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The New Automotive Value Chain

One of the biggest transformations of a global industry is taking place right now and the automotive value chain will be altered beyond recognition as new services emerge

The world is witnessing the final days of the Internal Combustion Engine (ICE) as the ubiquitous automobile becomes a part of the ecosystem of Internet of Everything (IoE). The powertrain of the ICE has lasted almost a century-and-a-half since 1872, when the American inventor George Brayton came out with the first commercial liquid-fuelled internal combustion engine. In 1876, Nicolaus Otto, working with Gottlieb Daimler and Wilhelm Maybach, patented the compressed charge, four-stroke cycle engine.

It is projected that the global automotive industry will grow to just under $9 trillion by 2030 according to Statista. New vehicle sales will account for about 38% of this value. Automotive technology will change considerably in the next decade. One in five new car sales globally are expected to be battery electric vehicles, and millions of new self-driving cars will be added to the world’s fleet.

One of the biggest transformations of a global industry is taking place right now that’s having a domino effect on a range of industries from financial services to entertainment, and of course data science as automobiles become computers on wheels. The automotive value chain will be altered beyond recognition, and a flood of new services have started to emerge. We will see the convergence of information technology and automotive to create a new value proposition. The automobile will become a part of entire ecosystem of the Internet of Everything (IoE).The new automotive value chain from hardware, software, connectivity, and integration of all these.

With the shift to electric, computing has become the heart of the vehicle, with a central processor managing the battery, running the electric motors, brakes, lights and other critical systems as well as additional features such as entertainment or heating in the seats. Just like a gas-powered car should be serviced regularly, a modern electric vehicle may receive software updates to improve safety and performance, offer new in-car services, or unlock sources of revenue for the manufacturer.

Automobiles today contain around 125 million lines of code compared to an F-22 fighter jet’s two million, a Boeing 787’s 15 million, and Facebook’s 62 million. This is impressive when you consider that these vehicles have basic, standard Advanced Driver Assistance Systems (ADAS) that allow them to autonomously parallel park and maintain safe speeds while on cruise control.  What’s even more impressive is the expectation that fully autonomous vehicles will have somewhere between 300-500 million lines of code. This fact alone means that new cars will likely contain the most sophisticated software systems on the planet in the next five years. This spells some clear writing on the wall: what sets cars apart will no longer be the engine’s number of cylinders.

While the hardware of an automobile will be a complex system embedded with sensors, screens, buttons, antennas (cellular & Bluetooth) and computing components, the software will include an organized system for collection of computer data and instructions intended to assist with the creation, collection, monitoring, and/or the analysis of vehicle and/or transportation data. Examples include systems related to general computing and industrial operating systems software, user-facing interfaces and screen mirroring software (e.g., Android Auto and Apple CarPlay), application software dedicated to a specific domain (e.g., navigation and OTT audio/video), and life-cycle management software for updates and system validation.

As the new generation automobile will be a connected device it will have to seamlessly connect with other vehicles, traffic instruction systems, transportation infrastructure to be able to operate smoothly in a smart environment. Connectivity includes the wireless means through which data is passed and analysed across different components to enable the execution of digital automotive and/or transportation products, services, and capabilities.

Connectivity can be established through embedded equipment in the vehicle, retrofitted, or established by leveraging a tethered device (e.g., smartphone). Examples of connectivity methods include cellular (e.g., 3G, 4G, and 5G), close-range wireless (e.g., NFC, Wi-Fi, and Bluetooth), intervehicle or V2X (vehicle-to-everything) communications or cellular V2X [C-V2X]), GPS, and satellite technologies.

Integration services will include the functional coupling of physical and virtual components, systems, and/or subsystems. These will help enable and optimize the development and delivery of digital and digital services. This integration often includes providing the capabilities and expertise to support the bridging of “old” and “new” platforms, technologies, and frameworks to support a bridged feature evolution. Integration services would unify and analyse first-party and third-party data streams, augment legacy systems capabilities and/or reporting, redefine business or manufacturing processes, or even deliver off-the-shelf, “configured,” or custom products and services.

Like any connected device, the security of the software systems will become extremely critical to prevent hacking. Security and privacy services must ensure that all aspects of vehicle systems and data remain trusted, utilized, and operated as initially designed (and conform to existing and emerging regulations). This includes capabilities to secure embedded or retrofitted physical hardware interfaces, monitoring of software, protecting data at rest and in transit, and certifying compliance for all data protection and personally identifiable information (PII) regulations and standards. Digital automotive and transportation products and services, which leverage data as a basis to deliver value, provide a broad attack vector for nefarious actors and must be designed, developed, tested, validated, and monitored to ensure that they cannot be exploited, hacked, or utilized for unintended purposes.

Connected vehicles are expected to deliver a deluge of data from the increased adoption of high-speed data-embedded connectivity in vehicles, onboard sensors, migration of analogue vehicle systems to digital (and “fly by wire”) control, and consumer demand for enhanced and immersive experiences. This will require the technologies, expertise, and innovation from data management vendors, typically coming from the world of cloud, database, integration, and marketplace services to help manage vehicle, edge, and cloud data. They will also perform data normalization, labelling, compliance, distribution, third-party contracting, and monetization functions.

Automobiles of the future will be guided by machine learning technologies as they will constantly become smarter as they communicate with other vehicles and smart city infrastructure. Artificial Intelligence (AI) and machine learning technologies will be applied for the development of systems and tools that leverage data models to improve on their own without constant supervision or solely relying on pre-planned algorithms. AI and machine learning are being applied to multiple operational and support domains including AV driving functions, traffic and pedestrian monitoring, predictive maintenance, and vehicle condition evaluation.

This automotive transformation will also have significant impact on financial services like automobile insurance for instance. Insurance services facilitate the financial protection of all that the vehicle may touch or interact with, including providing protection from damage, injury, and liability expenses. This includes potentially supporting the vehicle’s components, software, fleet provider, passengers, drivers, roadside infrastructure, and even pedestrians.

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