Software-Defined Vehicle (SDV) Market Size Expected to Reach 572 Trillion Won in 5 Years

Samjong KPMG Proposes Software-Defined Vehicle (SDV) Strategy for Automakers
Pursuing 'Convenience, Diversity, and Up-to-Date Features' through Vehicle Subscription Services
SDV Emerges with Improved Fuel Efficiency and Enhanced Consumer Convenience

As the automotive industry undergoes a major transformation from internal combustion engine vehicles to electric vehicles, and from hardware-centric to software-centric structures, the market size of Software Defined Vehicles (SDV) is expected to reach $419.7 billion (approximately 572 trillion KRW) within the next five years.

On the 23rd, Samjong KPMG published the report titled "Cars Running on Software, The Future Dreamed by Automakers," which identified the rise of SDVs as driven by ▲the future direction of automotive development ▲the pursuit of software-based integrated control systems ▲improvements in vehicle fuel efficiency (electric efficiency) and expansion of consumer convenience.

SDVs refer to vehicles whose key functions are operated through software, where the vehicle’s value and core competitiveness are determined not by hardware but by software.

To realize SDVs, it is essential to secure next-generation electrical and electronic architecture, hardware platforms, and software platforms. The next-generation electrical and electronic architecture focuses on integration centered on vehicle functions and simplification of the architecture, favoring domain-centralized and zonal architectures over distributed control systems. Additionally, with the advancement of autonomous driving technologies and frequent use of AI-based software requiring powerful computing capabilities, establishing a hardware platform based on high-performance processors is also crucial.

The report highlighted the vehicle operating system (OS) as the core competitiveness of SDVs. To perfectly implement SDVs, which require flexibility to support adding, changing, and deleting services, securing a software platform is essential, and a vehicle OS is indispensable for the smooth operation of the software platform.

Meanwhile, the report suggested response strategies for automakers actively entering the SDV market centered on vehicle OS.

First, it called for building an app ecosystem based on ease of use, diversity, and up-to-dateness of vehicle applications. To meet the increasing demands for in-vehicle customer experience, it emphasized that adding and deleting applications should be as easy as using a smartphone whenever needed, and that vehicles should be equipped with functions consumers require through a variety of applications. Maintaining up-to-dateness in all services, including infotainment, autonomous driving, ADAS, and in-vehicle embedded software, is also an indispensable condition for SDVs.

Hyundai Motor Concept Car RN30

To facilitate smooth use of applications, automakers are providing vehicle subscription services. Hyundai Motor Group applied FoD (Feature on Demand) services to the EV9 through the Kia Connect Store. The FoD service allows customers to selectively purchase software functions whenever needed, just like installing apps on a smartphone, and access those functions via over-the-air software updates.

Next, as various business models centered on automakers are observed, strategies should be prepared according to collaboration areas. First, in software-centric collaboration models, joint ventures between IT or content companies and automakers, such as Sony-Honda Mobility, are presenting new business models in the automotive market. In hardware-centric collaboration models, automakers also sell smart devices like smartphones, aiming to provide more personalized services not only through vehicle data but also through customer data obtained via smartphones.

Finally, as global and domestic automakers actively engage in SDV development, competition for talent acquisition is fierce worldwide. Acquiring startups can secure new capabilities and high-quality personnel, but it is essential to create a collaborative environment between existing and new staff. When leveraging external capabilities through partnerships or joint ventures, it is necessary not only to find partners that meet each company’s needs but also to ensure a sufficient process of sharing visions between the parties.

Dongjun Shin, Head of the Automotive Industry Division at Samjong KPMG, said, "Software Defined Vehicles (SDVs) are establishing themselves as new smart devices and another living space," adding, "As Google and Apple increasingly seek to engage deeply with vehicle data centered on infotainment OS, it is time for automakers to establish their own business models."