In late 2012, a young upstart car company called Tesla Motors beamed out a software update to its earliest sedans. When tethered to a WiFi or 3G internet connection, Model S owners could download a tweak to their music player and some other features. It was a minor change, but one with profound reverberations that continue to this day. 

That marked arguably the first time a car company treated a vehicle like a modern tech product—one designed to adapt and improve over time thanks to new, software-enabled capabilities. Previously, new features came with new models or mid-life updates to cars, and fixes happened at car dealerships. Now, both can happen wirelessly. As is so often true of the biggest automotive trends these days, Tesla paved the way and now the rest of the world is scrambling to catch up. 

Tesla Model S Interior Flawed: Here Are The Fixes

Tesla pioneered the iPad-like in-car touchscreen, as seen in this early Model S. 

Today, auto giants from General Motors to Volkswagen are laser-focused on transforming themselves into tech companies. That was made abundantly clear at this year’s CES technology conference, where carmakers showcased in-car DJ apps, ChatGPT-based voice assistants and aggressive plans to develop lots and lots of software. 

They’re chasing the holy grail of “software-defined vehicles,” smarter cars that are as satisfying and entertaining to operate as a smartphone, increasingly autonomous, and able to download transformative new capabilities with a tap. In a sense, your preferred car company wants to become Netflix or Apple’s App Store. They think that recurring revenue from subscription services and downloads will make them much richer than selling dumb cars ever did.

“At this point, every automaker knows that software-defined vehicles are the future,” Ed Kim, president and chief analyst at the market research firm AutoPacific, told InsideEVs. “Those who aren’t being serious about it do so at their peril.”

This digital transformation will be difficult. So far, it has been marred by lengthy delays, frustrating glitches and fully bricked vehicles. Even if car companies can pull it all off, it isn’t guaranteed that buyers will want to shell out for streaming services, video games and the slew of other flashy tech features that carmakers hope will add billions to their bottom lines.

The Difficult Road Ahead

Turning cars into cash-printing smartphones on wheels is no doubt a mouth-watering proposition for an industry that suffers from notoriously slim profit margins, especially compared to the tech business. But making that happen won’t be cheap or easy, industry analysts told InsideEVs.

To understand why, you need to first understand the radical shift that’s taking place. Software has been present in cars for decades, but it was historically spread out across 100 or more discrete bits of hardware, written by dozens of different suppliers and designed to remain unchanged from the day a vehicle left the factory to the day it was junked. 

“We call it the loose confederation of software providers,” Ford CEO Jim Farley said during a recent podcast appearance. “We can’t even understand it all.”

Volkswagen Golf with ChatGPT integration

Car companies want to up their software game dramatically. That push includes things you’re probably already used to, like your music player, smartphone integration and maps. But it also goes way deeper than that. We’re talking about automated driving systems, features you pay for on a subscription basis, new entertainment and e-commerce add-ons, battery management systems for EVs and, crucially, the ability to alter practically any part of a car with a simple over-the-air software update, commonly referred to as an OTA. 

For that, cars will need a brand-new kind of software architecture that’s easily updatable and more seamlessly integrated throughout a vehicle. The “loose confederation” will need to be united. 

“Just remember, car companies have never written software like this,” Farley said. “We’re literally writing how the vehicle operates, the software to operate the vehicle, for the first time ever.”

Some manufacturers, like Ford, aim to bring most or all software development in-house, emulating the approach of Tesla and other EV startups. Others are partnering closely with tech powerhouses like Nvidia to make their digital dreams a reality. All have their work cut out for them. 

While insourcing software development could produce a more differentiated product and streamline things, it carries major challenges for companies that never had to develop much software before, said Aakash Arora, the North America lead at Boston Consulting Group’s (BCG) Center for Digital in Automotive.

“Those journeys can be treacherous, to say the least,” he said. 

Things Already Aren’t Going So Hot

Industry players are in various stages of this transition. Things have not been a walk in the park thus far. Ford has hit snags sending out OTAs to its EVs, with failed updates rendering cars undrivable in some rare cases. (Granted, this has happened in rare cases with Tesla, too, so it can be a fraught process across the board.)

Ultifi, GM’s new in-house software architecture, appears to be suffering from more serious issues. After a brand-new Chevrolet Blazer EV glitched out on us during a test drive, GM paused sales of the model. GM CEO Mary Barra told investors last month that the company was working hard on a fix and was making changes to how it discovered and addressed software quality issues. 

“We disappointed these customers, and we know it," Barra said during the company’s fourth-quarter earnings call. "We are determined to get the software right, and we will."

Chevrolet Blazer EV Interior

Over at the mighty Volkswagen Group, which owns the VW, Audi and Porsche brands, persistent software snafus have produced buggy cars, postponed new models and, reportedly, contributed to the ouster of the company’s CEO in 2022. A spokesperson for Cariad, Volkswagen’s software division, noted that it has ironed out many software kinks from earlier cars and that the unit’s new head is overhauling the way it does business.

Volvo and its electric-only offshoot brand Polestar delayed production of their flagship SUVs by months, citing unfinished software. 

What we’re witnessing here is the clash of two extremely different ways of doing business, said Sam Abuelsamid, principal research analyst at Guidehouse Insights. Legacy car companies don’t have the right processes and organizational structures in place to quickly develop software and constantly push out updates.

“They’re trying to work in a fundamentally different way, and they’re not set up properly to do that,” he said. 

Automakers typically spend years working on a new car before it hits the road. That’s an eternity in the tech world, where software is created and deployed continuously. 

“The risk is: Can you actually move companies with hundreds and thousands of employees to operate at a completely different rhythm,” Arora said. 

Meanwhile, the tech workers carmakers hired to help out aren’t accustomed to the rigorous validation process involved in making software for vehicles that can kill people if something goes wrong, Abuelsamid said. Suffice it to say, Silicon Valley’s “move fast and break things” mantra doesn’t apply in Detroit. 

Although EV startups have the luxury of building up their processes from scratch in the image of the tech industry, they’re struggling with software too, Abuelsamid said. That just goes to show how complicated vehicle software is to get right. 

Ford Lincoln Digital Experience Top

A botched OTA in November left some Rivian owners facing black displays in place of their speedometers and infotainment screens. Lucid Motors’ early cars were plagued by all sorts of infotainment glitches. Tesla, an old hand at remote software updates at this point, still sometimes introduces bugs. Last month, it announced that 200,000 cars had a “software instability” that could bork their backup cameras. 

What’s Next?

Don’t expect software-defined vehicles to be glitch-free all that soon. As carmakers roll out their new platforms and software offerings in coming years, things will probably get worse before they get better, Abuelsamid said. 

Some automakers may realize they bit off more than they can chew and outsource more significant chunks of software to suppliers, he said. 

Abuelsamid said he expects that some auto companies will give up on trying to develop unique underlying software architectures, a trend that would benefit the industry at large. Having a small number of dominant platforms would create a friendlier environment for app developers and, ultimately, a better customer experience. That’s precisely what happened in the mobile phone market, he said, where developers coalesced around the Android and Apple systems while the rest died out. Manufacturers could still selectively develop bits of software that customers actually interact with—rather than the stuff that nobody sees, he said. 

Why Cars Are Becoming Tech Devices

There are a few key factors driving businesses that have long subsisted on hardware toward software obsession. The rise of EVs is one of them. 

For the foreseeable future, it will be harder to make money on EVs than conventional cars due to the high and volatile cost of lithium-ion batteries, Kim explained—hence the hunt for extra revenue from on-demand features and other tech-oriented offerings. And many electric cars drive fairly similarly to one another, pushing carmakers to devise novel ways to set their products apart, Arora said.


EV maker Polestar introduced Amazon Prime Video to its infotainment systems. 

Better software could simplify manufacturing, said Kyle Davis, a senior analyst at S&P Global Mobility. To take an extreme example, imagine if a company made just one variation of a car—and later switched on features like heated seats, punchier performance or driver-assistance technology based on what package a customer paid for. 

Recalls and warranty repairs could be made up to 100 times cheaper if a single software patch replaced thousands of physical dealership visits, Arora said. (We’ve already seen Tesla do this again and again.) Meanwhile, sufficiently impressive and upgradeable tech could help an automaker boost sales, improve loyalty and charge extra fees for new features long after a vehicle is sold, he added.

Really, a quick review of the world’s most valuable companies tells you all you need to know about the “why” here. The top spots are dominated by the likes of Apple, Microsoft and Alphabet, tech titans that have become enormously wealthy on the back of both hardware and high-margin software products. Right up there with them is Tesla, the car company that acts most like a tech company and is valued so highly, in large part, over its promise to eventually deliver fully autonomous cars. (Whether or not Tesla deserves its astronomical stock price is up for debate. But Wall Street has spoken.) 

BCG estimates that the global auto industry will generate some $650 billion in revenue from electronics and software in 2030, with $248 billion of that entering the pockets of car manufacturers. GM aims to rake in $25 billion from software services by then. (For context, it brought in some $172 billion last year.) Ford’s Farley says his company will multiply its software revenues, which are already in the nine figures, by 10 times in the next few years. 

Do People Really Want This?

How do people feel about the smartphone-ification of their cars? It’s a mixed bag. And even though everybody has 10 different streaming platforms draining their bank accounts, it turns out that suggesting they subscribe to certain car features can backfire spectacularly.

Kim, of AutoPacific, says consumers are generally enthusiastic about free software updates just like the ones they get on their other gadgets. Some, particularly EV drivers facing long waits at charging stations, are even interested in paying monthly for newfangled tech features.

Mercedes Sound Drive

A 2023 AutoPacific survey of new-car buyers found that a fifth of consumers are interested in streaming video from their cars, 18% want to browse the internet, 14% are interested in playing video games and 13% want the ability to video conference. Still, people want other, more basic stuff way more. Nearly half of new-vehicle buyers said they wanted LED fog lights and a wireless charging pad, last year’s most coveted features.

Things can get dicey when paid upgrades veer into functions that drivers think should be included in a car’s purchase price, Kim said. That’s when a software-defined vehicle can start to feel like a ripoff. 

Case in point: The internet threw a collective fit when news spread that BMW was charging a monthly fee for heated seats in some overseas markets. (A spokesperson clarified that that was never intended for U.S. customers.) The firm’s CTO, Frank Weber, told InsideEVs in December that BMW learned from the experience and that on-demand upgrades should be reserved for features that clearly required extra engineering. That could mean a self-parking feature or a hands-off driving system, for example. 

“People are very sensitive. They don’t want to be fooled,” Weber said, adding that the car industry is still teasing out what its digital transformation will actually look like in practice. 

Right now, car companies are mostly throwing spaghetti at the wall and seeing what sticks. 

Just look at GM’s controversial decision to eliminate Apple CarPlay and Android Auto, two extremely popular smartphone-mirroring applications, from its cars. Or Hyundai’s move to sell a car that you can get in and drive using just your face and fingerprint. Or Mercedes-Benz’s upcoming app that composes music while you drive using inputs from the brakes, steering and gas pedal. 

How exactly all this experimentation will shake out five or 10 years down the line is anybody’s guess. 

“I think automakers, by and large, haven’t really figured it out yet,” Kim said. 

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