Automobil Elektronik Kongress 2022

For me, the must-attend event to understand what is going on in the automobile industry is Automobil Elektronik Kongress (AEK), held each year in the small town of Ludwigsburg just outside Stuttgart. Stuttgart is the home of both Mercedes-Benz and Porsche, which have excellent museums (see The Mercedes Benz Museum and the Invention of the Automobile and a video tour of the Porsche museum). This year's conference had the subtitle The Automotive Industry on its Way to the Software-Defined Car.

The big challenge for the automotive industry, is adapting to the many rapid industry changes, and doing so when their deep expertise is in designing and building high-performance internal combustion engines (ICE). Experts agree on the majority of core changes, and some argue that timing of mainstream adoption may be too optimistic in light of some of the challenges. The switch to electric vehicles (EV, or usually NEV in China, for "new energy vehicle") will continue to be a key driver in the industry, the demise of ICE vehicles may be exaggerated. The big item in an EV is the battery, and here is the federal government's producer price index for batteries:

There is also a forecast shortage of copper, which is needed in large amounts for both EVs and the wind/solar expected to power them. For example, this recent S&P Global report on the future of copper points out that:

Copper demand is projected to grow from 25 million metric tons (MMt) today to about 50 MMt by 2035, a record-high level that will be sustained and continue to grow to 53 MMt by 2050. Power and automotive applications will have to be deployed at scale by 2035 in order to meet the 2050 net-zero targets. The chronic gap between worldwide copper supply and demand projected to begin in the middle of this decade will have serious consequences across the global economy.

The automotive industry is working on three big challenges:

• Electrification of power trains
• Increased automation for ADAS and autonomous driving
• Huge software challenge with cars predicted to contain 100M lines of code

The result of this is a disruption of the industry, partly driven by technology. Historically, automotive manufacturers (OEMs in the jargon) would buy from specialized suppliers like Bosch or Denso (tier-1s) and perform integration with wiring harnesses of the electronic control units (ECUs) that they purchased, perhaps 100 in a modern car. System design and manufacturing is different for the software-defined car, where electronics and software completely define the driver's experience. The OEMs seem to be adapting to control much more of that part of design and production. At the same time, inside the bodywork of the car is some sort of central electronic control unit and some zone controllers. Presenter after presenter had a picture something like the one above (from NXP) or the one at the start of this post (from Arm).

There is another challenge, which is that there is wide discussion that the automotive supply chain, from semiconductors to software development, is headcount-constrained. See the central column in the above table. Lots of the presenters at AEK pointed this out and talked about cooperation and working together because of the financial and hiring issues. The industry is seeking to manage these changes while preserving and enhancing their brand: to be "the ultimate driving machine" or deliver on (quote from the opening keynote) "Porsche is one of the most iconic brands" and still differentiate when there are shared technologies.

Another area of change is around the software used to be shipped inside the ECUs and then never updated after start-of-production (SOP). That is no longer the case, and over-the-air (OTA) updates are becoming more and more common, and this will only increase with the change to higher-powered centralized controllers in each vehicle. It is widely discussed that the value will be in software, as in the above chart from ZF Group. The OEMs are seeking to monetize services, although there have been a few hiccups as the industry explores options and consumer sentiment..

The last time I went to AEK a couple of years ago, someone pointed out that the challenge was a bit like the one faced by PC manufacturers. How do you differentiate your PCs and laptops when Microsoft sells you all the same operating system. In the opening keynote, Oliver Blume of Porsche pointed out the 2022 equivalent:

Most Porsche drivers use iPhones. So the big question is how to make seamless connectivity without handing the experience of the Porsche totally over to Apple.

Porsche is a driver’s car, and it will always have a steering wheel. But there are things like autonomous parking and, in the future, autonomous charging that Porsche owners would like.

I am a subscriber to Ben Evans' weekly email where he recently was discussing standardization meetings for Web3 and said:

Imagine making a ‘mobile internet standards body’ in 2000 with Nokia, Sun, NTT DoCoMo, AOL and Microsoft. Actually, no need to imagine—there were lots of them, but what happened?

I noted this in several of the presentations and discussions on the first day. It turned out that many of the second day's presentations were more focused on execution topics, and I will cover some of them in a future post.

Many presentations included sentiment on maintaining brand, as shown above. As Magnus Östberg said:

Mercedes is a luxury brand. We can't have someone else’s experience in the car.

That sums up quite a bit of the first day. The automotive manufacturers all have existing positions in the market, which they want to improve or at least preserve. And there are many significant questions being discussed.

Here are two slides from the second day presented by Christian Sobottka of HARMAN. He had several short amusing videos of actually asking people on the street. If you ask the car-buying public what they think of the software-defined car, they are...confused. They have no idea what it is. Christian's great analogy is that it is like asking people if they wanted a software-defined phone. Everyone has one, but they don't recognize it under that name. A "smartphone" is a much better name, and the automotive industry needs a catchy one too (and "smart car" is already taken).

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