- Ford CEO Jim Farley think the software-defined vehicle revolution is a bigger deal than EVs or competition from China.
- The software revolution is what enabled the transition to EVs and the rise of Chinese automakers.
- As driving becomes more automated, the software experience is going to become even more important, Farley told Car and Driver.
Everyone on Earth seems to know about how disruptive electric vehicles have been to the car market. It’s the most impactful change in transportation since the dawn of aviation, reshuffling not only what powers our cars, but what countries make them, who makes the best ones, and how people use them. Yet it’s happening at the exact same time as another revolution, one that’s less well understood, but arguably more transformative.
Don’t take my word for it.
“Everyone thinks these three things—China, software, and EVs—they’re all the same. No, they’re not the same. The software thing is 10 times bigger to me,” Ford CEO Jim Farley said in a recent interview with Car and Driver.
It’s a bold claim. But it’s one that I agree with. Here’s why.
One Powers The Others
When I talk to traditional car enthusiasts or normal folks who don’t pay close attention, many are skeptical of the screen-dominated cabins of modern cars. They argue that these screens make cars more expensive.
That couldn’t be further from the truth. Tesla was the first company to really recognize that by centralizing all of the controls into one single, mass-produced display, you could massively reduce costs. Having a separate, individually designed switch for every single function is extraordinarily expensive as it is, and fitting them all together in a way that won’t rattle after 100,000 miles is no small task.
Then you add in the massive software complexity of traditional cars, and the cost saving start to mount. Traditionally, automakers farmed out all of the software work to suppliers, which meant that your seat motor, climate system, wiper control, power liftgate, interior lights, and sound system were all controlled by separate electronic control units (ECUs).
Traditional automotive design required a bunch of “domain-specific” controllers that only had one job. Now, companies are moving toward “zonal architectures” that centralize computing into a few key notes, using software owned by the automaker itself, not suppliers.
This was easy for car companies at first, but as cars got more complex and consumers demanded more features, we started putting hats on top of hats on top of hats. The whole thing grew rickety and unbalanced, with long product pipelines and a glacial pace of change. If you ever wondered why your 2023 car’s infotainment feels like a 2013 Android phone, this is why. The companies had to make dozens of different ECUs talk to one another and smooth the connections between them. Doing that well once was nearly impossible; making such a system easily upgradeable over the air was impossible.
But Tesla recognized that by centralizing all of the computer functions in the car, they could massively reduce cost while providing a more upgradeable and common platform. That’s why new features launch to Teslas often, and simultaneously, while my Chevy Blazer EV—built in the old paradigm—has to go to the dealer before it can receive its next big “over the air” update. And it’s also why companies like Ford and Chevy struggle to match Tesla’s cost or efficiency.
“When we ripped apart a Tesla … I was just absolutely flabbergasted. The Mach-E’s wiring harness was 70 pounds heavier and 1.6 kilometers longer. We didn’t know what was going on in [Tesla engineers’] minds. But now we understand,” Farley said. “They had no prejudice. We had prejudice. We’d gone to our supply-chain person and said, ‘Buy another wiring harness.’ [Tesla] said, ‘Let’s design the vehicle for the lowest, smallest battery.’ Totally different approach.”
The original Tesla Model S was the first true software-defined vehicle. Nearly 15 years later, American, Japanese, Korean, and German companies still haven’t figured out SDVs, while Chinese automakers have outpaced even Tesla in their software-driven approach.
That approach arguably enabled the EV revolution. It allowed Tesla to prove that you could make electric cars that were comparable in cost to gas vehicle while still offering excellent range and the features consumers demand. Then Chinese automakers took the ball and ran with it, applying that approach in a faster-paced environment with more government support, leading to cars that have largely eclipsed Western products in terms of cost, software experience, polish, and design.
The lesson is clear: Software-driven companies move faster and deliver more capability for less. Here’s how that’s going to keep disrupting the auto industry.
The Big Change Hasn’t Happened Yet
Cost is the first key advantage of a software-defined vehicle, or SDV. But enabling the EV transition is small potatoes compared to what comes next, at least from Farley’s perspective. As we drive towards an autonomous future, or at least a partially autonomous one, what happens inside the car is becoming more important than how a car drives. That’s already taken hold in China. While American consumers are more skeptical of car tech, there’s little reason to think it won’t happen here, too.
“We have to think more and more about how our vehicle is a third space, an entertainment space,” Farley told Car and Driver. “Now that you [can] drive on the highway and have 45 minutes free, what are you going to do in your car? Is it enough to have videoconferencing and consume content you would at home? Or do we need to change the drive to do something more?”
There’s a reason so many EV concepts feature rotating seats and big recliners: In a world where autonomy is looking more and more feasible, the in-car experience is going to get a lot more important.
Photo by: Genesis
Entertainment and work are going to become far more crucial aspects of car ownership. You’re not just going to compete on who offers the most powerful motor or the most range—I’d argue those will quickly become commodities—you’re going to choose things based on the overall experience, from the safety and quality of the autonomous driving system to the onboard workspace or entertainment options.
Is this a bigger deal for the world than EVs? Absolutely not. Reducing emissions and averting the worst form of climate catastrophe is far more important for humanity and the planet than being able to work in the last goddamn place on Earth where I’m allowed to not answer an email. But for car companies, this is a far bigger transformation, for two reasons.
First, consider that whether you sell a gas car or an electric car, you are mostly in the same business. You are in a highly capital-intensive hardware business with no recurring revenue and a bajillion recurring costs if you want to keep your sales up. Becoming a software company means building an entirely different type of business, one that moves faster without breaking too much, and one that also has to have cutting-edge autonomous solutions, AI tools, entertainment deals, user experience researchers, and constant support on a (hopefully) unified platform. It’s a tough and messy transition, which is why so many companies are bungling it.
Companies keep saying that electric vertical take-off and landing vehicles (eVTOLs) are the next big thing. I’m not sure whether to believe them.
But equally important is the simplicity of it all. By stripping it down to a product where the computing platform is central, and the hardware is relatively simple and, arguably, ancillary to the main value, you get a lot more flexibility. Farley notes that if you have a platform that can support a variety of electric motors and batteries arranged around a central computing node, that’s useful for a lot more than cars. Think robots, delivery drones, and eVTOLs or air taxis.
Will Ford really get into all of those businesses? Probably not. But if you’re a company that can build a world-class software platform good enough to dominate the automotive space, there are plenty of other industries where that might work. Plus, there are plenty of weird and experimental form-factors that automakers haven’t even tried before, from micro-mobility pods to autonomous heavy duty equipment. So yes, the future of the car industry is electric. But as the SDV revolution spreads, the products they make might start to look a lot less like cars.
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