“We need to convert the entire company system into a software center (SW). Only then can we stay ahead of the global competition.”
Chung Eui-sun, chairman of Hyundai Motor Group, said this in his New Year’s address this year. It’s not just Chairman Chung. The CEOs of global automakers unanimously agreed that a software-oriented shift, that is, a switch to a software-oriented vehicle (SDV) system, is needed to win the automobile competition in the future.
The industry predicts that the time when automobiles, which are simple modes of transportation, will be converted to mobility like SDVs, is not far away. In particular, if it does not keep up with the global standard, it is predicted that it will be shunned from the market like Nokia and Motorola during the smartphone transition period.
On the 30th of last month, 42.2 Dot, a company specializing in autonomous driving software of the Hyundai Motor Group, secured 346.2 billion won in funds. This is the first payment since Hyundai Motors and Kia announced in April that they would acquire 42 dot shares worth a total of 1.707 trillion won over three years. Hyundai Motor Group has supported 42.9 billion won so far.
42Dot is at the forefront of Hyundai Motor Group’s SDV conversion. Hyundai Motor Group’s full support for 42dot is interpreted as a willingness to have its own operating system (OS), rather than conversion through collaboration between companies alone.
Compatibility increases when you have your own OS. Higher compatibility leads to efficiency. Efficiency in a car goes beyond ease of movement and gives you freedom. 42Dot, which will run this process, is made up of information technology (IT) experts. It means an organization that can implement the entire process from software development to vehicle installation.
■ What on earth is SDV?
Tesla is probably the closest car to SDV, which means software-oriented car. Tesla simplified all the functions of a car and turned them into mobile computers.
Tesla has received a lot of attention because it has chosen to complement even unfinished cars through over-the-air (OTA) software updates after launch, while existing car manufacturers put perfect and flawless cars on the market. In this way, Tesla was able to establish itself as the overwhelming No. 1 in the electric vehicle market.
In the industry, SDV is often compared to a mobile phone. Even if you are using an old phone, you can use the same functions as a new phone if you update the OS. The exterior is the same, but the interior is capable of maintaining the performance of the latest device every time.
Unlike internal combustion engine vehicles, which were based on detailed machinery and parts, the importance of software is emphasized in electric vehicles that include electric motors and various electronic devices. This transition is interpreted as a period where hardware such as wheels and batteries are attached to software-based software.
SDV doesn’t just mean online video streaming service (OTT) and OTA. Simply put, anything you can do on your phone can be done in your car. If you buy a new car, you can migrate your information and use it like the old car.
In addition, as parts are simplified, vehicle development and production costs can be reduced by up to 20%. Because it is a kind of platform, it can monitor and control vehicle systems in real time. Reliability also increases. By integrating driver assistance systems (ADAS) and autonomous driving technology, it can improve performance and increase driver safety.
SDV is becoming more important day by day. Hyundai Motor Group, as well as global automakers such as GM, Volkswagen, Mercedes-Benz, and Toyota, are focusing their efforts on not becoming the Nokia of the auto industry.
■ Future value of SDV… Market growth $83 billion (108 trillion won) in 2030
According to a report by global market research firms IHS Markit and Mackenzie, the global automotive software market is expected to grow rapidly from $31 billion (40 trillion won) in 2019 to $60 billion (78 trillion won) in 2025, and $83 billion in 2030.
As market growth is predicted, GM and Volkswagen both plan to apply software to vehicles by 2030 and start generating profits through it. Tesla already realizes revenue through various functions and services through OTA.
There is also a constant demand for an SDV-related workforce. According to the Korea Automobile Research Institute, the number of personnel related to vehicle software in the United States was counted at least 28,000 in 2020. GM, Ford, Volkswagen, etc. employ 5,000 related workers every year. Toyota also fills more than 40% of its new hires with software specialists.
■ SDV Transformation Needed for Hyundai Motor Group to Leap Forward
Hyundai Motor Group ranked third in global finished cars last year. The first quarter of this year also exceeded the operating profit of Toyota, the global leader. Sales volume is also increasing every month. However, it is not known how long this trend will continue. In the mobile phone market, Nokia maintained its No. 1 position between 1998 and 2011. However, it was late in the transition to smartphones and lost its competitiveness in the market in an instant.
Hyundai Motor Group introduces the ‘first mover’ strategy. It means we will continue to be active. 42Dot has been building an autonomous driving technology system and a full-stack mobility platform (overall operation and software) since its inception with the aim of implementing UMOS, an urban transportation OS.
Autonomous driving technology is also at a high level. The combination of road traffic data accumulated over 56 years by Hyundai Motor Group and high-level autonomous driving technology can also create a strong synergistic effect. Above all, the experience of CEO Song Chang-hyun, former CTO of Naver, is expected to play a major role in the transformation from a traditional manufacturing company to a technology company.
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The industry analyzes that Hyundai Motor Group’s decision to acquire 42dot and entrust the conversion of SDV was made under the judgment that it would be difficult to do so internally. This is the same as the steps taken by global companies such as Volkswagen, Ford, and Stellantis to separate internal organizations and dedicated software departments through the establishment or acquisition of subsidiaries.
An SDV industry official said, “We may experience a complete transformation by 2025 at the earliest.”
