With connected entertainment, driverless technology, a revolution in car-hailing and the fumes from VW’s emissions scandal still lingering, 2016 is shaping up to be a pivotal year for the auto industry.
As the auto industry approaches its one-hundredth birthday, it’s crucial it keeps up with the disruption that has hit other industries. GM’s recent acqui-hire of the now defunct Sidecar team is an indication automakers have started to dip their toes in the otherwise unfamiliar waters of Silicon Valley, recognizing there’s value to be had in the tech community.
Our only comfort is that we’ve been here before. The telecom industry was also once on the cusp of change. The rise of mobility, and the trend lines smartphones have followed in the last decade, now show us the road that may lay ahead for cars.
Polarization of high and low ends
When Apple launched the first iPhone in 2007, it pretty much had the smartphone market all to itself, by introducing a new standard of what we could expect in the way of features from our mobile devices.
Since then, Samsung has taken a leading position in the smartphone market, competing with Apple to introduce the fastest and flashiest systems with each new model. As a result of this competition to build the most technologically advanced smartphone, some mobile manufacturers are going above and beyond what is necessary. Sony, for instance, recently touted a 4K resolution on one of its new smartphone screens. A 4K resolution would be barely noticeable on a 60-inch TV, never mind a 6-inch mobile screen.
In response, we’ve seen manufacturers like Huawei, Xiaomi and OnePlus prove that if you keep production costs low you can offer advanced technology at more attractive pricing.These companies are establishing themselves by offering smartphone at a fraction of the cost of the high-end models, with “good enough” technology.
This segmentation of the market allows users to only pay for the features they use – the avid photographer can buy the $700 smartphone with a 16MP camera, while the rest of us can pay half of that for the 5MP camera, which is all we need. While iPhone remains priced at a premium, upstarts have found a way to offer equivalent features at a fraction of the price.
This market diversity is coming to cars, too. While the high-end segment in first-world markets will adopt electrical and self-driving cars, the bulk of automotive growth in the next 50 years is predicted to come from emerging markets. Here, drivers may not own a Jaguar or Tesla but will have a vehicle with just enough tech to offer the basic comfort and safety features, leaving the rest for the user to customize as they choose.
You can already see this segmentation taking place. Just look at the competent infotainment systems in Vauxhall’s budget Adam in the U.K. or Mahindra’s e20 in India, for instance, which offer the same new technology that less in-tuned consumers are getting in new vehicles.
Big auto will partner with small startups
When it comes to innovation, the established car makers have shown little ability to change in line with consumer interests. Recent innovations have been reactive, tweaking a new model in response to the latest financial or safety scandal rather than pushing hard to update its technology.
History tells us that’s a fool’s errand. Nokia and BlackBerry ruled the handset business, but failed to shift gears when iPhone shook things up, remaining wedded to their keyboards, even as consumers moved on to touch screens.
Automakers must realize the shifts already taking place in their industry. For consumers, the value of cars is moving away from the act of driving. What they now want is highly technologically centric vehicles that look, feel and act like the kinds of online services and consumer electronics they use every day.
To differentiate, smarter car makers will race to offer these features in 2016. But having stalled on rolling out connected car features so far, their track record shows they will need to build with friends on board. Just as Apple acquired Siri and Google bought in the precursor to its Maps, car makers may need to invest, partner or acquire to tool up.
Cars, like smartphones, will become commoditized
While many mobile makers once battled to mimic the iPhone, today differentiation is the leading trend in smartphones, largely thanks to open-source technology.
Mobile-centric, in-car entertainment systems improve manufacturers’ proprietary systems by orders of magnitude. But their emergence seems fixed on just two standards: Apple’s CarPlay and Google’s Android Auto. These systems enable drivers to connect their smartphones, enabling their devices to become part of the car instead of just an accessory.
We’re likely to see many more in the next 10 years. Android has changed mobile not because it runs on a single product but because its open-source underbelly is customized and remodeled by all manner of smartphone makers.
The same is likely to happen in the car, where open-source systems will allow automakers to benefit from modern, future-proof connectivity all while maintaining unique identities and even features. This integration also enables automakers to seamlessly issue updates to its technology, keeping pace with its competitors’ technological developments without forcing consumers to buy a new vehicle.
We are still waiting to see this unifying, enabling framework emerge. But the first car company that offers an open-source in-car system can expect rapid migration of consumers from automakers’ own, expensive preconfigured offerings to cheaper and more easily customized cars.