Alastair has over 10 years’ experience leading research activities in scaled, high-growth industrial and technology markets. At Interact Analysis he is responsible for electric trucks and buses, autonomous trucks and off-highway electrification.
The automotive market is experiencing its most dramatic transformation since its birth over 100 years ago. Three powerful trends – electrification, autonomy and mobility – are redefining the ways cars are built, driven and owned. These seismic shifts are impacting the entire automotive industry, not least the solutions used to design, test and simulate the production and operation of new vehicles.
PLM Solution Market Growth
Major product lifecycle management (PLM) software and solution vendors are signalling strong growth for the entire PLM market over the next three to five years.
French vendor, Dassault Systèmes (3DS) said that it expects between 5% and 10% average market growth for PLM software between 2017 and 2023 in its 2018 Capital Market Day presentation, with the expectation that its own business will beat this.[The original chart outlining this can be found here on Slide 5 as we don’t have permission to recreate the image here].
Siemens, after pursuing a series of acquisitions to expand its PLM offering, is also targeting very strong growth for its overall PLM product line. During its mid-2018 analyst call, Ralf P. Thomas, Siemens CFO, said he expects its digital factory software business to “grow by between 10 and 15% over the next 2 years.”
The growth opportunity extends beyond PLM solutions too. In the closely related automotive test sector, National Instruments, a leader in automotive test solutions, is targeting high growth for its transportation business. In a 2018 investor conference it stated it was expecting to achieve 10-12% growth in transportation related revenues out to 2020.
Despite being a mature application for PLM applications like CAD, CAE and EDA, the current dynamism of the automotive market is driving much of the growth in the overall PLM market. 3DS reported in Q1 2019 that its Transportation and Mobility software sales were growing at a double-digit rate, ahead of the overall PLM market growth. Whilst Siemens does not give a detailed break out for the automotive portion of its PLM business, a review of Mentor’s pre-acquisition financials show it experienced an annual average revenue growth rate of 20% in its transportation business line for the five years running up to 2017.
The core to this catalysis is the mega trends mentioned in the opening paragraph – electrification, autonomy and mobility. Car manufacturers and tech companies alike are rushing to develop electric and self-driving vehicles to meet emission standards and improve road safety. Vast capital investments are being made in R&D and new vehicle platforms, all of which require engineers with access to PLM design tools. Furthermore, autonomous vehicle development is increasingly requiring large, high-end simulation systems to test and validate performance. This is why, despite being entrenched with over 80% of the top global OEMs and automotive Tier 1s, Siemens is bullish about its opportunity as its PLM products (and those of its competitors) will be very much in demand to support the push to electric and autonomous vehicles.
A grand unified theory of autonomy
In physics there is a problem connecting the very small world – the realm of quantum mechanics – with the very largest systems – the realm of general relativity. Despite the best minds in science working on it for over a century, a theory that explains and connects both is proving elusive.
Happily, things might be a little closer in automotive with the recent launch of the Siemens PAVE360 pre-silicon autonomous validation environment program. Using solutions from companies acquired over the last 10 years at a cost in excess of $10bn, Siemens has established a design-simulation-emulation solution that scales from silicon (the very small) up to cities (the very large). This is a breakthrough for the autonomous car market – and one we wrote about in 2017 when the Tass acquisition was announced – as it opens up the possibility for Siemens to offer a collaborative platform for companies across the supply chain to develop their own custom system-on-chip (SoC) for autonomous vehicle operations.
Why does this matter? To date, only a very limited number of companies have supplied the hardware to develop autonomous vehicles, with Nvidia being perhaps the most well-known. In many ways, Nvidia has done a great job building the market and supporting OEMs as they develop autonomous vehicles.
Automotive OEMs tend to ‘buy in’ capabilities from the supply chain, so in many ways Nvidia has been a great fit for them. However, automotive OEMs also like competition – to drive down pricing – and the ability to develop core IP in-house. Vehicle autonomy is very likely one such area where owning all the hardware IP may be a critical brand differentiator in years to come. Just recently Tesla announced it had moved away from Nvidia and developed its own custom silicon for vehicle autonomy.
Siemens, using its existing PLM customer base, is obviously looking to expand its offering and sees that a toolset designed to develop, test and validate autonomous vehicles may be just the product its existing customers want and need. Time will tell if it exerts competitive pressure on the likes of Nvidia, or whether it positions itself as more of a partner.
Another approach – driven by the changing nature of the automotive market – is that being pursued by Dassault Systèmes (3DS). The 3DExperience platform from 3DS is designed to help enterprises create experiences for end-users, as opposed to simply creating services or products. Why is this important? Well, the automotive market is moving slowly but inevitably towards an ‘experience’ based business model. In an age of mobility as a service – where consumers don’t own a vehicle, but simply pay for access to transport when they need it – consumers will value those services that offer the best experience be it highest availability, slickest digital integration or innovative UX. None of these relate to ‘mundane’ features like engine size, fuel economy or safety. As OEMs look to move beyond features to experiences, a partner that can help them through every part of their organisation – design, marketing, R&D, sales – will be invaluable.
The thread that runs through all of this is data, and lots of it. The design and simulation/testing of new vehicle platforms generates petabytes of data daily, particularly when you include all of the sensor and video data generated by self-driving test fleets.
This data is creating opportunities for a raft of new and old companies alike as it creates demand for automotive testing equipment, high-end processing hardware and vast amounts of data storage and transfer. It is helping to reinvigorate the PLM market through new partnerships.
Cognata, an Israeli start-up, is focused on creating a simulation and validation engine for autonomous vehicles. This has immense value because the necessary testing of autonomous vehicles may take billions of miles, which cannot be done with real world driving alone. A simulation platform speeds up the process and helps to reduce R&D costs. Cognata has also inked a partnership with Dassault Systèmes to bring the vehicle autonomy simulation platform into the engineering workflow, allowing earlier integration into vehicle designs.
Foretellix, another Israeli start-up, is focused on the ‘measurable safety’ of autonomous vehicles. Borrowing from EDA testing in the semiconductor industry, Foretellix has developed a scenario language, can generate scenarios based on this language, and then give a metric on how a vehicle copes with these scenarios. This process gives a ‘measurable safety’ value for a vehicle and focuses not on the quantity of miles driven/simulated, but the quality of those miles (i.e. a full range of different scenarios) and how whether the vehicle successfully dealt with all scenarios.
The PAVE360 solution from Siemens can also be used to capture data and generate virtual scenarios for the validation of autonomous vehicles. By incorporating multiple sources, like the GIDAS database of scenarios (a German datset of traffic accidents), the Siemens PAVE 360 solution can be used by governments and others to, in essence, pre-qualify autonomous vehicles for on road testing by showing that they can already ‘cope’ with demanding scenarios.
Unique demands require unique solutions
What is clear now is that the transportation market is putting a unique and exciting set of demands on its supplier base. PLM solution vendors and start-ups are creating new products and approaches – either through acquisition or R&D – to address these demands. There is a sense of purpose and urgency in the market and a raft of high-growth revenue opportunities.
Contact Alastair Hayfield at Alastair.email@example.com to learn more about our automotive and PLM research.