#403

Software-Defined Vehicle:
Organization & Strategies

CONTABLE OF CONTENTS
Introduction

Connected &Autonomous

Executive Summary
The transition towards software-defined vehicles is already providing car makers with many opportunities thatwould not have been possible to capitalize on before the industry’s uptake of new technologies. At the center ofthis innovation is the opportunity to leverage these technologies to shift feature monetization from point-of-sale toafter-sales.

The Basics
Case Studies
AnalysisEmbedding these new experiences into the vehicle, with room to develop and expand them over its lifecycle, will
require a strategic realignment for companies across the industry. Here, OEMs, vehicle brands, and new
automakers will increasingly need to consider the overall ecosystem – understanding how best to adapt theirindividual organizations toward the SDV’s technological promises and stance as a potential ‘third living space’.

Recommendations
Next StepsIn this report, our experts map out the different strategies used to incorporate software-defined vehicles into newvehicle line-ups. In doing so it understands how key industry players are organizing themselves as they prepare for
SDV development, while identifying the products, services, and business models being pursued by stakeholders
today. It likewise highlights the challenges and constraints of SDV development from an organizational perspective.

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#403/Software-Defined Vehicle Organization & Strategies

Key questions answered> How are OEMs, suppliers,> How are these companies
and otherorganizing themselves tosoftware/technology
support software-defined
stakeholders more broadly
vehicle development,incorporating the transition toincluding corporate
software-defined vehicles into
governance, subsidiaries, andtheir broader corporate
regional/distributor entities?
strategies?

> What types of products,services, and businessmodels are stakeholders
pursuing as an outcome of
their transition to softwaredefined vehicles?

This research supports

Product Planners

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Software-Defined Vehicle:Organization and StrategiesContents
Software-Defined Vehicle: Organization and Strategies
Introduction ≫Executive Summary ≫48▪ Jaguar Land Rover▪ Enabling Simplifying Complexity▪ NIO▪ Enabling Revenue Flexibility▪ TeslaNext Steps ≫▪ You and your colleagues struggles▪ New ways of working

Analysis ≫▪ Steps in unison to deliver benefits▪ Delivering Experiences▪ Detailed considerations▪ Information to All & Innovation from All

37106▪ Expert insight▪ How we help – Consulting support▪ How we help – Off-the-shelf Reports▪ FaaS+

The Basics ≫13▪ SDVs: What you need to know

Contact Us ≫110

▪ Empowering, Informed Leadership▪ Transformed Service & Sales Model▪ Software-Defined Vehicles aren’t here yet▪ Deterministic Agile & Smart Choices▪ Benefits of a Software-Defined Vehicle

Case Studies ≫▪ Lifetime Delivery▪ Modular Creation & Ownership17▪ Continuous Twin

▪ Risk Appetite▪ Android Automotive▪ BMW▪ Cariad▪ Ford▪ Harman▪ Mobileye

Recommendations ≫98▪ Enabling Pace & Agility▪ Enabling New Experiences▪ Enabling Owning Own IP
Total number of pages - 110

Introduction

Introduction

Introduction
The transition towards software-defined vehicles is already providing car makers withmany opportunities that would not have been possible to capitalize on before theindustry’s uptake of new technologies. The transition is creating new opportunities forOEMs to break established automotive paradigms (such as ‘Build vs Buy’ or ‘Waterfall vsAgile’) to deliver benefits such as rapid pace of deployment and better customer
experiences.

SectionContent

Bird’s Eye View

In September 2023 (following the release of the Securing theSoftware Defined Vehicle Report), and again in December 2023
(following the release of the Software Defined Vehicle Forecast
Report), this report shall be updated on the SBD Automotive
Portal with an additional ‘Bird’s Eye View’ chapter which pulls out
the key points from across the layers of the Software Defined
Vehicle.

At the center of this innovation is the opportunity to leverage these technologies to shift
feature monetization from point-of-sale to after-sales and requires a strategic realignment
for car makers, which will increasingly need to consider the overall ecosystem and how toadapt their own organizations to fit the new world of ‘a smartphone on wheels’.
Embedding these new experiences into the vehicle, with room to develop and expand
them over its lifecycle, will require a strategic realignment across the industry.

ExecutiveSummary

Consideration of the struggles of today’s ways of working andsteps to take to shift to new ways of working.

The Basics

What do you need to know about Software Defined Vehicles?

Case Studies

Examples from across OEMs and the supply base on today’s stateof the art of organization & strategy to deliver SDVs.

Analysis

Nine paradigms are considered in terms of today’s way of working
and how this spectrum of options will be opened-up with theintroduction of SDVs

OEMs, vehicle brands, and new automakers will increasingly need to consider the overall
ecosystem – understanding how best to adapt their individual organizations toward theSDV’s technological promises and stance as a potential ‘third living space’.
In this report, our experts map out the different strategies used to incorporate softwaredefined vehicles into new vehicle line-ups. In doing so it understands how key industry
players are organizing themselves as they prepare for SDV development, while identifying
the strategies and business models being pursued by stakeholders today. It likewise
highlights the challenges and constraints of SDV development from an organizational
perspective.
Rather than focusing on head-count or reporting hierarchies, SBD’s analysis focuses on
the required culture shifts and a holistic focus on outcomes.

Recommendations

Detailed steps for OEMs and partners to deliver the five key
benefits of a Software Defined Vehicle

66Introduction

External Perspectives
To increase the impact of SBD Automotive’s report on Organization and Strategies for the Software Defined Vehicle, we’ve asked forsome external perspectives from some experts outside of SBD, and have included their viewpoints at times in the report.

Jason Craker – Transformation Director andAutomotive Sector Lead

Jason has significant experience as a hands-on, global CDIO
operating in fast moving, customer focused environments.
He has as a significant interest in how this traditional
industry is transforming into an emerging mobility sector,
addressing the shift to sustainable transport with digital
enabled customer services at its core.
Jason leads Changemaker’s Automotive Practice having
previously been responsible for establishing the global digital
eco-system for Polestar as their Chief Digital Information
Officer.

Many industries and organization haveconsumed extensive effort to deliver Digitaltransformations programs, the Automotive
industry is no different. The major differenceis that the Automotive industry is in theprocess of digitalizing its internal (enterprise),external (customer journey) and also theirproduct (vehicle). Without doubt the mostcomplex transformation being to deliver atrue digital product with the delivery of aSDV. The question is have we got a welldefined and common view of what is a SDV
and what does the future look like...

“7Himanshu Khandelwal - Partner & Managing
Director

Himanshu has over 25 years in management consulting andautomotive industry with a focus on value driven approachto complex transformations in product development,manufacturing, sales, and service. Prior to joining
AlixPartners, Himanshu served as Automotive Partner andManaging Director at EY and IBM Global Business Services.

Shea Burns - Partner

Shea has more than 20 years of experience in management
consulting, engineering, manufacturing, and quality in theglobal light-vehicle, commercial-vehicle, and off-highwayequipment industries. Before joining AlixPartners he wasvice president of consulting at AVL.

A convergence of data-driven experiences, consumers desiring uniqueand personalized services and influenced by subscriptions, the rise ofelectrification, accelerated adoption of ADAS (Advanced Driver
Assistance Systems), AI, cloud computing, and analytics has createda perfect storm that has firmly impacted the automotive sector, withno signs of fading away. While the concept of an SDV has been indevelopment for several years, there has never been a stronger
impetus to propel its advancement. SDV involves the integration ofsoftware systems to control various vehicle functions, including
powertrain, security, safety, connectivity, and infotainment. SDV has
the potential to deliver personalized experiences not only at the pointof sale but also throughout the vehicle's lifespan via software updates.
While SDV offers significant long-term value to customers, OEMs arealso eyeing the potential benefits, such as increasing and retaining
market share, cost reduction through software reuse across multiple
platforms, shorter product development cycles, potential increases inresidual value, and upselling opportunities to drive new revenue
streams. This shift necessitates the collaboration of OEMs, auto
suppliers, technology partners, and other ecosystem stakeholders tofulfill the promises that SDV holds. The shift also forces OEMs to reset
their operating model, organizational boundaries, make vs buy
decisioning, insourcing vs outsourcing, and investment prioritization.

“Florian Rohde – Managing Partner

Florian worked for several years in the "classic" automotive
world at Siemens and Continental before he implemented acontinuous validation concept at Tesla in his role as senior
manager of the vehicle firmware validation.

After Tesla, Florian served as director of system integrationand validation at NIO.
Florian joined iProcess as Managing Partner in 2019 as an
acknowledged SDV expert supporting the industry transition
to the vehicle 4.0.

We are seeing the automotive industry on
the largest quantum leap since electronics
changed cars from a pure mechanicalproduct to an ECU based system. Software
defined vehicles bring so many
opportunities for engineers to shape themobility of the future, yet it requires
adaptation of the players involved, and italso welcomes new players. At iProcess weare working closely with established OEMsand suppliers looking to make thetransition as well as with newcomers
starting their automotive journey.

“7Introduction

Birds Eye View
This report is one of four 2023 reports that look at different layers and enablers of the Software Defined Vehicle. In September
2023, and again in December 2023, the report shall be updated on the SBD Automotive Portal with an additional ‘Bird Eye View’
chapter which pulls out the key points from across the layers of the Software Defined Vehicle.

88Example slides
from the report

NIO

Case Studies

NIO’s battery as a service
The CompanyNIO

When2020

The Approach

Battery as a service – battery rental tocustomers

Overview
Car owners have the option to independently purchase ownership of the vehicle shell without thebattery and then use the battery through a leasing arrangement. In simple terms, it means
treating the battery as an asset and allowing a large number of users to lease it.
Nio’s battery as a service is initiated by the Nio commercial team, the aim is to reduce thethreshold of purchasing a Nio and better interact with the battery swapping service for customers.
Currently, Nio has 30,000+ BaaS customers. The main feature of NIO's BaaS (Battery as aService) model is the joint establishment of a battery asset management company with battery
manufacturers (such as CATL) and financial backers (such as Guotai Junan and Hubei Science andTechnology Investment Group). The battery asset management company is primarily responsible
for the operation and management of battery swapping stations, as well as the recycling of usedbatteries. The responsibility for operating the swapping stations is shifted from theautomotive company to the battery asset management company.
However, customers who chose the BaaS option are concerned of the vehicle residual value as
rarely there will be some buyers to buy the vehicles under the policy.

Achievements• To reduce the threshold of purchasing a car• Flexible battery upgrade options

OEMs
Disruptors

Multi brands OEMs

Partners
Silicon providers

Tier-1

SW integration
providers

Organization
Product planning

UX

Engineering

Marketing

CyberIT

LayersObstacles• Complex collaboration with the financing
company and other stakeholders

Single brand OEMs

Cloud ServicesShared Services

Vehicle Applications

Platform &Middleware

OS & Virtualization

Hardware & E/E• Increase the resale value
Lifecycle
DesignVerifyManufacture

Operation

Launch1010Analysis

Introduction

Chapter Introduction
This chapter introduces the concept of existing Key Automotive Paradigms which
can be unlocked by OEMs and partners as part of their journey to Software
Defined Vehicles.
Each of today’s paradigms is defined and considered in terms of indicative
verbatims one might hear in such a culture or arrangement. Each paradigm gives
a spectrum of options with benefits and challenges in tension. Case studies fromthe previous chapter along with additional examples help to demonstrate thestate of the art of today’s organization and strategies.
OEMs and partners delivering Software Defined Vehicles will continue to have
today’s options into the future, with the addition of breaking up opportunities in
the middle of the spectrum which were previously not possible.
The chapter then attempts to consider the benefits that can be achieved in this‘center space’ and to identify the enablers that should be put into place.
What benefits do the enablers of this chapter deliver?
• Pace & Agility• New Experiences• Owning own IP• Simplifying Complexity• Revenue Flexibility

Option A

Today’s Paradigm

Option B

What to deliver?
Delivering Commodities &Features

Delivering Services

Commercially DefinedCompetitive Products

Innovative Features
through Technologies

Point of Sale

Aftersales

Who will deliver?
Product Delivery

Service Operations

Vehicle Line Leadership

Functional Leadership

Third Party Sales &Service

Dealerless Sales &MaintenanceHow to deliver?
Waterfall

Agile

Insource
Build

Outsource
Buy

On-Vehicle Verification

In-Loop Verification

1111

AnalysisⅼTransformed
Sales & Service

Today’s Paradigm

Huge transformation amongst emerging OEMs
Sales & service are conducted through

Third Parties
established in the market“Advantages

Challenges

Risk-sharing

Costs added

Long-term customer
relationshipWithout Dealers

Difficult to achieve with today’s State of the Art

A car dealership is a business that specializes in selling new or used vehicles to customers.
It serves as a retail location where customers can browse, test drive, and purchasevehicles. Car dealerships often offer additional services such as vehicle financing, tradeins, maintenance, and repairs.

The dealer is the trustedconnection to the end
customer

Sales & service are conducted

Centre Space

being required in the market

Car sales direct to consumers, also known as direct-to-consumer car sales, involve selling
vehicles directly to customers without the traditional involvement of a dealership. In thismodel, automakers or online platforms act as the sellers, allowing customers to purchasevehicles directly from them.

“Dealers are a relic of a past
before the internet
Advantages

Challenges

Lower sales cost

Loosing older target groups

Real Estate needed

Capture, own, & use data tobuild customer relationships

US law prohibiting direct-toconsumer in some states

Sales and service bundle

Large inventories parked

Connection with a younger
target group

No personal consultations

Visual presence

Aging cars on the dealer lot

Direct customer data from
configurators

Hard to upsale

Inventory outsourced

Need to educate dealers
about features

Transparent pricing

No test drives as sales
argument

Personal interaction

OEM has no quality controlof the services provided

Not bound to opening hours

Financing and trade-inchallenges

1212

AnalysisⅼTransformed
Sales & Service

Examples TodayCustomer experience of Sales & Service moving to the OEM
Fixed dealership

Hybrid offering

Transformed
service & sales
model

Outsourced
service

All the services andsales are throughtraditional
dealerships

Customers choose
where to purchase(e.g. online order)
and take service,with options incompetition

Flexible Customer
Relation Management
and parts purchases
between OEMs,
dealer, and service
providers

OEMs outsourced
some service from its
portfolio to 3rd party
companies, whilst
continuing their
responsibility

Directmanagement
channelOEM-operated direct
sales and service forcustomers though inhouse channelsNio power & Nio service
Two important value-added services offered andmanaged directly by Nio. Customers can purchase theseservice via Nio APP directly, including battery swapping,charging van, door-to-door tire service and pick–up
service, etc.

Mobile OEM Units
Ford Explorers are deployed across United States
providing laocal support to customers where Ford own
the customer experience and local dealers provide theparts.

Direct Sales Model
The customer can buy new cars from a dealership oronline straight from the OEM. No mater where thepurchase takes place, there is only one price andnegotiations with the individual dealers aren’t permitted.

Charging Network

Supercharger service is now a significant part of Tesla
Energy, but its original launch, and still driving its KPIs, isas a sales incentive to Tesla owners. Customer
interactions priorities the car, app and website.

1313

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