SWOT Analysis

Connectivity and Digitization in German Automobile Industry

SWOT analysis has been widely used for strategic management over the last fifty years. Highly
efficient in analyzing an industry's internal and external environments, an organization, a
product, a person, a project, a city, and so on. This technique has aided managers in making
strategic decisions. Although it is a simple tool, yet if utilized properly, it can lay the ground for
solid strategic formulation [ CITATION Gur17 \l 1033 ]. The main aim of performing a SWOT
analysis is to check robustness and gaps in the development and adoption of digitization and
connectivity in the German automotive industry. This analysis is aimed to help developers and
policymakers in making a forecast about the said industry. It will identify goals that have been
achieved and areas that need more focus.

STRENGTH

1. The complexity of the automotive industry is increasing day by day. With the
transformation of vehicles into the software-intensive product, by increasing
functionality of various electronic control units. As multiple actors are involved in the
software development of a single vehicle, the need for a project-specific supply chain
arises. As a solution to this difficulty, a European cooperation project named
AMALTHEA was initiated in 2011, succeeded by AMALTHEA4public in 2014. A total
of 22 partners, including companies, universities, and research institutes from Germany,
Spain, Turkey and Sweden, run this project. This project aids software developers in
setting up project-specific tools and tailors them according to the need of their project
[ CITATION Wol15 \l 1033 ].
 Does anyone use this? How is it being used? Which companies are using it? Why is
this a strength? It's just a project for now.
2. Guissouma H, Klare H, Sax E, and Burger E conducted a study on software release and
management in Germany. As per their findings, the German automotive industry follows
its plans rigidly to develop and release software in the market. German companies have
developed a mechanism to release their software regularly. Before final release,
intermediate releases are carried out to fix bugs and make software error free. Severe
bugs are fixed inside workshops, where the technician will test the final updated
 software. The entire process can take any time between 15 to 90 minutes [ CITATION
Gui18 \l 1033 ].
 That's interesting to know, are there other studies like that? Why is this a strength? Is the
German automotive industry doing better than other companies like Tesla or Apple? Are
there any more findings from the study?
3. Volkswagen was highly dependent on a third party for the development of their
software. To overcome this weakness, the company started their Car.Software
organization in January of 2020. The primary purpose of this project is to connect the
associates and subsidiaries that develop car software and software for the digital
economy. This group will work at the national and international levels. Based on the
Audi Electronics Venture GmbH, it will connect different group brands and regions to
work under one banner. The company also aims to increase the in-house software
development share from 10 percent to 60 percent by 2025 [ CITATION Vol19 \l 1033 ].
 That is also interesting. Do other carmakers also have companies like this? Is it going
well? Is there feedback on that? Are these internal companies or external companies?
That was 1.5 years ago. Are there any findings on this? In itself, this is also not a
strength. First of all, it is only information about what VW has done in this regard. What
makes this a strength?
4. Volkswagen is not the only player working towards in-house software development.
Mercedes-Benz has also announced that it will work on its own system development. By
2024, the company plans to launch MB.OS (Mercedes-Benz Operating System). The
company plans to hire 3,000 software engineers, one-third of whom will work at the
company's leading development site in Germany, while the rest are expected to work in
different cities all around the globe. According to their chief technology officer, in long
run, Mercedes will depend on in-house development for more than 60 percent of its
software needs [ CITATION Vij21 \l 1033 ].
 This is also interesting but not a strength. See above, it's just information to begin with.
Why are they doing this? What made them do it? What are the benefits of doing so?
Why only 60% in house? Why do many not work centrally? Are there advantages to
this? Why don't all German car manufacturers work together on an operating system for
 cars? Is there any info on this? BMW and Mercedes had a cooperation. But it was
terminated. Why?

WEAKNESS

1. The German automotive industry faces a problem with its software release and

updates. Although there are more frequent updates during software development,
the automotive system, once in the field, seldom has a new release. The frequency
of software updates is also very low. Mostly, the software is updated only once a
year as dependence upon software increases, frequency of field updates need to
increase. Updates in a short period (throughout the year) are becoming a necessity
[ CITATION Gui18 \l 1033 ].

 That is true, but is that a weakness? Is that perhaps at most a danger? After all,
that is a central element. Tesla is constantly updating its systems. How are the
German companies positioned? BMW, for example, also has over-the-air updates
and now updates more frequently. As it stands here, this is also just information
that says there are more frequent updates and the 2018 cars (that was a long time
ago) tend to update annually.
2. For automotive software to work efficiently, the system required a massive

amount of data. This will put more pressure on companies to secure consumers'
data, as these cars need a massive amount of data for their functionality.
Connectivity in vehicles will generate an enormous amount of data. An
autonomous vehicle is expected to create 4 TB of data daily, equal to information
generated by about 3,000 people on an average day. The German government is
still on its way to find a solution to the problem of data protection. What type of
data is to be stored by companies and for how long is still in debate. [ CITATION
Bur17 \l 1033 ]. It can negatively affect the demand for such cars. To gain

customers' trust, the industry needs to develop soft that store least amount of data
or remove the data entirely from its system after a specified time span. This will
help to gain the trust of customers in the said product.
 The point about data protection and German authorities is an important one. But
what about companies like Tesla? If this is such a problem, do they do it better?
Normally, data protection is worse at American companies.
3. Volkswagen and other players of the German automotive industry are far behind

Tesla in the development of technology and software for vehicles. The

automakers are trying to take control of the situation, but they face problems due
to a shortage of software exerts. Due to the high demand for technology
development in every sector, attracting software engineers in the automotive
industry is a significant challenge. To overcome the shortage of experts, notable
players in the industries have planned to share their human resources. Yet, this
challenge remains the core problem for German auto manufacturers [ CITATION
EVA20 \l 1033 ].

 This is a very important point. But there is a lack of evidence here. Is it really
missing? Why is it missing? Is Germany / Europe not providing enough training?
Are the car manufacturers not attractive enough? What kind of companies are
planning to share their employees? How can one imagine that? Do automotive
 companies do this as well? Are there any strategies to deal with this shortage of
employees? Like remote development from Silicon Valley or India?
4. Apple and Volkswagen signed a deal to develop software and turn its T6

Transporter vans into Apple's automated shuttles. Unfortunately, this project has
suffered and is far behind the decided schedule. The project has suffered
dramatically due to continuous changes in plans and directions [ CITATION The181 \l
1033 ]. The failure of Volkswagen to build a car on time is problematic. In times

when Ford and Google have joined hand to work on software development,
Volkswagen has missed an opportunity to lead the industry in such
collaborations.
 Why did the project fail? I haven't read anything more about this, I don't think it
exists anymore. What were the reasons for and against it? Apple is still looking
for a car manufacturer to build cars for it or to cooperate with it. Why can't it find
one? That is actually a strength for the automotive industry compared to Apple
and Google. They can build cars and have a good sales and production network.
 OPPORTUNITIES

1. German automotive industry is considered a leader in the global automotive industry. The
adoption of software in cars brings opportunities for all players involved in the industry.
The adoption and development of software over the air (SOTA) and Firmware over the
air (FOTA) bring opportunities for players for the industry. Other than SOTA and FOTA,
the transfer of data to and from vehicles, software development to run communication,
and other functions can be monetized [ CITATION IHS15 \l 1033 ]. Once developed, these
applications and software can be outsourced to other countries.
 Generally correct, but too little content. Who benefits from it? How exactly can it be
profited from? Are there already examples of this? Your source is from 2015 - maybe
there are already current findings.
2. European automakers, including Volkswagen and BMW, have outsourced many of their
functions to Asian countries [ CITATION Hen14 \l 1033 ]. The development of software and
connected cars brings an opportunity for the industry to get back all the outsourced
functions. This back sourcing would expand the industry by giving more opportunities to
all the related players in the industry. Back sourcing would also make the sector
autonomous in various functions.
 What was all outsourced to Asia. I haven't heard anything about that yet. Does it make
any sense at all to bring the outsourced functions back? There was certainly a business
case behind it. Can the Germans even develop the software in house? Who would benefit
from bringing the functions back?
3. With a rise in technology, innovation in the automotive industry is happening rapidly.
Recent years have seen a surge in demand for connected cars. It is estimated that by
2030, the automotive software market revenue will grow to $78,894.2 million, as
connected vehicles are highly dependent upon software [ CITATION CIS20 \l 1033 ]. As the
German automotive industry is a leading industry for the development of vehicles, this is
an opportunity for the industry to develop cars and their software. The software
developed can be outsourced to other countries to increase revenue.
 Now you suddenly speak against point 2 and say that functions should be outsourced. I
do not understand this point as it stands here as an opportunity. It is clear that more
software is needed. That is simply a premise for me. The opportunity must exist, for
example, in the sale of certain functions by the software. Or by selling data recorded by
the car.

THREAT

1. For the software-based automotive industry, using wireless bug fixes is an

essential concern as they will reduce the costs of updating and fixing software.
The total worldwide cost saving using software over the updates (SOTA) is
estimated to reach $35 billion by 2022 [ CITATION Bir15 \l 1033 ]. USA-based car
company Tesla is winning the race to introduce such software developments. The
company has already started introducing autopilot updates remotely, which makes
their product more attractive for customers [ CITATION Gui18 \l 1033 ].
 This is an important and interesting point. The updates mean that customers no
longer have to go to the workshop. But normally, software problems are fixed in
the workshop free of charge anyway. Is there more and more up-to-date
information on this? The lower workshop costs may be offset by lower costs for
the update if it is covered by the warranty.
2. Digitization will open doors for non-traditional IT companies such as Google and
Apple to enter the automotive system of an industry. As it brings new
opportunities, it brings new competition to the market. New business models arise,
and new modes of innovation are discovered. Market and customer segments are
redefined [ CITATION Gao14 \l 1033 ]. Customer expectations change, and unique
needs arise. Companies need to keep track of changing market dynamics and
customer needs.
 This is precisely a point that needs to be examined more closely. This is too short.
Google and Apple are already in the game. They have Apple Car Play and Google
Car and want to develop their own vehicles. Exactly what opportunities and risks
does that present for the German automotive industry? Does cooperation make
sense? If so, why doesn't anyone want to cooperate with them?
3. The connected car opportunity is enormous and is intended to bring significant
revenues to the industry, yet this opportunity is not without challenges. There is a
growing tension between the automotive manufacturing industry and the
companies supplying the supportive software, components, and infrastructure, as
the need for solutions and business models emerge from the outside automotive
industry. Mark Fields, the president and CEO of Ford Motor Co, has already
raised concerns about carmakers becoming subordinate to other businesses.
Companies like Nokia, Intel, Cisco, Google (with its android auto), and Apple
(with its CarPlay) have announced million-dollar investments for the automotive
industry, intending to get major share of the pie [ CITATION IHS15 \l 1033 ].
 Exactly, that is a danger, but the automotive industry has responded to it. What
opportunities does this present? What has been done? Collaborations with Intel
 have been in place for a long time, especially in autonomous driving. What
functions or business models have already been taken over by companies from
outside that would normally have to come from the automotive industry? Is this a
real threat? Why doesn't the automotive industry simply invest billions like
Google and Apple?
4. History stands witness that companies who fail to collaborate and innovate at the
right time have faced severe decline. Where significant players in the German
industry are trying to become self-sufficient in developing their own soft,
American company Ford has already signed a deal with Google for in-car
connectivity and cloud services. The deal is said to be worth hundreds of millions
of dollars. Google will take the lead for Ford's growing vehicle connectivity and
all related computing services [ CITATION Huf21 \l 1033 ]. This collaboration poses a
significant threat to all other software and car companies. With Google providing
Ford with cutting-edge technology and Ford's expertise in the industry, this
collaboration may create a hurdle for other companies to grow. Companies in
Germany need immediate action to deal with such an unprecedented situation.
 That is an interesting point. One weakness is probably the lack of cooperation. But
what is the reason for that? There are already many attempts like Mercedes and
BMW.. https://www.sueddeutsche.de/auto/bmw-daimler-vw-software-id3-
1.4856930 (maybe you can translate the page).

5. The growth of Chinese technology is a point to ponder for all technology-related

companies. China aims to become a world leader in science and technology by
2050 and is rapidly progressing towards its goal [ CITATION Hua18 \l 1033 ] . China is
also working towards making software for the automotive industry. Significant
companies of Germany have either signed contracts with Chinese companies or
have outsourced tasks. Volkswagen is already using Chinese software developers
in designing global automotive architecture. The company has around 4,000
software engineers working in China for it. It is expected that China will become
 the leading international research and development center for connected
vehicles[ CITATION Reu19 \l 1033 ]. Like Volkswagen, BMW, and Chinese tech
company ArcherMind have signed a joint venture of $7.64 million. The primary
purpose of this joint venture is to develop software for cars as reliance on digital
cars increase [ CITATION Chi20 \l 1033 ].

Why is that a danger?

That's an interesting point. Why China and not the U.S.? Are there reasons for that? Are there
other countries where software developers are located?

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