Instant Depreciation for New Cars? OTA Update Means Cars Are No Longer Negative Assets for Drivers

2021-06-07 Emerging Technologies TrendForce

As software and hardware technologies improve in the automotive industry, cars now have an increasing number of smart features in response to the demand for user friendliness; for instance, the Car2Home ecosystem was created as a natural extension of V2X (vehicle-to-everything) technology. Advances in automotive systems and technologies, however, do little to assuage prospective car buyers’ fears of instant depreciation and maintenance fees, which are both justified and frequently parroted by existing owners.

Recent years, however, have seen the emergence of a new technology known as OTA (over-the-air) that can at least address car buyers’ maintenance-related worries. Automakers can fix software issues in the car with OTA updates, thus saving the driver the time and effort it takes to perform a factory maintenance. Simply put, OTA is a cloud-based service that allows automakers to perform a host of actions, including software/firmware updates, OS upgrade, issue fixing, and security patches, through a cloud-network-car connection.

As such, OTA technologies are highly dependent on data encryption, decryption, and transmission, meaning OTA services involve not only software and cloud services vendors, but also cybersecurity companies as well. According to TrendForce’s investigations, about 72% of new cars sold in 2025 will be OTA-enabled vehicles thanks to advancements in V2X, automotive electronic/electrical architectures, and intra-vehicle communications.

OTA pioneer Tesla kicked off its OTA strategies in 2012

Tesla is perhaps the impetus responsible for the surge in OTA viability in the automotive industry. Elon Musk believes that cars should be appreciated, as opposed to depreciating, assets for the consumer. As part of that belief, all Tesla models are capable of OTA updates of software and firmware, reflected in Tesla’s revenues from “service and other”, which saw yearly growths from 2016 to 2020 (Tesla’s 2020 earnings from “service and other” alone surpassed US$2.4 billion). Therefore, Tesla’s sales volume will remain the key to the market size and penetration rate of OTA technology.

Other automakers, such as BMW, Mercedes-Benz, GM, Ford, Toyota, and Volkswagen, also began rolling out OTA updates in their models from 2015 to 2020, although it wasn’t until the year 2020 did most of these companies perform OTA updates on any appreciable scale. Furthermore, most OTA updates were software updates as opposed to firmware updates (for ADAS and powertrain functionalities), since issuing firmware OTA updates still remains a major issue for automakers at the moment.

TrendForce also indicates that, should automakers wish to improve automotive functionalities with OTA updates, they would need to completely overhaul their cars’ electronic and electrical architectures. In this light, one of the prerequisites of performing functional OTA updates is the availability of compatible hardware in cars.

For instance, in order to activate LiDAR functionality, automakers must first equip a car with LiDAR hardware. Once self-driving technology matures to the point when it is deemed appropriate to be enabled on a given car, then automakers can activate the necessary LiDAR functionality with OTA updates.

Of course, all of this hinges on whether automakers are willing to bear the cost of preemptively equipping their cars with the necessary hardware, as well as whether they have any faith in the success of new services/functions to be activated by OTA in the future. Most importantly, however, if consumers were uninterested in these services and functions, then automakers would have no way of recouping their preemptive investments in the aforementioned hardware.

On the whole, despite most automakers’ planned to roll out the capability of OTA updates to their vehicles, they still face bottlenecks in performing OTA updates safely and providing useful upgrades for users. Only by overcoming these hurdles will automakers effectively improve the driving experience and convince car owners as well as prospective buyers that OTA is a worthy investment.

(Cover imgae source: Pixabay)