Why Cars Are Now ‘Driving Smartphones’
Few industries in recent times have undergone a transformation as radical and all-encompassing as the automotive sector.
This seismic disruption is about far more than the mainstream take-up of the electric motor and the end being seemingly nigh for the internal combustion engine. As our newest Autotech and Mobility M&A report emphasises, various ‘megatrends’ throughout society are catalysing a fundamental transformation in how vehicle manufacturers do business.
Take Tesla’s direct sales model, which streamlines the whole purchasing process by taking that much-satirised figure, the car salesman, out of the equation. This has been hailed by many commentators as the way of the future. As one recent article in MarktWatch bluntly said, ‘Few would mourn the death of the traditional car-buying experience. The haggling and the I-have-to-talk-to-my-manager routine. The multi-hour wait for financing as you sit through sales pitches for extras like leather protection and roof racks.’
It looks like time-consuming visits to the garage to have your car serviced or upgraded may also be radically reduced. This is thanks to the advent of cloud-connected automotive tech, which enables vehicles to have key components improved and re-jigged remotely, with zero effort required of their owners.
The over-the-air era is here, and – in the words of our report – means we can start to think of vehicles as ‘driving smartphones’. This shift has brought with it huge opportunities for automotive software startups, whose products can be distributed and periodically updated this way.
A decade-old prophecy
The car/smartphone analogy was first popularised just over a decade ago, by no less a figure than Toyota president Akio Toyoda. He made the comparison when he unveiled a futuristic concept car called the Fun-Vii, which tore up the rules on how a vehicle can operate and look.
As well as being (hypothetically) powered by customisable tech, including onboard 3D holograms that could help navigate traffic, the Fun-Vii’s entire exterior consisted of a video display. This would allow a driver to switch up the appearance of the car whenever they wanted. Perhaps covering the car with images from your camera roll, or something downloaded from the internet. As Akio Toyoda put it, ‘Some of you might have thought to yourselves, “Is this really a car?”. It’s like a smartphone on wheels.’
While real-life connected cars haven’t quite attained the sci-fi look and capabilities of the Fun-Vii, things have evolved at a rapid clip since Toyoda spoke those prophetic words. Several other top figures in the automotive industry have explicitly voiced their ambition of seeing cars becoming remotely customisable and upgradable like smartphones. And it’s perhaps unsurprising that the company which eventually inaugurated the over-the-air age turned out to be the most famous EV disrupter of them all.
Tesla’s big step
In 2012, Tesla made history by providing the first over-the-air operating system update within the automotive industry.
The changes brought about by the obligatory update for the Model S sedan were in fact relatively minor. The Model S range calculator was altered to slightly lower the car’s driving range, the display capabilities of the instrument panel were expanded, and there was the addition of a new entry/exit protocol, meaning the instrument panel would react to people getting into or leaving the car.
But the really significant thing about the upgrade, and what made it a milestone moment in monitoring, was the manner of it delivery. As with any smartphone operating system or app upgrade, it was provided via the embedded 3G data connections or the drivers’ home WiFi. And, just like a smartphone update, users were able to schedule it to occur at a suitable time – i.e., when their vehicle was safely parked for a few hours.
Legacy manufacturers get in on the action
Tesla may have burnished its trailblazer credentials by introducing over-the-air to automobiles, but legacy manufacturers have also adopted this technology, to lesser and greater degrees. In 2020, for example, Ford began rolling out over-the-air capabilities for its vehicles, which – in the car giant’s excited words – would ‘help improve your vehicle’s capability, quality and overall driving experience while you’re sleeping.’
Meanwhile, earlier this year, Volvo introduced over-the-air software updates across its entire range. This means that, in more than 34 countries, everything from in-car infotainment and app options, to navigation and EV charging systems, will be continually improved without drivers having to do anything besides set the times for the updates. As Volvo’s chief product officer put it, ‘By making all Volvo models able to receive over-the-air updates, we make important progress towards our ambition of making our customers’ cars better every day.’
A new report by Allied Market Research tells us that the global over-the-air market generated almost $2.6 billion in 2020, with the total value set to reach more than $13.7 billion by the end of this decade. The market will grow in line with ever-increasing demand for connected EVs, with major tech players in this space including the likes of Verizon Communications, Qualcomm, Bosch, and Harman International.
The latter has been an active acquirer in the sector of late. In a deal on which Hampleton advised, Harman purchased German startup Apostera earlier this year. Apostera specialises in automotive software solutions like ADAS, sensor fusion and augmented/mixed reality systems – precisely the kinds of solutions that may potentially be upgraded over-the-air, depending on how well-developed a vehicle maker’s (and/or country’s) cloud infrastructure is.
The latter is, of course, the essential point. The potential of over-the-air to transform how we drive and maintain our vehicles is immense, but – as noted by the recent Allied Market Research report – ‘lack of infrastructure in emerging countries and high cost associated with OTA updates hinder the market’. However, as such obstacles are inevitably overcome, and more software startups like Apostera emerge to cater to the autotech market, we’re sure to enter a truly new era for car users everywhere.