interview
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interview
Deichmann talks to Focus about
the drivers of the automotive
software revolution
focus: Tesla has established the
over-the-air (OTA) update model
for cars, signaling the car is some-
how work in progress. Will that
be the lead model when it comes
to business?
Deichmann: There are no alternatives
to software-defined functions. Eu-
ropean manufacturers were very
successful in the past because of
their configuration policy, where
margins for extras, such as info-
tainment systems with big screens
and premium seats, were particu-
larly high. In the software age the
number of variants is so big that we
are at a point where the complexi-
ty is not manageable. That’s where
OTA updates come in, which help
to reduce the number of hardware
variants when I sell the car. The
customer decides which function
he wants to unlock and pays for it.
In addition, the more software you
have in the car, the more complexi-
ty there is. If I want to avoid repair
shops getting stuffed, OEMs need
OTA-updates to get them fixed.
focus: Doesn’t this require a huge
mentality shift in the perfection-
driven German car industry?
Deichmann: Yes, but the industry
has made significant progress in
the past two or three years.
focus: How big is the global market
for automotive software?
Deichmann: Our studies show it will
grow to 82 billion dollars by 2030,
that’s an average 9 % growth an-
nually – three to four times faster
than the overall automotive mar-
ket. But the real question is: How
does software create value? For ex-
ample, there are direct services such
as paying a monthly fee for traffic
data. This area was a big hope five
years ago, now we see that many
people tend to get their data from
their smartphones where this ser-
vice isn’t monetized directly. But
software is also about sales and
customers expect to “feel” the soft-
ware. If a car feels like a tin box, he
won’t buy it. In China this is ac-
celerated due to customer needs:
There are OEMs who don’t get
this right and therefore leave a lot
of space for new attackers.
I N T E R V I E W with Johannes
Deichmann, software expert at
McKinsey Stuttgart, Germany
“Significant
Progress”
© McKinsey