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The logo of Swedish automobile manufacturer Volvo. (File photo) (Reuters)
The logo of Swedish automobile manufacturer Volvo. (File photo) (Reuters)

Volvo wants autonomy over software and semiconductor order structure

  • With this move, Volvo wants to quicken the ordering process from suppliers.
  • With a more decentralised structure, Volvo wants to evade future crises like the recent chip shortage that has seriously hit the automobile sector.

Volvo Cars’ chief executive said his company needs to take more direct control of the software in its vehicles, which will dramatically transform its relationship with traditional auto suppliers.

Hakan Samuelsson summed up the structural changes that the Chinese-owned Swedish carmaker needs to make as “quite a revolution, really." During EcoMotion Week, a mobility conference webcast from Tel Aviv, he said reliance on suppliers for certain functions slows Volvo down, and that setting up a more centralized electronics architecture will lead to more direct relationships with chip manufacturers.

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“Today, the software is decentralized in a lot of black boxes, and we buy it from suppliers based on specifications, but when we want a change and you have to talk to suppliers, it is too slow," Samuelsson said. “To have speed of development but also to guarantee high-quality, over-the-air downloads, you really need to secure the compatibility of all functionalities, and that is very difficult if you have the old structure."

(Also read | Volvo mulling IPO this year after abandoning Geely merger)

Samuelsson’s comments allude to two major challenges that have been vexing established automakers: one for several years, and the other more recently.

Tesla Inc. has become the world’s most valuable automaker by far because its vehicles are both electric and capable of being updated over the air, much like mobile phones. Incumbent car manufacturers are only just starting to build their vehicles with similar capability, and they’ve relied on their traditional suppliers for help.

Bringing more of this work in-house could also spare Volvo and other carmakers from supply-chain issues like the shortage of semiconductors that hindered auto production for months, according to Samuelsson, whose CEO term was recently extended through the end of 2022.

Large carmakers are highly reliant on first-tier parts suppliers such as Germany’s Continental AG and Robert Bosch GmbH, who procure chips and other subcomponents from smaller parts makers and chip manufacturers. Samuelsson sees this setup as needing to change, in part so that Volvo can be more direct with semiconductor makers about how many vehicles it’s planning to build.

“With a more central electronic architecture, we will be the one who has the commercial relationship with the chipmaker, and that is necessary to give the suppliers the right forecast," Samuelsson said. “That is very difficult when we have this decentralized structure with various black boxes."

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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