Automotive OTA Market

Over the past few years, the number of connected devices has increased significantly. The growth in the utilization of IoT technology and an increase in the number of connected devices are due to emerging applications and business models, and strongly reinforced by standardization and reducing costs. According to Ericsson’s report on connected devices, there will be around 29 billion connected devices by 2022, of which around 18 billion will be IoT enabled. These IoT-enabled devices include connected cars, meters, wearables, machines, and other consumer electronics. Among all these IoT-enabled devices, the increasing number of connected cars is one of the significant trends. Moreover, with an increase in the number of connected cars, the need for continuous updates of the software embedded in these connected cars has also grown significantly. Therefore, like smartphone updates, automotive makers are now providing updates for automobile software. All the components, ranging from dashboards to door locks, can be updated to the latest versions. This has given rise to the market for automotive OTA updates. Autocar makers such as Tesla, Inc. and BMW AG are introducing OTA updates capabilities for their cars. The OTA updates are expected to save visiting time of car owners to any mechanic shop for repairing small bugs in software.

Vehicles are increasingly becoming automated and software-dependent; due to this, the instances of vehicle recalls due to various faults, including bugs in software, has increased significantly. Recalls take place when the automakers call off their vehicle models from the market for further inspection and repair.

The recall can be either voluntary or influenced. Voluntary recalls happen when an auto manufacturer calls off the vehicles for inspection of a specific vehicle model. From 2013 to 2016, the number of voluntary recalls increased considerably. In 2016, Chrysler, a key manufacturer of automobiles, recalled 1.4 million vehicles that were potentially affected by hackable software vulnerability. In the same year, General Motors (an American multinational automobile manufacturer) recalled nearly 4.3 million vehicles worldwide for a software defect. Similarly, in the same year, Honda Motor Co., Ltd (a Tokyo based automobile and auto parts manufacturer) recalled 350,000 vehicles over a software that was affecting the electric parking brake. In 2015, AB Volvo recalled 59,000 cars across 40 markets over a fault in their software that could shut down the engine temporarily.

The year 2016 was recorded as the year of highest recalls, specifically in the US. In 2016, in the US alone, one OEM recalled approximately 300,000 vehicles to fix problems with their infotainment audio units; another one recalled 100,000 vehicles to repair faulty relays, and yet another one recalled around 80,000 vehicles due to software bugs. Due to the increase in these voluntary recalls, the need for OTA updates has gained significant importance. OTA updates have the capability to tackle security issues as well as automotive glitches in the software.

Recalls incur a significant amount for automakers. The Auto Industry’s Growing Recall Problem—And How to Fix It, a study conducted by AlixPartners in 2018, stated that in 2016, US-based OEMs as well as suppliers paid approximately USD 11.8 billion in claims, and recorded USD 10.3 billion of warranty and recall accruals. Therefore, in order to reduce recalls, automakers are implementing OTA updates in their vehicle, which will, in turn, drive the growth of the market.

Automobile OTA updates are prone to cyberattacks; however, providers of automobile OTA updates can offer secured, end-to-end encrypted OTA updates to minimize the risk of cyberattacks. Also, the development of OTA technology and security standards such as ISO 26262 can help increase the adoption of OTA update solutions as well as enhance the quality and comprehensiveness of security features from software suppliers.

Highly secure OTA updates solution offered by providers can ensure strong integrity, confidentiality, and authenticity. This particularly means that the OTA updates solutions offered by the providers should have the capability to secure the OEM IP and the data being processed. Also, integration of OTA updates and metadata security can help in preventing attackers from installing malicious firmware in the vehicle. For encryption, blockchain-based techniques can be used to address the security issues in OTA updates solutions. Research suggests that blockchain based architecture can potentially help providers to offer end-to-end encrypted OTA updates solutions. All the key entities—OEMs, service centers, automobiles, cloud server, and software distributor (SD)—in the blockchain architecture can form a cluster to efficiently manage the software update process. These secured solutions can be offered by the service providers to provide efficient OTA updates for the automotive sector.

Software updates require a strong network infrastructure, and when it comes to vehicle software updates, even stronger network infrastructure is required. For functions such as updating of engine management software, several gigabytes of data are processed; to update this large amount of data, an efficient network connectivity is required. Developing economies, including countries in Africa and South America, have inadequate network infrastructure which might limit the adoption of OTA updates solutions. Developing countries lack cost-effective and efficient data plans, which can lead to difficulties while updating automobile software, specifically from the customers' end, thereby restricting market growth.

OTA updates solutions for vehicles are gaining popularity due to an increase in the number of software-defined vehicles. However, laws and regulations in some countries pose challenges for the growth of the market, as they limit the adoption of OTA updates solutions by automobile manufacturers. For instance, passenger car manufacturers in the US face several difficulties in implementing OTA updates solutions in their vehicles. This is largely due to state franchise laws regulating the relationship between OEMs and dealers. Several unions and regulatory bodies at the state and national levels are pressurizing the state legislature to protect the dealers’ business in the US. They strongly oppose any impact on the dealer’s profit margin in repairing, servicing, and financing services. This is expected to be a challenge for a number of automobile manufacturers who sell their vehicles through dealers, to provide OTA capabilities to in their vehicles.