What is FOD?
23 June 2022
What is an automotive feature on demand (FOD)? This breakthrough technology could change car design, development, and the way vehicle manufacturers think about optional extras. It could also benefit consumers, but where will it leave the used-car market? Autovista24 Deputy Editor Tom Geggus answers these questions and more in this latest explainer video.
Features on demand
While closely linked, features on demand should not be confused with over-the-air updates. Both use wireless technology to enhance a vehicle’s technological capabilities, but only one should be thought of as a direct revenue stream. With the potential for pay-per-use or subscription models, the commercialisation of this customising system is huge.
Replacing reliance on factory-based customisation, FOD allows consumers to activate the features they want, when they want them. From enabling navigation systems, to advanced driving assistance systems (ADAS), there is a lot of potential for consumer exploration and uptake. Furthermore, because these systems are not permanent, the user can continually adapt their choices over time.
This creates new commercial opportunities for vehicle manufacturers willing to preload their cars with every capability available. However, this involves a precarious balancing act. The systems that await activation in these models must be affordable enough to install en mass, while also being attractive enough for consumers to turn on. Over-charging for an expensive system with no appeal would be a sure-fire way for companies to lose their balance with this technology.
Meanwhile, FOD-enabled vehicles have the potential to give residual values an uplift on the used-car market. Thanks to a good average level of equipment and continued flexibility, these models should help keep RVs steady. Buyers will be less likely to face difficult ‘take it or leave it’ scenarios, where their choices are restricted to models with the wrong options for their needs. But automotive companies should look to provide a way of identifying which features on demand a car has access to. This will help avoid confusion and lost value on the used-vehicles market.
Autovista Group chief economist Dr Christof Engelskirchen and Autovista24 principal analyst Sonja Nehls, have previously discussed FOD capabilities in an Autovista24 podcast episode. This included a detailed conversation on the application of features on demand, their impact, and the performance of the technology on the used-car market.
Autovista24’s What is? series explains some of the most important automotive terms and technologies used in the industry. Semiconductors, over-the-air updates (OTA), bi-directional charging, electric vehicles (EVs), type approval, autonomous technology, seasonally-adjusted annualised rate (SAAR), total cost of ownership (TCO), and residual values (RVs), have all featured so far.
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Transcript – What is FOD?
What are features on demand or FOD? I’m Autovista24 Deputy Editor Tom Geggus here with your handy ‘What Is?’ definition.
Now, the first thing you need to know about FOD is that it is closely tied to over-the-air updates otherwise known as OTA. However, this does not mean that they’re the same thing. OTA automotive technology allows car makers to update a vehicle software improving the vehicle by upgrading features or squashing bugs, but where does this leave us with FOD? Well, features on demand also uses wireless technology to change a car’s capabilities. However, emphasis is placed on allowing the driver to personalize their experience through different commercial offerings. This means a carmaker pre-loads a vehicle with all the optional extras and capabilities available during the manufacturing stage. These then remain dormant, so after purchase the user can access an online portal, decide which features they want and pay to activate their chosen functions.
Let’s take this model for example. Someone using it as a fleet car might want to enable driver assistance capabilities for those longer journeys. Meanwhile, a different user might want to upgrade the navigation system for a holiday abroad. Now, importantly these choices are not carved into stone. Functions can be added or removed as the user sees fit. However, it’s not just consumers who stand to benefit from this flexibility. Leaving customization up to the user frees the manufacturing process of additional complexity, meaning shorter production times.
However, vehicle manufacturers do need to consider what features to make FOD compatible. This is because some systems require more expensive hardware. If these functions are not activated the carmaker might have been better off using the conventional method of installing equipment to order. This makes pricing a hotly scrutinized area. Carmakers must choose the right features at the right cost to ensure profitability without pricing out potential users, but how do automotive companies plan to create additional revenue streams with FOD?
Well, one method is a pay-per-use model, freeing consumers up to opt for capabilities as and when they want them. Then there’s also the subscription-based models, not unlike popular music and video streaming services. Here users can pay a set amount over a dedicated period to access the functions they want, but then what about when FOD enabled vehicles get passed on to the used car market? Well, here features on demand should have a positive impact. This is thanks to a higher average equipment level and adjustability. Car residual values or RVs should therefore see an uplift. The ability to customize a car will expand the used car target group with buyers able to avoid ‘take it or leave it’ scenarios, but carmakers still need to make sure that FOD features are easily identifiable on the used-car market so sellers know they’re offering and buyers know what they’re getting. Features on demand are the next major milestone for vehicle customization benefiting both customers and carmakers. However, automotive companies will need to walk a costing’s tight rope to get there.
If you want to learn more Autovista Group’s Chief Economist Christoph Engelskerschen and Autovisita24 Principal Analyst Sonja Nehls discussed FOD capabilities in a recent podcast and if this video has left you wanting to know more about over the air updates and residual values we have explainer videos on that subject too. Autovista24.com also sends out a daily email and records a podcast once a fortnight.
There’ll be links to all this great content in the description below and don’t forget to let us know what other automotive terms you’d like us to define, just leave us a comment. If you’ve enjoyed this video please make sure to give us a like and subscribe. We’ll catch you next time.
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