Last month, my car went into the factory for the third software-related recall in the past six months. Once again, the helpful staff at the dealership was unable to install the required updates themselves. Instead, our SUV, now undriveable, was left on the lot waiting for its turn with the experts at BMW headquarters. The line took four days.
This delay was painful and pointless. Automakers learned long ago to have the necessary parts and labor on hand before physically recalling a vehicle. Surely a company that claims to have 9 million fully upgradable cars already on the road could set up an equivalent process for software.
Managing these updates will only become more important as electric vehicles become more popular and digital information and safety systems in gasoline-powered vehicles become increasingly sophisticated. Software fixes accounted for 15% of U.S. recalls last year, up from 6% five years ago, according to National Highway Traffic Safety Administration data.
BMW had three software recalls in the U.S. last year, more than many rivals, according to NHTSA records. Overall, Ford had the most cases with 19, followed closely by Chrysler. Tesla had the highest market share, with 50% of the 16 recalls requiring software fixes. This is not surprising, given that electric cars rely much more on software and have fewer parts than internal combustion engines.
But the recall data only scratches the surface of a larger software problem. Similar to mobile phone providers, car manufacturers regularly use updates to improve existing features and sell new services to existing customers. Tesla was a pioneer in offering periodic “over-the-air” upgrades and paid subscriptions to its self-driving system, Autopilot.
Most manufacturers send out updates on a regular basis, covering everything from internal lighting modes and battery usage improvements to important safety changes. “It used to be that you could manufacture a car, shrink-wrap it and sell it,” said Kevin Mixer, a senior analyst at consultancy Gartner. “The car is now a living platform…Companies are learning on the fly.”
This is proving more difficult for traditional automakers than for emerging competitors. When Gartner ranked automakers by digital performance last year, the top seven were all Chinese and US EV makers, including Rivian, Tesla and Nio, while traditional manufacturers had a dismal average score of 33 out of 100. It was a great result.
Software issues have delayed recent launches at companies like Volvo and General Motors. Frustrated with internal software development, Volkswagen executives signed a $5 billion partnership with Rivian last summer.
Traditional automakers are struggling to update for the same reason that major banks are spending billions of dollars modernizing their back-office technology: sprawling legacy systems. Tesla started with a clean slate, but existing automakers must dismantle old electrical systems and production lines, overcome firewalls and integrate software code written by suppliers.
That means some updates will simply come from the ether. Some people turn their cars into bricks. Or, similar to my recent troubles, I can trick the associated BMW app into thinking my car is 1,300 miles east of its actual location and has half the battery life it actually has.
The benefits of doing this correctly are significant. As more cars come equipped with fancy screens and infotainment systems, and as EV battery technology improves, automakers will need to find new ways to differentiate themselves from their rivals.
Luxury goods manufacturers have already shown that making customers feel like they’re getting something special is key to convincing them to pay extra. When done properly, software updates strengthen the bond between automakers and their customers, maintaining the regular contact provided by oil changes and maintenance checks.
“User experience and vehicle styling are once again becoming central to car differentiation,” says Jürgen Riels, global head of automotive at consultancy Accenture. “Customer care in the best possible sense.”
Software updates are also revenue opportunities in and of themselves. Accenture predicts that by the 2040s, digital services could generate up to $3.5 trillion annually for automakers, representing 40% of total revenue, up from 3% today. The possibilities range from upgrading to heated seats, self-parking, to allowing drivers to purchase food, fuel and premium entertainment directly from inside the vehicle.
But that lucrative future will have to wait until the auto industry masters the art of seamless software updates. So far, BMW has avoided that, as my visit to BMW’s automotive purgatory shows.
brook.masters@ft.com
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