Commercial vehicles – Stoking rebellion

The increasingly vexing software problem.

  • John Deere has been locked in a battle with its customers (farmers) for several years over farmer’s rights to repair and modify their vehicles which highlights, more than ever, that the value in vehicles will soon virtually all be in software.
  • Furthermore, it is a concern that those involved in representing the interests of users in this industry also appear to have no understanding of software or its importance.
  • Nowhere is this brought to light more clearly than the long saga of John Deere and its long-suffering customers.
  • Effectively John Deer has locked the firmware vehicles such that any repair or maintenance, no matter how trivial, can only be done by an approved technician costing $150 per hour plus the callout charge.
  • This also means that John Deer can determine the end of life for the vehicle simply by ending its repair service to that model.
  • The net result of unauthorised tinkering is a bricked $150,000 tractor and no work being done.
  • Needless to say, this has incensed the farmers and added fire to the right to repair movement which seeks to force the manufacturers to allow users to repair their own equipment themselves or with a contractor of their choosing.
  • Unfortunately for the farmers, their lobbying group, the California Farm Bureau, has done a deal with farm-equipment dealers (see here) that gives farmer’s the right to repair and modify the hardware but not the software.
  • To rub salt into the wound, the California Farm Bureau is calling this a victory when in reality it is a crushing defeat for the farmers highlighting that their own representatives have little grasp of the real issues at hand.
  • This is because software now pretty much controls everything in advanced tractors meaning that most repairs will still be impossible and the farmer will be forced to wait for an engineer to show up and pay far more than the farmer would for a 3rd party contractor.
  • Typically, California paves the way and so the expectation of the farm-equipment makers will now be that the rest of USA, and presumably, the world will follow.
  • This highlights just how important the issue around software ownership in vehicles is becoming.
  • While farmer’s (and regular drivers) own the hardware that they are driving they only have a perpetual license to the software which legally means that it’s the manufacturer that owns the data that the software generates.
  • Even if the vehicle makers do legally own the data, depriving users of access to and control of their data is likely to incense vehicle buyers and be viewed very dimly by regulators and data privacy advocates.
  • However, while manufacturers are permitted to maintain an iron grip on their software to the detriment of their users, the market will find a way around it.
  • This is why there is a growing market in Eastern Europe for cracked John Deere software that allows the farmers to make all the modifications they desire.
  • With their own representatives failing to act in their best interest, this market and others like it are likely to continue to grow.
  • The existence of these markets benefits no one as users are exposing themselves and their equipment to unknown risks and the manufacturers remain loathed by their customers.
  • Hence, some middle ground is needed where software can be modified by users such that their needs are fulfilled and that there is a competitive 3rd party market for service.
  • The current situation benefits no one and simply opens the way for a new entrant to come in, change the rules and eject the incumbents from their lofty complacency.

RICHARD WINDSOR

Richard is founder, owner of research company, Radio Free Mobile. He has 16 years of experience working in sell side equity research. During his 11 year tenure at Nomura Securities, he focused on the equity coverage of the Global Technology sector.