OEM Suppliers Warn on China Risk: Emphasize Standardization, Prioritize Customer Interaction
In the rapidly evolving world of automotive technology, Chinese automakers are making significant strides by adopting software-defined vehicles (SDVs), a strategy that has been in use in Chinese vehicles since 2010. This approach is transforming both the end-customer experience and the development speed of new vehicles, giving Chinese manufacturers a competitive edge over legacy automakers.
One key way Chinese automakers achieve this advantage is through software-centric continuous upgrades. By treating the vehicle as a software platform that evolves via over-the-air updates, they can rapidly deploy advanced features, bug fixes, and performance improvements throughout the vehicle’s lifecycle. This approach democratizes high-end features and enhances the ongoing user experience. For instance, BYD offers its “God’s Eye” driver-assistance system for free on some models.
Another advantage is the integration of domestic tech ecosystems. Companies like Baidu, Tencent, and Alibaba are leveraged to integrate vehicle, road, and cloud technologies deeply. This integration supports advanced driver assistance, autonomous capabilities, infotainment, and vehicle-to-everything (V2X) communications, providing a richer, data-driven customer experience.
Chinese automakers also benefit from significantly faster and more efficient development. By adopting software-defined architectures early and aggressively, they bring vehicles to market about twice as fast, with 40–50% less investment and roughly 30% lower costs compared to legacy automakers. AI-enabled solutions further cut development times and verification costs by around 20%, enabling a rapid innovation cycle.
Government support and economic scale also play a crucial role in the rapid development and adoption of SDVs in China. Strategic government policies, subsidies, infrastructure investment, and support for the domestic supply chain create a highly favorable environment for SDVs. Combined with overcapacity and intense domestic competition, Chinese companies push extreme efficiencies that traditional players cannot easily replicate.
The enhanced consumer value proposition is another significant advantage. With vehicles not aging in the hands of the consumer due to continuous updates, this constant evolution creates sustained customer engagement through subscription services, new safety, convenience, and entertainment features, driving recurring revenue streams and higher lifetime value per vehicle.
Legacy auto companies, on the other hand, face challenges in managing internal-combustion-engine (ICE) and hybrid vehicles, as well as adapting to ever-changing regulations. However, the supply chain, particularly Tier 1 suppliers, can act as a change agent for traditional automakers. Suppliers that have worked with Chinese automakers can help traditional automakers navigate the necessary changes.
NVIDIA's DRIVE Orin centralized compute platform is used by BYD across its New Energy Vehicles (NEV) lineup, and GM and Hyundai have recently announced commitments to NVIDIA's platform. Volkswagen Group is investing nearly $6 billion in Rivian, and Rivian's software will power future vehicles across VW’s ten automotive brands.
Attention to changing organizational mindsets to focus on customer experience can benefit both OEMs and suppliers. The relationship between OEM and Tier 1 is now co-dependent, according to Maitê Alves Bezerra. Chinese automakers are hyper-focused on end-customer experience, while western automakers struggle with fiefdoms and silos that impede product planning and cycle speed.
However, there is a perception among some western auto executives that China does not prioritize safety. Yet, China is actually making significant strides in safety, including AI cockpit technology. Despite these advancements, it is crucial for Chinese automakers to maintain a strong focus on safety as they continue to push the boundaries of innovation.
In summary, Chinese automakers’ early and deep embrace of SDVs—supported by tech ecosystem integration, government backing, and software-centric lifecycle upgrades—results in superior customer experiences and dramatically accelerated new vehicle development. This synergy enables them to outpace legacy automakers both in innovation speed and cost efficiency, reshaping industry competition globally.
- Chinese automakers, by focusing on software-defined vehicles (SDVs) and integrating domestic technology companies like Baidu, Tencent, and Alibaba, are deploying advanced features, such as autonomous driving and vehicle-to-everything (V2X) communications, much faster and at lower costs compared to traditional automakers, creating a richer, data-driven customer experience.
- The adoption of software-centric continuous upgrades allows Chinese manufacturers to rapidly deploy features, bug fixes, and performance improvements throughout the vehicle's lifecycle, democratizing high-end features and enhancing the ongoing user experience, as demonstrated by BYD's free "God's Eye" driver-assistance system on some models.
