the automaker and cannot break the security measures walling it off without violating copyright law. Giving car owners freedom to change the code would devalue their intellectual property, in their eyes. This claim could end the American pastime of tinkering under the hood.

Tinkerers, aftermarket repair shops and copyright activists are lobbying for an exemption to the Digital Millennium Copyright Act (DMCA) of 1998 to guarantee car owners the right to alter the software in their vehicles.

The argument that letting people fiddle with their cars compromises copyright laws goes against history: Since the Model T, gear heads have switched out tires and suspension systems, adding turbochargers and other performance boosters. Carmakers have never complained about these “mods” in the past, and in any case there wasn’t much they could do. The rise of new copyright laws, however, has given them additional leverage and they are exercising it.

The Electronic Frontier Foundation argues that automakers are engaging in “copyright creep.” Aftermarket parts-and-tuning is a $35 billion industry, according to Derive Systems, a car-software company that opposes the auto companies on software tinkering. Derive estimates that 60% or more of aftermarket mods require software tuning. In a world in which every device may someday include software, it is essential to preserve the right to tinker.

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About Author

Bill is an Associate Producer at Horsepower Broadcasting as well as our Operations Analyst. He personally oversees most all of the myriad interviews with our automotive celebrity guests. He handles scheduling, contacts, press releases, press passes and everything in between. His keen intellect is awe inspiring and he is a true academician in every sense of the term.

Many of our business related blogs and posts are created and written by him as the business category is what Bill is most familiar with. He has a wide range of interests in business related subjects including marketing, sales, finance, motivation, leadership, banking, technology and leading edge thinking.

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