Getting onto the information highway

ust as you can’t keep that dog and cat hair on your clothes from migrating into the car, dammit, the digital revolution isn’t stopping at your vehicle’s door either. Young — and young at heart — drivers want to stay connected behind the wheel, which is why vehicle manufacturers and technology companies are combining expertise to develop connected cars that are equipped with Internet access, a wireless local area network (LAN), and special technologies that tap into the Internet or wireless LAN and provide additional benefits such as automatic notification of crashes, notification of speeding, and safety alerts.

And as the rolling hot spot becomes the new normal, it’s creating both opportunities and challenges for the automotive industry and its parts suppliers.

PUTTING THE WEB BEHIND THE WHEEL

These may be relatively early days for connected cars, but there’s no denying their place as one of the key next steps in the evolution of the automobile. The number of cars connected to the Internet worldwide will increase by more than sixfold in the next few years, from 23 million today to 152 million in 2020, according to research firm IHS Automotive. By 2018, the firm continued, one in five cars on the road will be “self-aware” — able to discern and share information about its mechanical health — and wireless and/or digital technology will be embedded in 88 per cent of new cars globally by 2025. North America is forecast to be the largest region for growth, moving from an estimated 100,000 units in 2025 to nearly 3.5 million units in 2035 or a 29 per cent worldwide share. Are we talking big money? You bet. This shift is expected to generate some major profits in the coming years, with global revenues projected to reach US$20 billion by 2018, according to a recent report from market analyst firm Juniper Research. That’s not chump change, and there’s more: the revenue and profit possibilities of the connected car go beyond the thousands of dollars automakers charge for these high-tech options. By 2017, one-quarter of all automakers will earn money from e-commerce transactions drivers make from the car, according to a January 2014 study by the Center of Automotive Research.

Small wonder, then, that automakers are pouring billions into connected car development. In June 2014, General Motors, Volkswagen AG’s Audi luxury line, and Tesla each revealed plans to offer Web connections in their cars, including Wi-Fi hot spots for tablets and laptops. At the 2014 North American International Auto Show in Detroit, GM touted its 4G LTE-connected Chevys while Ford introduced more applications that work with its voice-activated Sync system, including those that allow drivers to activate a home security system from the car. And new alliances are forming at speeds that put Survivor contestants to shame. Google Inc. announced a partnership with GM, Honda Motor Co., Hyundai Motor Co., and chipmaker Nvidia Corp. to bring the Android operating system to cars; and Apple is already working with BMW AG, Daimler AG’s Mercedes-Benz, GM, Nissan Motor Co., Honda, and others to bring its iOS operating system to cars through devices such as the iPhone.

OBSTACLES AND OPEN ROADS

But before automotive execs and OEM presidents start pricing new beachfront mansions in Maui, there are one or two grey areas that remain to be settled as the symbiosis of car and IT progresses. The first relates to product identity, and strikes at the heart of what it means to be an OEM — specifically, what networked mobility means for the existing superiority of OEMs, and whether they can maintain it in the face of the gazillion emerging technologies of the networked age. Simply put, if the tech companies get to define the terms of the connected car, automakers risk losing control of their own cockpits and the revenue that will flow from them. “The worst-case scenario for the automakers is going to a generic interface where you plug your phone or iPad into the centre console,” said Jeremy Carlson, a senior analyst with IHS Automotive. “They want to differentiate their cars. They’d rather not compete strictly as value appliances.”

One of two outcomes seems possible, each based on consumer perception. In the first, the car itself becomes the mere carrier of mobile Internet-compliant devices — the worst-case scenario just mentioned, in which OEMs only provide their vehicles as wireless online access systems, with virtually no control over the transmitted contents and intended uses. In the second outcome, the car itself becomes a mobile Internet-compliant device and creates its own value perception via networking. For automakers, this is hugely preferable. “The big advantage for OEMs is that, by using these proprietary software solutions, they can largely retain control over the contents and services offered,” said Sebastian Paas, IT expert and partner with KPMG. “With open source-based software, by contrast, they could only communicate using providers approved by them via the interfaces offered in the car.”

The second grey area centres around the Mario Andretti-like speed with which the information and communication industry is evolving. The potential problem, in a nutshell, is that the auto industry has adopted development times of three to five years for its products, and operates strictly within its model cycles; modern communication devices, meanwhile, can be obsolete within six months. “To be able to carry out a diverse number of conceivable functions in the longer term, the connectivity unit in the car must be updateable,” Paas continued. “To do this, either the communication unit will have to be replaced, and so must be no bigger than a conventional smartphone; or the unit acts in the vehicle as a mixture of router, radio, and telephone, and becomes updateable in the form of a renewable memory unit through flash updates.”

How can automakers respond? Well, it might not be so hard after all. “The primary concern of the OEMs is to have cars with a six-year lifespan that can be updated every year to keep them technically current,” said Steve Rodgers, president of the Automotive Parts Manufacturers’ Association (APMA). “The solution is for the auto parts makers to show the OEMs how to make rapid changes to a vehicle’s CAN bus architecture and add new features and applications every year that will keep it competitive.”

ARE YOU EXPERIENCED?

One big advantage for the car manufacturers and auto parts makers is obvious: IT corporations don’t know how to build complex automobiles, and the new arrivals on the auto industry scene have a steep learning curve ahead of them. “Connected cars are a good opportunity for auto parts molders — including the Canadian shops — because a lot of these components can be manufactured locally, are a significant value-add, and are an area in which we can be competitive,” Rodgers said. “Many of the new companies coming into the connected vehicle technology industry are either small start-ups or come from the aerospace industry, and neither group is necessarily familiar with what it takes to build an automotive prototype or with what an OEM is looking for in a prototype. In production alone, where per model around 8,000 individual parts have to be combined 2,000 times per working day, the experience of well-versed auto experts is indispensable.”

But it won’t be a cakewalk, either. “As knowledgeable as they already are, established auto parts makers are going to have to become a lot more tech savvy in order to develop and maintain a clear understanding of the types of connectivity applications and features that consumers will want going forward,” Rodgers continued.

At present, then, it remains to be seen which companies and sectors will come out on top in the high-tech mash-up that’s transforming vehicles into hot spots; ditto for whether the car manufacturers or the Internet providers will win the war for product identity.

Regardless, Canadian auto parts makers seem optimistic on the whole about the rise of the connected car, especially after the near-death experience of the Great Recession. “APMA’s member companies are definitely excited about the technologies and opportunities, and the ways to differentiate themselves, that connected cars provide,” Rodgers said.

Sounds like they’re more than ready to cruise the information highway.