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Automakers and Dealers Get Ready for OTA Updates

Sam Abuelsamid
Dec 20, 2019

Smart Car 2

This winter, Ford and General Motors (GM) have talked more openly about their plans to deploy over-the-air (OTA) software updates to future vehicles. While OTA updates are common in the mobile device space, they aren’t an entirely new phenomenon for legacy automakers. But there are some challenges (such as legacy hardware and their independent dealer networks) for those automakers. 

Tesla made headlines following the 2012 debut of the Model S when it began deploying feature and functional updates to customers via the cellular data or Wi-Fi connections in those cars. The EV manufacturer was the first to allow customers to purchase optional functions (such as AutoPilot) after buying the vehicle and without a dealer visit. More importantly, those functions have often gotten better (and occasionally worse) on a regular cadence via that same update mechanism. Tesla had two advantages over traditional automakers that made this possible. The Model S and subsequent new vehicles have used a modern electronic architecture with more centralized compute platforms that are designed to be remotely updateable. The Silicon Valley company also has no franchised retailers that rely in part on revenue from the automaker to reprogram car computers for recalls. 

New Models to Hit Market with Modern Architectures

Every other major automaker has had electronic architectures that have evolved piecemeal since the addition of electronic controls starting in the 1970s. These systems didn’t have the security or in-vehicle networking features needed to reliably do OTA updates on safety critical systems. Only the telematics and infotainment systems have received OTA updates to date. That is now changing as new models with redesigned, modern architectures are beginning to roll out. GM’s digital vehicle platform, Ford’s new EV platform, and Volkswagen’s MEB EV platform are all designed to support OTA. Starting with the Cadillac CT5, which is now shipping to dealers, and the Ford Mustang Mach-E next summer, both automakers have promised updates that don’t require dealer visits. 

Navigant Research, a Guidehouse company’s report, Market Data: Connected Vehicles, projects that almost 58% of new vehicles sold globally will have support for OTA updates by 2025, growing to nearly 100% by the end of the decade. 

Will Dealers Be Compensated for OTA Deployments?

With the hardware support coming to new vehicles, manufacturers must figure out the business side with their dealers. If a vehicle needs to have a computer reprogrammed with new calibrations for a compliance recall or a functional improvement, the customer has to take it to a dealer’s service department. The dealer then gets paid by the manufacturer for each vehicle they update as they would for any other warranty work, an amount that could be $100-$200 for each occurrence. That revenue stream mostly goes away with OTA, although customers still have the option to bring the car in instead of taking the update. When Ford announced its SYNC 4 system in October 2019, the company declined to get into specifics about the arrangements it had made with dealers, but did acknowledge that dealers would be compensated in some way for the lost revenue. 

President of Cadillac, Steve Carlisle, told the media that with the CT5’s debut and the debut of other upcoming models, dealer service departments will be getting adjusted time rates for other warranty and recall tasks once OTA is deployed. This extra revenue combined with the ability to free up service bays for other work should more than offset the lost payments. Ford, VW, and others will likely follow a similar path.