How the Car Industry is Reinventing Itself in 2016


Lessons from the 2016 North American International Auto Show

At the North American International Auto Show, Ford’s CEO Mark Fields announced to an attentive crowd that the Motor Company is no longer an automaker but a, “mobility company.” This public rebranding at one of the largest auto shows of the year is indicative of the shift occurring in the automotive industry.

Car manufacturers are no longer focusing on the strength of the engine or how well the car handles on the road; instead, companies are realigning their efforts to create a mobile experience, one defined by connectivity between car and driver and between car and smartphone.

Ford itself has been investing in a connected in-vehicle infotainment (IVI) system for some time and was one of the first to enter the market when it debuted Ford SYNC in partnership with Microsoft in 2007. So despite Fields’ splashy remarks, Ford didn’t walk away with the headline of the event. Instead, the most important takeaway from this year’s NAIAS, which occurred on January 11-24 2016 in Detroit, was one of industry movement: at an event hosting around 750 different cars, the focus on technology was undeniable.

For the first year in over a century of auto shows in Detroit (though the NAIAS did not earn its name until 1989), the auto conference partnered with a technology company (IBM) to enhance the visitor’s experience with apps for the event. IBM also gave a presentation on the importance of data security and software, as did Wind River Technology, despite the fact that both are software companies, not car manufacturers. And echoing Ford’s rebranding, Toyota’s presentation didn’t discuss cars but revolved entirely around new satellite technology that will allow terabytes of data to be downloaded to a moving car.

But perhaps the biggest announcement came from U.S. Secretary of Transportation Anthony Foxx, who announced the White House’s plan to spend $3.9 billion in the next 10 years on R&D for self-driving cars and to work with the government and industry leaders to create a “model state policy” within the next six months. This is big news for the self-driving car economy, as one of its biggest hurdles to market remains standardization and establishing the requirements needed for the car to be road-ready.

What do self-driving cars have to do with IVIs and connectivity?

Though it sounds like science fiction, the eventual existence of the self-driving car is predicted by nearly every industry veteran, though the timing of their arrival is still up in the air. Some say 5 years, some 10 or 15. With the very apparent potential profits, it’s no surprise that many car manufacturers are investing in the technology and developing their own self-driving cars. Only a few days before Foxx’s press statement, General Motors announced a $500 million investment in Lyft to further develop autonomous cars, the latest company to enter the world of driver-less car R&D. Yet it is tech giant Google that has the most promising self-driving car in development to date with a vehicle that only makes a mistake every 1,244 miles (it’s closest competitor is Volkswagen, at every 57 miles).

So what does this have to do with in-vehicle infotainment systems? The biggest naysayers to IVIs point to the risks. More than 90 percent of all car accidents are caused by the driver. So what happens when we give drivers more technology to pull their eyes from the road? If you remove the driver from this situation, not only does that remove the safety concerns, but suddenly the person in the car isn’t distracted from the IVI and that infotainment system becomes much more important to the in-car experience.

Are transportation services reacting the wrong way?

This brings up the question of how IVIs can and already are impacting transportation services. As of yet, the biggest product initiative is in-flight entertainment services. However, for car transportation services, there has yet to be any great success. Perhaps the biggest effort has been New York City’s outdated television installations in their taxis or Boltbus’ inclusion of mobile hotspots.

But tech industry darling Uber is now entering the infotainment market with the recent release of Uber Trip Experiences, which allows users to access third party apps through Uber’s own and stream media and information. Considering that the automotive industry is valued at $2.3 trillion dollars and the transportation services industry over twice that, innovation in this marketplace could generate a lot of revenue, and it’s surprising that so few companies have tried to enter that market as of now.

Yet Uber’s latest product initiative is limited to the smartphone and is targeting this generation of infotainment systems, systems that are defined by bluetooth connections to wireless devices. The next generation of infotainment systems will be something much more powerful. Nermin Hajdarbegovic, Technical Editor of the Toptal Engineering Blog, describes this imminent software engineering evolution with an effective simile: “next-gen infotainment platforms are to current systems what smartphones are to feature phones.”

To back up that claim, Hajdarbegovic points to recent hardware developments that can handle the stresses of a car environment and the key areas of market potential for infotainment, such as safety, insurance liability, and fuel economy, among areas that have already been identified as valuable such as map services and voice control. Finally, Hajdarbegovic points out that the development of infotainment systems is likely to increase dramatically in the developing ecosystems of Apple CarPlay and Google’s Android Auto.

The future of IVIs: Google, Apple, and MirrorLink

There can be no doubt that Google and Apple are some of the biggest players in the infotainment market, despite the fact that they are newcomers on the scene. The first car offering Apple CarPlay was sold on September 8th, 2014, in a Ferrari FF model no less, beating Android Auto to market, which wasn’t available until May 26, 2015 in Hyundai’s Sonata Sedan. Yet despite the youth of these products, they are both poised to take over the market.

In an April 2015 study, IHS predicted that both Android Auto and Apple CarPlay would sell a little under 1 million units in 2015, but by 2020 those figures would climb to an annual 31 and 37 million units respectively. Not only is that incredible growth, but it is important to take into account MirrorLink, which was expected to sell just over a million units in 2015 and 17 million by 2020.

This prediction of Apple and Google dominance is notable because MirrorLink is a standard maintained since 2011 by the Car Connectivity Consortium, whose members include major auto manufacturers and smartphone makers (though Apple and Google are notably absent from that list). In essence, what this means is that no auto or smartphone manufacturer (within the consortium) can block a MirrorLink app, which has the potential to prevent Apple or Google monopolizing the infotainment space, and give third party applications a better chance on infotainment systems.

While in-vehicle infotainment systems will be profitable by a large margin, their road won’t be an easy one. Many drivers are frustrated by the quality of in-car tech. In fact, according to a study by J.D. Power, infotainment systems have been the top reported problem with new cars in the past two years and in a different survey conducted by Mckinsey 37 percent of drivers would switch to another manufacturer if they offered better connectivity.

This means that IVI competition will be steep, and whoever can build the best system will win the customers. When automakers run as low a profit margin as 3 percent, that is significant. The war between Uber and Lyft, between Google Android Auto and Apple CarPlay, between the major auto manufacturers, may all be determined by as small a thing as an infotainment system.

Edited by Stefania Viscusi
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