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Tuesday, March 29, 2016

New Automobile Software Upgrade Market Opportunities

As the Software Over-the-Air (SOTA)-enabled vehicles market gains momentum, ABI Research forecasts that 203 million OTA-enabled cars will ship by 2022. Both SOTA and Firmware Over-the-Air (FOTA) will see a spike, with nearly 180 million new cars supporting SOTA and 22 million FOTA by 2022.

Beyond Tesla, car OEMs will primarily focus the next three to five years on SOTA versus the still nascent FOTA upgrade. Moreover, the majority of new vehicles will include computer software that will require periodic updates.

"Three factors changed the course of the automotive industry and paved the way for the future of OTA: recall cost, Tesla’s success as the foundation of autonomous driving, and security risks based on software complexities," said Susan Beardslee, senior analyst at ABI Research.

It is a welcome transformation, according to the ABI assessment, as OTA is the only way to accomplish secure management of all connected car software in a seamless, comprehensive, and fully integrated manner.

Emerging OTA Technology Applications

OTA can positively change the car recall process. In the past two years, the recall rate increased to approximately 46 percent with four major car OEMs setting aside a combined $20 billion during the course of 2015 in warranty reserves.

Though not all vehicle recalls can be fixed via an OTA update, ABI market analysis suggests that close to one-third of last year’s recalls could have been addressed over the air, saving car OEMs at least $6 billion.

As the level of vehicle autonomy accelerates, cyber security concerns will become increasingly critical. To address cyber security risks that stem from software upgrades, ABI anticipates the automotive industry will begin to see more mergers and acquisitions over the next two years, as car OEMs emphasize the value of software management solutions.

"Movimento, in particular, is a huge acquisition opportunity," continues Beardslee. "One of the leading software management vendors in the automotive industry, Movimento reflashes more than 3 million vehicles per year and can detect and delete cyber attacks within 10 milliseconds."

But this industry change is not without its challenges: particularly, the threat to car dealerships and the danger of customers opting out of software upgrades. The car dealers have everything to lose. When the automotive industry becomes fully OTA, car dealers will lose the revenue enhancement that they acquire in making updates and repairs.

Customer opt outs, on the other hand, were a challenge long before the arrival of OTA and one that car OEMs will likely find a way to address, as they move toward a recurring service revenue generation model in the early 2020s.