The Future of Automotive | Ford's Challenges with the Software Defined Vehicle (SDV)

Ford Motor Company announced this week that it is merging FNV4, its project to develop a next-generation electrical architecture designed to unlock new functionality and upgradeability for both EVs and internal-combustion cars, with its existing architecture, seemingly confirming reports that the project has not gone as planned. It’s another in a long, long line of false starts in the race for legacy automakers to develop true “software-defined vehicles” (or SDVs), and further proof of just how hard the task is. But long term, the SDV vision will be worth the effort. Software-first architectures reduce costs, increase flexibility and—perhaps most importantly—allow automakers to move faster, without being slowed down by a complex web of suppliers creating their own code. Though becoming a leader in SDVs will be just as challenging as becoming an electric vehicle powerhouse, it’s also equally important. Consumers have had it with clunky, slow automotive technology, and the modern car is so computerized that a seamless electronic interface is an absolute necessity. None of the legacy automakers has solved this problem yet. All of them have thrown billions at it. Only some of them will complete the transformation. Dealers should be excited about the SDV future. As the vehicles get better at diagnosing their own issues, they will proactively communicate with the driver to help them get service work done at their local franchise dealership. The Software Defined Vehicle should unlock dramatically more loyalty from a dealership’s vehicles in operation – and thus more revenue and profit through their parts and service departments, which just happen to also be the dealerships’ most profitable departments. Our portfolio company WarrCloud’s data shows that the average franchise dealer loses about 70% of their service customers after the vehicle’s warranty period expires. Cox Automotive data shows that service work being done at franchise dealers has decrease from about 45% of all vehicles in operation back in the 1960s, to just 30% today. So for dealers, the Software Defined Vehicle future, and the fixed operations loyalty that it will drive, can’t come soon enough.