Automotive Engineering in the Software Era

Deloitte Study: Mastering the interplay between automotive hardware and software engineering

In the automotive industry, software contributes an ever-increasing amount of value. Yet many OEMs and suppliers still lack important capabilities for tackling the new era’s challenges, and development structures need to be transformed to enable the new software paradigm. In a new study Deloitte identifies the ten most important trends and assesses the industry’s software development readiness.

The automotive sector is under unprecedented pressure to adapt, and software engineering plays a central role in this process. Each of the four overarching automotive mega-trends fundamentally involves digital solutions: connectivity, autonomy, sharing, alternative powertrain (CASA). Accordingly, traditional automotive hardware manufacturers have no choice but to transform into software houses. As the study’s authors point out, modern cars already incorporate as much as 100 million lines of code. For the autonomous vehicles of the near future, the number is expected to increase fivefold. In comparison, an airplane contains “only” 10 to 15 million lines of code. 

Advanced development capabilities will be necessary to address other important issues as well. Today, customers and regulators demand from manufacturers a higher degree of responsibility regarding sustainability and security. Software solutions will be critical for OEMs and suppliers if they want to meet such demands. But how well are organizations prepared for these challenges? In order to analyze development trends and assess the industry’s software development readiness, Deloitte conducted twenty in-depth interviews with expert professionals in the field and established a readiness assessment framework. The study identifies capability gaps, provides additional context and offers practical implementation guidelines. 

Automotive software development trends

Which aspects of product development are most important for the sector right now when it comes to software? The study discusses the top ten software trends, ranked according to their relevance:

  1. Importance of software in the vehicle
  2. Decoupling of SW/HW development
  3. Relevance of vehicle lifecycle in the business case (over-the-air updates, OTA)
  4. Software as differentiator with increasing complexity
  5. Importance of artificial intelligence / machine learning (AI/ML) in products and processes
  6. Modular hardware for reusability and complexity reduction
  7. Centralized electrical / electronic (E/E) architecture for high performance electronic control units (ECUs)
  8. Cloud ecosystem as central data hub
  9. Connected services as differentiator
  10. Operating systems for reduced integration efforts

Interview participants were asked to assess the strategic relevance of each trend as well as their organization’s respective development readiness.

Analyzing the results, the study identifies core capabilities necessary to address readiness gaps. These are discussed in five categories:
R&D strategy, product & platform, development process, organization & people, compliance & regulation.

One finding that is particularly striking: suppliers are ahead of OEMs in several areas of software development readiness, likely due to OEMs’ history of outsourcing – including trends such as OTA SW updates, connected services, and cloud ecosystems.


R&D strategy
This category contains one of the most important areas for OEMs, in which they lack readiness and lag behind suppliers: developing a holistic approach to the R&D business case by looking at software-based monetization options throughout the entire vehicle lifecycle – beyond the start of production (SOP). OEMs urgently need to transcend traditional vehicle cost based business cases and open up to the new digital era financially.
Other important areas for improvement are partnership management, followed by technology portfolio management and sustainability strategies. 

Product & platform
Considerable action is required in meeting the evolving product and platform requirements in software development, particularly by OEMs, but also by suppliers.
Possible measures include automated analysis of customer requirements and regular OTA feature rollout. Even more pressing is the need to separate hardware and software architectures, and the introduction of a modular software approach. Furthermore, software-specific quality management needs to extend beyond SOP and cover the whole vehicle lifecycle. 

Development process
This category contains the most serious OEM readiness gaps. They underperform above all in the adoption of agile methods, which are essential for the continuous development, production and maintenance of modern software. Transcending the traditional domain-dependent development approach through SW/HW development decoupling represents another major challenge for OEMs. Further important areas include the introduction of unified toolchains and process assurance.

Organization & people
Software professionals are scarce in the current job market. Therefore, forward-looking talent resource planning and internal training programs are crucial tools for making the workforce fit for the challenges of the software era. New agile roles and an organizational separation of hardware and software teams help to make the most out of existing resources.

Compliance & regulation
Compliance is the category in which OEMs rate highest in terms of readiness, particularly in the area of technical regulation, which will be of major importance going forward (e.g. SOTIF / autonomous driving). Similarly, economic laws and data governance (e.g. UNECE/WP29) are generally managed well. The topic of environmental regulation should be of particular concern for suppliers, as they significantly underperform OEMs in readiness.

Getting ready for the advent of software

Even though some OEMs and suppliers have already started to invest heavily in software capabilities, computing architecture and partnerships, a lot remains to be done according to the study results. As it is critical to act fast to ensure competitiveness, the study presents ten no-regret moves that may be implemented in any case, such as establishing a software board role, updating product development processes (PDP) or setting up cultural change initiatives with the aim of establishing an end-to-end mindset. To find out more about these guidelines, the detailed results of the readiness assessments and additional background information, you can download the comprehensive Deloitte study Automotive Engineering here.

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