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Business / Motoring Opinion

Car connectivity to drive future

By Yale Zhang (China Daily) Updated: 2016-04-25 10:13

Car connectivity to drive future

Co-founder and head of internet company Le Holdings Co, Jia Yueting (left, front) and guests present the LeSEE all-electric battery concept car at a ceremony in Beijing on Wednesday.

Young users increasingly open to smart vehicle options

How should we refer to car connectivity? At first, it was known as "telematics", a weird nomenclature created by the IT industry through the combination of telecommunications plus informatics. It embraced communication between drivers and the call centers of the original equipment manufacturers (or third parties) to obtain services or assistance, such as real-time traffic information, roadside rescue, and car diagnostics. Importantly, car owners needed to pay annual fees of 500 yuan ($77) to 1,200 yuan for such services.

Early this decade, "connected cars" became the term of choice, as it referred to not only the functions of telematics, but also V2V (vehicle-to-vehicle) or V2X (vehicle-to-infrastructure) functions, aimed at a better driving safety and better traffic flows.

But industry people quickly decided this name was not sexy enough, so they started using the phrase "smart cars". This refers to not only connected cars, but also autonomous driving, and includes new-energy-vehicle, especially all-electric vehicle, technology.

Car connectivity to drive future

The long-term vision for smart cars is 100 percent autonomous driving, together with Intelligent Transport Systems, which can release people from the burden of driving and reduce traffic accidents.

There will be fewer crashes and collisions, since all vehicles will be controlled by a mega-matrix system, not handled by human beings.

If this can be realized in 20 to 30 years as predicted, the auto industry will be turned upside down.

Since there will be no drivers, the risks of an accident will be significantly reduced, and all the features used to attract customers today, such as drivability, handling, and safety features will no longer be selling points.

The vital 'brain'

And if safety features are no longer an important feature, there will be no need to stamp or laser weld superstrong car bodies or to pass stringent collision tests.

Thus the safety technology barriers will be lowered for car manufacturers. The most important part of the car will be the "brain", and the embedded Telematics Control Unit, the "brain", to facilitate access to the internet.

Giant IT companies such as Google or Apple are better positioned in this kind of technological competition, since they have experience of computer hardware and software integration, and of developing algorithms, which are all vital for autonomous driving.

Traditional car companies may find themselves losing their competitive edge quickly over time.

To make things worse, car sharing has become very popular among the younger generation.

It can be expected that for young people in big cities, punctual and safe transportation from point-A to point-B by an autonomous car whenever they send a request will become the norm and owning a car will become less important.

This long-term future is terrifying for the traditional auto industry, because that will mean the world will need fewer new cars each year. Industry estimates suggest that in the not too distant future, global new vehicles sales will decline by 30 to 50 percent from today's 80 million units.

That will be accompanied by new competitors in the form of the IT/internet giants, which will be able to leverage their advantages in what will be the new selling points. For traditional auto companies, "to be or not to be" is an existential question that is becoming ever more pertinent.

However, from today's reality of traditional telematics services to the future in 30 years, there is still a long way to go. Most global auto companies have strategic plans or road maps to transition into technology companies.

During this transition era, the key will be to grab the big data of the cars and drivers first, and then to develop different levels of autonomous driving technologies.

The precondition for having access to big data is to have an embedded telematics TCU system in the car first.

Today's embedded telematics services have been developing for more than 10 years in China but still, the services look more like the icing on the cake, and car owners do not agree these "services" are necessities for driving. So while they welcome these new functions, they firmly refuse to pay extra for them. Thus the installation ratio of embedded telematics in new cars was less than 10 percent by the end of 2015.

New connectivity paths

Since consumers rely on and trust the maps on their smartphones more than the map system, recently smartphone connectivity systems that use a car's built-in display such as Apple's CarPlay and Baidu's CarLife have become popular with consumers as they allow the maps on smartphones to be used without any extra annual fees. Such systems are expected be part of more than 80 percent of new car sales in five years.

However, a phone connection solution cannot keep the car online all the time, and since they are third party devices they cannot integrate with a vehicle's CAN-BUS deeply enough for autonomous driving.

Therefore, from an industry point of view, only an embedded TCU system can do the job. At the same time, automakers are planning to reduce the services provided by call centers and shift instead to cloud systems for more self-service experiences, so that the annual fees can be reduced or eliminated.

It is estimated that embedded TCU systems will be available in the coming two to three years from all the traditional automakers.

Interestingly, in this regard, it is industry needs instead of consumer demand driving connected cars and smart cars forward. And policy does not play a major role here since there are no regulations about telematics in cars in China (although there are some in the commercial vehicle sector).

Autonomous driving remains at the experimental stage due to the technology currently available and the legal risks should there be an accident, but many startup entrepreneurs backed by venture capital have announced ambitious plans to "build" smart cars: electric vehicles with advanced driver assistance systems and car connection features.

VC darlings

While they do not have experience of developing or manufacturing cars, they do have a good understanding of how to tell stories to venture capitalists. Connected, autonomous, electric cars are definitely a favorite for venture capital.

Not long ago, one smart car company's executive in charge of manufacturing complained internally: "I have only two questions: first, why does this company want to manufacture a car in the first place? Second, how will it sell this car to the market? Till today, I don't see any serious discussion about these two questions!"

Obviously, this executive is a traditional car guy; he does not understand capital market rules or trends.

However, it's 2016, not 2046. We are not in the ideal driving environment of Intelligent Transport Systems yet, therefore manufacturing smart cars still has the high barriers associated with manufacturing a traditional car as the general assembly processes, such as stamping, welding and coating, cannot yet be bypassed. A good understanding of capital markets is far from enough.

Whether by a traditional car company, or a new startup or an IT company, the hope is there will be more "quiet" smart car technology development in China; more doing and less talk.

The author is managing director of Automotive Foresight (Shanghai) Co Ltd.

(China Daily 04/25/2016 page37)

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