The software shuffle

Software is now as important as hardware in cars

It is easier for a tech firm to make cars than a carmaker to become a tech company

A VISIT TO Nio house in Berlin, which is modelled on a network of 100 similar establishments in China, offers evidence of a fundamental change. Here you can still acquire a car, but unlike a traditional dealership only a small fraction of the floorspace is taken up by vehicles. Nio sees itself as a lifestyle brand and tech firm. The “focus is on the user experience”, says Lihong Qin, its president. Using a Nio is about enjoying the journey and the community built around its brand. Its cars are packed with high-definition screens and state-of-the-art sound systems. In Berlin owners, potential owners or anyone else can drop by the coffee bars and meeting rooms, buy locally sourced branded goods, or even leave their children in a high-tech play area.

The usual way of differentiating car brands by mechanical excellence was personified by the ICE’s performance, design and Spaltmass (a German word for slim regular gaps between bodywork panels that are hard for newcomers to reproduce). Nowadays buyers are no longer so bothered. McKinsey, a consultancy, reckons that only 8% are “petrolheads” who love driving for its own sake. Future drivers and passengers want to make the most of their trips. The features and functions that do this rely on software rather than hardware. Tu Le of Sino Auto Insights, a consultancy, puts it bluntly: “customers don’t care about panel gaps.” The software updates keeping Tesla’s technology fresh matter more.

Dirk Hilgenberg, boss of Cariad, VW’s software division, says the car will be a “third living space” between home and work. Software controls performance, driving features…