I don't know how exactly this update is supposed to be installed, but somewhere the encryption key must be supplied, if the file is encrypted at all.
Since it's apparently not you that supplies the encryption key/password there are mainly two possiblities:
1. The device's update mechanism has a hardcoded encryption key which is somewhere in the existing firmware
2. The encryption key is shipped with the encrypted file (and thus only obfuscation), this is quite unlikely
[3. The file is not encrypted at all]
Since it's apparently not you that supplies the encryption key/password there are mainly two possiblities:
1. The device's update mechanism has a hardcoded encryption key which is somewhere in the existing firmware
2. The encryption key is shipped with the encrypted file (and thus only obfuscation), this is quite unlikely
[3. The file is not encrypted at all]