Meet the Software Supplier in 600 Million Vehicles

[Transcript]

[00:00:00] Jan Griffiths: This is the Auto Supply Chain Prophets Podcast, where you'll hear from experts of all facets of supply chain in the auto industry to help you prepare for the future. I'm Jan Griffiths, your co-host and producer.

[00:00:17] Terry Onica: I'm Terry Onica, your podcast co-host. Let's dive in.

[00:00:24] Jan Griffiths: Hello, and welcome to another episode of the Auto Supply Chain Prophets Podcast. Let's check in with my co-host, Terry Onica. Terry, what have you been up to?

[00:00:32] Terry Onica: I know I mentioned on a prior podcast that AIAG had me develop the MMOG/LE, that's Materials Management Operations Guideline Logistics Evaluation. It's a supply chain assessment in automotive industry, a workshop class. The current level one class just gives you an overview of what MMOG/LE is, and how you apply it to your supply chain, and understand all the best practices. So, they had me do a level two, where we'll go deep dive into a workshop to really look at what do companies submit to their customers for evidence, all the work instructions, and making sure they're to the right level of detail, what would get accepted by an OEM, what would get rejected by an OEM. So, I'm super excited. It should be available in September. So people can start watching the AIAG website for when it'll start. I know current students are really excited to take it.

[00:01:24] Jan Griffiths: I'm so glad, Terry, there's people like you in the world that really want to do this kind of work with MMOG/LE because that's not me. That is not me. I know you know it, and you love it. And I know that it's important for a business to understand it and have a good foundational system in place. And I know that there's an impact on the bottom line, and I understand all of this. I just don't want to be the one to do it. But where I've been lately is in my happy place, which is the creative visionary space. And I've been working with AI and working on how to apply AI in different languages to podcasting. It would seem that AI is in the news a lot lately. What does this mean to our audience? This, you know, we hear about Software-Defined Vehicles, open source, and I don't know if you're like me, but I go, 'Uh-huh,' like I know what I'm talking about. I have no idea. I don't know what open source means. I don't really, really understand what a Software-Defined Vehicle is. And I certainly don't know if I was in my old supply chain role, what do I need to know and what should I be thinking about? Which is why I am thrilled today that we found the perfect person to help us understand what it's all about and where we should be focused in the world of the automotive supply chain.

So, today it gives us great pleasure to bring on a guest who is, wait for this, not only grounded in the realities of the automotive business, he's been there, done that. He started his career with General Motors and he's worked in the Tier Ones, but he also has deep, deep knowledge in the world of electronics and software. And if that isn't enough, he operates with the visionary edge of a startup entrepreneur, which is a rare combination, particularly in our auto industry. And if you look at his history on LinkedIn, you'll see it. And we actually worked for the same company at some point in time in the wire harness business, but we missed each other. He's also a board member of the University of Michigan Economic Growth Institute. How's that Terry for a background?

[00:03:41] Terry Onica: Oh my gosh, I can't wait for this.

[00:03:43] Jan Griffiths: He is Manoj Karwa. He is the Chief Revenue Officer for the Americas and Officer of Elektrobit. Manoj, welcome to the show.

[00:03:53] Manoj Karwa: Thank you, Jan. Thank you, Terry. I wish you came with me everywhere. What a great introduction.

[00:03:58] Jan Griffiths: Well, you know, we wanted somebody who knows many different sides of this because we meet people that know legacy auto. We meet people who understand Tier Ones. We have electronics companies, but maybe startup entrepreneurs, but somebody that knows all of that, that really has all of that in their background. We love the idea of Elektrobit because, as I was doing my research, Elektrobit, and this is straight from your website, Elektrobit software powers over five billion devices in more than 600 million vehicles. So, that qualifies you as a company that kind of knows what's going on, right?

[00:04:37] Manoj Karwa: Yeah. And anybody who's driving a car or anything with wheels, we're probably in that vehicle. And it is great to be able to support all those different vehicles.

[00:04:46] Jan Griffiths: Tell us about Elektrobit, but take us back to the basics. Talk to us, talk to me specifically, like you're talking to a child. What is open source? What the heck is that? And what is a Software-Defined Vehicle in the simplest terms, please?

[00:05:05] Manoj Karwa: Right. So, a little bit about Elektrobit, a 35-year-old company headquartered in Germany. I just came from Germany, which I love to talk about my experiences there. We have offices in India, China, Korea, Japan, and Eastern Europe; in the US, we're located right here in Southeastern Michigan with staff on the West Coast and in Mexico. A global entity. We're an independently operated company, but fully owned by Continental AG. So, it gives us the backing of a larger Tier One.

What are Software-Defined Vehicles? Well, just like your smartphone, when you first buy it, it keeps getting better. The expectation is there's more features, more benefits, and you're going to evolve; the vehicle will evolve over time to meet customer and fleet requirements. There's a wide range of sensors to provide inputs, and there's communication internally and externally. The expectation is that it's not a one-and-done, that you buy it, and this is the experience. But the fact is that it'll get better over time; it'll delight you either with infotainment, with safety, with performance, with diagnostics; this is what's happening now, and this is the future.

[00:06:10] Jan Griffiths: That's great. Thank you. So, what's open source mean?

[00:06:14] Manoj Karwa: Well, open source, we're a big proponent in that; we don't believe in proprietary systems; we don't believe in closed systems. And the benefits of open source is you can go faster to market. It's cloud-ready. There's a term in industry called shift left, be able to do virtualization, be able to speed up development. In addition, open source, you have a wide range of developers that use industry standards. The way we approach this is through industrialization for the passenger car transportation segment. And you get everything in one box. The idea is that it's easily portable, so you're not tied in. And the way the industry has gone from when I first started as a young man in General Motors, there were domain-based systems, where a Tier One or Tier Two would make the control system, the APIs, the software, and it was all stay within that control system. But now, it's gone from domain to zonal architecture, where instead of having hundreds and hundreds of ECUs, you may have a small finite number that would be able to control the vehicle in a zonal architecture. And that really provides benefits because you get high computing power, and less cost and less control systems, and less wiring.

[00:07:25] Jan Griffiths: Let me make sure I got that. So, basically, open source means that there are a lot more people that can work on it. It's exactly what it says. It's open source. So, it's not captive to a particular supplier and it gives you more capability and less cost. I get that right.

[00:07:43] Manoj Karwa: It can, if designed well, you have a community of qualified developers. You have software tools, source codes, it's freely available, and you're not vendor locked in. That's the key element.

[00:07:54] Jan Griffiths: Now, see, that's my language. Terry and I can relate to that. And that resonates with our audience in the supply chain. We're not locked into the vendor. And we love those words.

[00:08:05] Terry Onica: What exactly is the technology you're providing in the car? What is it doing?

[00:08:09] Manoj Karwa: So, if you think about every control system or any control system in the vehicle, it starts with silicon microprocessor, might be NXP, NVIDIA, Qualcomm, and on top of that lays an operating system, which we develop. And then the middleware software. And we're a big proponent of automotive standards, such as AUTOSAR, Adaptive AUTOSAR, and we developed the operating system and we developed the middleware software. We work with the OEMs and the Tier Ones because they'll bring in the APIs. So, it may be for, let's say a digital cockpit, it may be for ADAS. This morning, I was talking to a major Tier One Electric Drive. They're asking me how we can move towards SDVs. So, it can be a holistic view, but oftentimes, we work with individual Tier Ones and every control system we touch in one way or the other.

[00:09:00] Terry Onica: So, what is your competitive advantage in the industry?

[00:09:04] Manoj Karwa: Where we differentiate ourselves is multiple levels, number one, we're one of the few companies that provides the products, which is the software, and also the services. Why are services important? At times, you have to maintain the software, not for a year, not for five years, but up to 15 years. There's over-the-air updates, there's changes that need to be maintained and managed as part of the ecosystem, so we offer products and services. That's number one. Number two, we're one of the few companies that really believes in open source. A lot of our competitors have, again, great software packages, but they're proprietary and they're locked in. One example of how we've differentiated is we have the industry's first Linux Open-source Software Functional Safety Suite. That is ASIL B, B as in boy, certified. It is the first of its kind and quite disruptive in the industry because functional safety is a key part of enabling safe and reliable software. Our ability to deliver that in an open source way really helps drive the benefits of open source into an area that never was before. In addition, we are truly a global company. I was just in Germany. I was so impressed with not only our headquarters, which is in Erlangen, our sales offices in Berlin, Munich. But as a former test engineer, I got very excited about our laboratory at Ohm, where we can not only test and validate software but we also prototype hardware. So, we do all the things to support a Tier One and an OEM.

[00:10:29] Terry Onica: A question I have for you, and I'm sure a lot of listeners here today, we're so used to parts getting delivered to the assembly line, right? Physical parts. How do you deliver software to the vehicle on the assembly line? How does that happen?

[00:10:47] Manoj Karwa: Yeah, it's a great question. Part of it is the partnerships that we developed. Sometimes, it's a two-way partnership with us and the OEM; sometimes, it's three-way us, the tier one, and the OEM, and sometimes, we're right on the silicon. So, it's still with the silicon microprocessor, the tier one, and the OEM. So, there's multiple ways that we support. We're not the traditional Tier One where we're not manufacturing and delivering, but we work with our partners such as the Tier Ones and the OEMs.

In addition, we love to participate in over-the-air updates because there's an expectation now to continuously improve your vehicle and continuously improve any sort of transportation. And that's how we also support a lot of our different customers.

[00:11:29] Terry Onica: You had mentioned earlier you were in Germany and I understand you got caught in the CrowdStrike. Tell us about that experience personally. But what are we going to do in the transportation industry with regards to that and software in the vehicle? How is that going to work?

[00:11:50] Manoj Karwa: You're bringing up memories and nightmares; I felt like Steve Martin or John Candy in Planes, Trains, and Automobiles. Flying into Germany, I went to Berlin, and then drove on the Autobahn, which was amazing, 156 miles per hour, the fastest I've ever been in a vehicle. And then, the CrowdStrike occurred, not a malicious attack; it was software that was pushed that perhaps was invalidated by a very small company out of Texas that nearly 50 percent of all planes and hotels use. So, I'm sitting in Berlin and my flight gets delayed to go to Amsterdam. And because that flight was delayed, my connecting flight was canceled, as was all the other flights. And the airline told me, at least through my app, that I would not be able to leave till Tuesday; this was Saturday. Amsterdam is not a bad place to get stuck, so I didn't mind that. But I did have things to get back to, including family and work and other things. The other interesting thing was that when I got on the phone with the specific airline, they said they'd call me back in nine hours. So, this affected so many aspects. Not only the trains were delayed by an hour, the planes were being canceled. And at the airport, it was amazingly crowded; lines were everywhere. I thought it was the beginning of the apocalypse because it was something I hadn't experienced since right before flying before COVID. And it got me thinking, this is happening to one industry because they push software that perhaps was invalidated. They put software that impacted so much aspects of our life. Now, if you think about the vehicles in the world, in the US, for example, there's about three million commercial fleets in the US; we're talking about buses, last mile, medium duty, heavy duty. Let's take one example: there's about 480,000 school buses. The US Environmental Protection Agency is putting forward five billion dollars to electrify all the school buses. And those school buses being electrified, they're connected to telematics, to software, so are the charging stations. So, imagine if this happened just with one segment in the US, and there's going to be a point in time where all school buses are going to be electrified. And there's a lot of benefits for that in terms of total cost of ownership, return investment. But what if somebody pushes software that stops the charging? That stops the performance of the vehicle. That enables them not to be able to put kids in the morning or pick them up. Even that one small segment, what could that do to our society? The example that happened with the airlines and the hotels, that was not a malicious attack. But when we're talking about autonomous, connected, shared vehicles, if this occurs, this is why it's so important to validate software, either through virtualization, through demonstrations, upfront, before you push it forward. Because I can only imagine what would happen in the US or any other country where a type of vehicle or a segment of the market just slows down or gets stopped. It made me very thoughtful about what I'm doing today with Elektrobit and how important embedded software is in everything we use, especially transportation. Not only could it be an inconvenience, as it was for me, but it can be dangerous, a vehicle could be taken over, could be a safety issue, it could be a weapon. I think what we're doing and why I came into Elektrobit, why I thought this was so important about autonomous, about cyber security, functional safety, it's all tied together.

[00:15:12] Jan Griffiths: There was an interesting article that came out a couple of days ago, and Elon Musk said, and I quote, "The CrowdStrike issue gave a seizure to the automotive supply chain," and he has mandated that CrowdStrike be deleted from all of the company's systems. He's not happy with the entire thing. What should leaders in the supply chain in the automotive industry do when they're considering a partner for software? What are some of the things that they need to think about? Because I'm thinking that going to the cheapest guy out there probably isn't the right thing to do. So, I'm thinking that there's a few things that you have to think about before you select a partner. And just going back to my supply chain days, I remember Continental being a supplier to me in previous jobs, and they were always rock solid; technology was always there, but they were not known to be the cheapest. And that's not something that I think you want to be known as, but these are all factors that supply chain leaders have to consider. So, what are some of the key things that supply chain leaders need to think about before they partner or bring a provider into their ecosystem?

[00:16:25] Manoj Karwa: I have to mention coming from the EV space, I did meet Mr. Musk in the early days of 2009 and 10. I wondered why after making his money in PayPal, he entered the automotive industry. As I was talking, I was thinking, that's one way to lose your fortune. Why would you want to deal with all the supply chain issues, all the headaches, all the delays, all things that are outside of your control? It's quite interesting that the impact of the supply chain, to your point, is a race to the bottom. I've been in the sales role for the last, let's say, 10 years plus; I've told my bosses and board members that if I was the cost leader, you wouldn't need me. I would just put my prices on the website. I need to differentiate providing more value to the customer and more value in terms of either quality or save them time resources. I need to continue to delight them, over deliver. I actually learned this from Toyota, "Under promise and over deliver." So, this is hopefully a wake-up call to the supply chain leaders that a race to the bottom, the lowest cost, is not the way to go. And the way we try to differentiate, and we're a fully independent company. We work with all the Tier Ones. The reality is we try to tackle the most complex solutions because we realize with our expertise and our ability to be in 600 million vehicles and 5 billion devices, to be able to develop industry-leading software that's open source and also provide this industry-leading service. We're clearly differentiated from some of the others. And I think also, as you're sourcing, you need to have localized support, too. And that's why we have offices in all the major automotive markets, as I mentioned because I think this has become a bigger issue. I really think as the industry becomes more electrified, there's going to be more and more OEMs and a more fragmented market. The barriers to entry to become an OEM have dropped. You don't need big stamping equipment. You didn't need huge capital investment. While I was in Germany, I was talking to one of the leaders there, and he said that back when he was growing up in the sixties or '70s, he said that there used to be a tractor manufacturer in every village in Germany because it was easy to put together. I almost see that every local market might have their own EV skateboard. And it's going to be a very diversified and fragmented market. And I think that having localized support to be able to be nimble, quick, to be able to deal with lower volumes, midsize volumes, not every vehicle is going to sell a million vehicles like the F-150. And the reality is you have to be flexible, nimble, and to be able to scale. I believe that we're well-positioned for that. The point is that if you're a supply chain leader, looking at the total cost, the long-term relationship, I think, is critical. The second thing is don't go towards proprietary systems. Don't single source. Having multiple partners, maybe a lead partner and a secondary, and as most supply chain managers do, challenge your suppliers to provide the best solutions.

[00:19:22] Jan Griffiths: Yeah, that's good advice.

[00:19:24] Terry Onica: Why is it important that current suppliers in the industry consider software as a part of their offering to their customers?

[00:19:32] Manoj Karwa: That's one of the reasons why I joined Elektrobit. I came from a very hardware background, working on battery systems, electric drive, power electronics, and charging. I saw a lot of the hardware, it was being commoditized, and it was not clearly differentiated. And the way to differentiate your hardware is to show additional value. And then the big question is how do you extract the value, which is with through software. So, understanding that if you're providing a system, a digital cockpit, a drive system, a vehicle, the expectation is you can't just provide a "me too" solution. How do I unlock more value to provide more services to my customers and to my fleets? Now, that value creation, the Software-Defined Vehicles, could be through an app store; it could even be with my Tesla. I get delighted every month or two when something new shows up; it's fantastic. And it's something that I didn't think I needed, but now I want. So, that's grid marketing. Also, there are performance benefits that I can pay for through my app. Again, who captures this value who's able to retain, and it may vary based on demographic, market segment, and age, too. I talked to my kids about being in Software-Defined Vehicles, and I said, "What would you pay for?" Oh, they want entertainment. Maybe I would want performance and maybe, Jan, you want safety. Everybody would want something different. And it's really delighting customers. And the hope is that the value creation gets shared, not only with the OEMs but the Tier Ones, and to provide an ongoing experience that also creates higher value in these vehicles.

[00:21:08] Terry Onica: When I think of software in the vehicle, and like we said, it's got to be ready and go, can't be disrupted. Tell us about the quality standards that you are following. How do you ensure quality when it comes to software and making sure that you've got it right? I'm really curious about that.

[00:21:25] Manoj Karwa: It's really about testing, verification, validation. We have separate groups that just do that. In addition, when we launched Linux for Safety, it was certified by a third party, TUV. So, not only do we pressure test our own software, but we also often use third parties to do that. In addition, we belong to several consortiums like COVESA, AutoTech, SAE, and others to also share best practices. So, I think this is a key element in terms of being open source, sharing it to a wider community, and to be able to learn from each other.

[00:22:02] Terry Onica: We've talked about supply chain, we've talked about quality, but the other area that I got to imagine is a little bit different is servicing, service of parts. So, how are you servicing your software going into the future? I think you mentioned it a little bit, but could you talk about just that aspect?

[00:22:18] Manoj Karwa: It's an expectation, it's part of our DNA that we will service a product for 15 years. That's available. It's an ongoing requirement to keep continue to maintain it, over-the-air updates, also maintain based on how it interacts with other systems. There may be safety requirements and functional requirements like the UN has cyber security. So, we offer localized teams, we offer global teams, we have developers in different parts of the world, and we leverage different time zones as needed, sometimes, issues with customers. And we also have global teams to be able to support customer requirements.

[00:22:54] Terry Onica: Looking at, because you're constantly updating, how does that work into the equation? You may have released something here, so if they go back and want to service something, how do you know which level to go to? Or is it always the latest one you would give them? How do you manage that?

[00:23:08] Manoj Karwa: We have a ticketing system, like a lot of companies do, that we track every engineering chain request. And we have to manage it. But you got me thinking about my own personal experience; I have a Toyota in my household. I have some Ford, and I have a Tesla; each one has had software updates, and for one of them, I have to go to the dealership to get the software update. The other one, the other OEM comes to my house and does a software update. The Tesla, I get a notification, I go to sleep, and I wake up the next day, and it's updated. I like my dealership; I like talking to them, but I really don't want to spend any time there. So, that is the direction the industry is going that go to sleep, and things get fixed. And it's not only this goes back to Software-Defined Vehicle; it's not only connected to an issue like diagnostics, but it may be features, maybe manufacturing. If an automaker can diagnose while you're sleeping, there may be a potential issue or maintenance, maybe can schedule for you. It can give you an alert, and it can share that information to the assembly line, to the Tier One, and even to the tier two supplier, "Hey, this is what we're finding out." I remember when I first started my career, we would get quality reports once a month, and you'd look at them, and then it was like a rearview mirror. So, I think with Software-Defined Vehicles, it's real-time. It's real-time computing. It's getting information. It's diagnostics. It's sharing. That's the expectation we now have because we all have iPhones. We all have smartphones.

[00:24:37] Jan Griffiths: That's right. Now, I have a question for you, and I'm going to ask you to flip your brain. Ready? Get out of the Chief Revenue Officer headspace and put yourself in the position of a leader in the automotive supply chain right now. And you know you've got to embrace software. You know that you've got to prepare your supply chain for the future. What's the one thing you would start doing right now if you were that supply chain leader?

[00:25:07] Manoj Karwa: Yeah. So, I'll start out with a joke. You pop open the hood of a car. You see the organizational chart of the OEM. No one is talking to each other. So, the first thing to do is software first. Think of software first. Think about what I can do with the software and then design the hardware around that. That is an approach that's disruptive and challenging because if I'm a, let's say, a foundational or legacy OEM, I have all these contracts. I have factories. I have unions. I have vehicles that are millions and millions of vehicles on the road I have to maintain for a decade plus. So, I'm being challenged by this. How do I disrupt that to think of software first? And if you think about what's happening in the industry, Volkswagen has invested in Rivian a billion dollars now and up to 4 billion later. That is very interesting. Having met Mr. Scaringe, having driven Rivians and seeing what they offer, their ability to go ground up to reduce from hundreds of ECOs to 17 down to 7 is so disruptive. Their ability to remove 1.6 miles of wiring harness that's amazing. And Jan, you and I would have been out of business long ago at a wiring harness company. Be able to eliminate 44 pounds from their second-generation vehicle. If I am managing the supply chain, if I don't do this today, I'm not going to survive. This is the future. And it's a matter of time. There's going to be a tipping point where the foundational, existing supply chains are not going to work. And as I tell my kids, you're going to get your lunch eaten if you don't reinvent yourself.

[00:26:47] Jan Griffiths: That is great advice and a great way to close today. Manoj, thank you so much for joining us today.

[00:26:53] Manoj Karwa: Thank you for your time, Jan and Terry. I really enjoyed it and I appreciate what you're doing.

[00:26:58] Terry Onica: Thank you.

[00:27:02] Jan Griffiths: Are you ready to find the money in your supply chain? Visit www.autosupplychainprophets.com to learn how, or click the link in the show notes below.