Back to overview
December 2017

ATS Report: How OTA Updates Impact the Value Chain – Downstream Dealers Fear Losing Lucrative Business

For OEMs, the ever-increasing prevalence of software in modern vehicles has seen a stark rise in the number of software-related safety recalls. As a result, automakers are now beginning to reassess how they manage software structures.

OTA updates will impact business models throughout the value chain - especially downstream where dealers and the aftermarket want to protect lucrative business. For dealers and workshops, margins in the parts and service business are significantly higher than the selling of cars. Dealers fear that any direct distribution of software from the OEM direct to the end-user will ultimately affect profit margins by causing less frequent face time between the dealer and the customer. 

As of today, only 0.17% of cars on the road have OTA-enabled ECUs, but analysts from IHS estimate this share to jump to 19% by 2023.

Public and private stakeholders are currently engaged in vigorous discussion on OTA updates: Distribution of profits vs customer safety. 

Takeaways

 
  • Digitalization and connectivity in modern vehicles bring benefits for all stakeholders and unlock new business models and revenue streams realized throughout the value chain.
  • Automotive manufacturers and end customers look forward to getting OTA updates live in new vehicles to bypass costly and inconvenient dealer visits for software updates.
  • Dealers concerned that OTA updates will lead to further consolidation of OEM control throughout the value chain and hurt profitable parts and service business.
  • Traditional OEMs seek to restructure dealer franchise network to address inefficiencies and enable crucial technologies – largely prevented by regulatory bodies and dealer lobby.
  • OTA updates are necessary to safely sustain increasing rate of digitalization - value chain should prioritize customer safety and adapt business models accordingly. 

This report gives an overview of how over-the-air software updates will affect business models throughout the automotive value chain, especially downstream where dealers fear slimmer profit margins. 

Request the full report here.