News that Volvo cars have cut 15% of its workforce in the U.S. is indicative of the pressure automakers are under in a year of unprecedented challenges. The announcement is part of a wider move by the Swedish automaker to reduce its workforce by 3000 globally as they focus on their ambition of becoming a fully electric car company.
As with Volvo, the focus for all automakers now is the creation of a leaner, more efficient organisation. The speed and evolution of Chinese EV brands has thrown down the gauntlet to the industry. Traditional hardware-led automakers must now embrace a software-defined vehicle mindset if they want to keep pace and survive.
The software-defined vehicle isn’t just about creating a car with the latest features to sell to market. It’s far more than that. Through advanced vehicle telematics and data-driven capabilities, this rolling computer on wheels is a powerful tool for automakers to streamline operations, cut costs and increase long-term profitability.
To achieve all this connectivity and data platforms must be integrated across the value chain — from vehicle to factory floor — to unlock full operational efficiencies. It will ensure a robust telematics platform and allow automakers to build an ecosystem of connected vehicles.
The benefits include :
Reduction of warranty and repair costs
One of the most direct ways connectivity saves money is through predictive maintenance. Connected vehicles, equipped with real-time diagnostics and vehicle telematics systems, can identify potential failures before they become serious problems. This allows automakers and dealers to proactively address issues under warranty, minimising expensive repairs and customer dissatisfaction.
For example, a connected vehicle might alert the manufacturer about a malfunctioning component trending across a specific model. Being able to pre-emptively recall or update vehicles before a widespread failure occurs can have a huge impact.
This proactive approach significantly reduces the cost burden of unplanned repairs, emergency logistics and replacement parts, while also improving customer trust and brand loyalty.
Cutting recall and service costs
Traditionally, software issues required customers to visit a dealership for updates or fixes, leading to high labour and logistical costs. Over-the-Air (OTA) updates have changed all that. Powered by connectivity, these updates mean automakers can push new software, patches or even performance improvements directly to the vehicle —much like smartphones. This reduces dealership dependency but also lowers the number of physical recalls, which can be costly and brand-damaging.
Tesla’s early adoption of OTA updates saved the company millions and set a precedent others are now following. Of course, managing OTA updates is not easy especially for traditional OEMs. Ford’s CEO Jim Fairley raised this issue in 2023. On technology podcast ‘Fully Charged,’ he stated that not only were 150 different companies creating software for the U.S. vehicle manufacturer but they were writing it in more than 100 different languages “that don’t talk to one another.”
This volume of suppliers and the complication it brings only add extra costs and delays to the OTA update process. This is why a single pane, connectivity management platform is so important as it takes the pain out of managing multiple vehicle software assets.
Building smarter supply chains and manufacturing efficiencies
The value of connectivity extends beyond the vehicle and into the factory. Through the use of Industrial Internet of Things (IIoT) devices, automakers can build smart factories where machines, robots and systems are connected to optimise workflows, reduce downtime and minimise waste. These systems can predict equipment failures, monitor energy consumption and automate quality control, all of which reduce operational costs.
Additionally, real-time supply chain monitoring, enabled by connected sensors and logistics systems, helps automakers avoid bottlenecks, ensure just-in-time delivery and prevent costly production delays.
Utilising data for monetisation and new revenue streams
Connected vehicles generate vast amounts of data — from driving behaviour, vehicle health, location and usage patterns. Automakers can monetise this data in several ways. For example, insights from vehicle telematics will help manufacturers design better cars, optimise feature offerings and reduce R&D expenses by aligning more closely with customer usage. Anonymised data — where allowed by regulation — can also be shared with insurers, city planners or marketers.
Perhaps the biggest opportunity though comes from leveraging data analytics. Understanding your customers better means automakers can create personalised subscription services for in-car apps, navigation or entertainment — features that are integral to the software-defined vehicle model. This shifts car makers into an exciting and highly profitable space. The ability to generate recurring revenue provides limitless opportunities for OEMs and means they don’t need to rely on car sales alone.
Lower insurance and accident costs
Advanced Driver Assistance Systems (ADAS) and connected vehicle-to-everything (V2X) technologies help reduce the frequency and severity of accidents. Safer connected vehicles mean fewer insurance claims and lower liability costs. Insurance companies are beginning to offer lower premiums for connected vehicles, and in some cases, automakers are partnering with insurers to share data in exchange for reduced rates, benefiting both the company and the customer.
Improved fleet management and lifecycle tracking
For automakers involved in fleet services — such as ride-sharing, car-sharing, or delivery operations — connectivity provides the critical data link between vehicles and the cloud. This connection enables the telematics platform to track fleets in real-time, optimise routes and monitor driver behaviour. The impact for automakers is significant: fuel consumption is reduced, vehicle wear and tear is minimised and overall utilisation is improved — ultimately lowering the total cost of ownership.
Investing in connectivity
While the initial spend in infrastructure — both in vehicles and manufacturing — can be significant, the long-term savings and efficiencies connected vehicles provide are far greater.
For automakers struggling to navigate this new landscape, managed connectivity, as opposed to basic connectivity, provides far greater support. It enables reliable, secure and scalable connected vehicle operations through consistent network performance, global coverage and data security. It also enables a robust telematics platform to collect and transmit critical vehicle data and integrates easily with an automakers own systems.
An advanced connectivity platform transforms connectivity from a utility into a strategic enabler — delivering business value, enhancing customer experience and ensuring long-term competitiveness.
As the automotive industry shifts toward electrification, autonomy and digital ecosystems, embracing connectivity and the software-defined vehicle is not just about gaining a competitive edge — it’s a financial imperative.
Learn more about how to empower your business with our smart, secure connectivity solutions.
