In recent years, global auto giants have announced one after another that they will evolve from traditional car companies to "software-defined" car companies (e.g., the Volkswagen Group has established its own software development company CARIAD, and Ford is working closely with Panasonic to develop all features of its in-vehicle infotainment system). With the advent of the electric vehicle era, the frequency of returning the car to the dealer for maintenance after it is sold will be drastically reduced, changing the relationship between the car owner and the car manufacturer/dealers, but OTA (over-the-air) technology will keep a certain level of contact between the two parties, either through new feature downloads, free inspections, or over-the-air recalls to update original faulty programs. The software development department can be said to be responsible for providing after-sales service and increasing the subsequent profitability of each vehicle. It can even be interpreted as the frontline unit that brings the relationship between the car owner and the car manufacturer closer (more so than the sales consultants and after-sales service consultants in the dealership). Even though the software development department is crucial to the future automotive industry, how many traditional car manufacturers can really devote their resources to the transformation?! There is no reason other than that software development engineering is not the specialty of traditional car manufacturers. Unlike the power battery, which is a key component of electric vehicles, "software engineering" is a business item that seems to be value-added. How exactly do you calculate the rate of return? It really is difficult for the decision makers of car manufacturers to give a financial analysis report to the board of directors. This is also the current dilemma of the Volkswagen Group's CARIAD in grasping the profit model. Another German auto giant, Mercedes-Benz, announced its cooperation with Nvidia on the development of automotive software two years ago. Maybe this business direction has caused Mercedes-Benz to lose control over software – the soul of future cars – development technology. However, in terms of the company's finances, it is a solid operation that can be "either offensive or defensive". Mercedes-Benz will be launching models with a brand new "soul" one after another starting in 2024, and Nvidia, which controls the development, is no doubt the biggest winner. Not only will it be able to share 40% of the revenue from the sale of Mercedes-Benz self-driving systems, including Drive Pilot, and future OTA upgrades, but other car manufacturers will certainly follow the same model of cooperation with Nvidia in the future. Toyota, the world's largest automotive group, also recognized two years ago that software would eventually outweigh hardware. It has established Woven Core (autonomous driving), Woven Alpha (networking, automotive software development, and high-definition map), and Woven Planet, which controls the above two companies, to carry out independent research and development just like the Volkswagen Group. The R&D results will be applied and verified in Woven City, the future city that broke ground in Shizuoka Prefecture at the beginning of last year.
Traditional car manufacturers are moving in divergent business directions in software development. What about the brain of the car – the automotive chip design business in the semiconductor industry? It is another key technology that car manufacturers can't grasp. Moreover, in terms of state-of-the-art AI chips for autonomous driving and MCUs, both the technology and the production are entirely in the hands of technology majors and chip foundry giants. The tricky part is that it is not something that can be independently developed by investing large sums of money. The design and manufacturing process of chips is already a strategic competition at national security level. Undoubtedly, car manufacturers must cooperate with chip giants on all fronts to ensure that they don't fall behind in automotive technology, and that the supply of chips is stable.
When chip design and software development, two areas car manufacturers do not specialize in, have become the cornerstones of future automotive technology, car manufacturers can hardly call the "brain" and the "soul" of the car 100% theirs anymore. As I've said before, the future auto industry will no longer be the auto industry we know today.