Young users increasingly open to smart vehicle options
How should we refer to car connectivity? At first, it was known as "telematics", a weirdnomenclature created by the IT industry through the combination of telecommunications plusinformatics. It embraced communication between drivers and the call centers of the originalequipment manufacturers (or third parties) to obtain services or assistance, such as real-timetraffic information, roadside rescue, and car diagnostics. Importantly, car owners needed to payannual 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 thefunctions 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 thephrase "smart cars". This refers to not only connected cars, but also autonomous driving, andincludes new-energy-vehicle, especially all-electric vehicle, technology.
The long-term vision for smart cars is 100 percent autonomous driving,together with Intelligent Transport Systems, which can release peoplefrom the burden of driving and reduce traffic accidents.
There will be fewer crashes and collisions, since all vehicles will becontrolled by a mega-matrix system, not handled by human beings.
If this can be realized in 20 to 30 years as predicted, the auto industrywill be turned upside down.
Since there will be no drivers, the risks of an accident will be significantly reduced, and all thefeatures used to attract customers today, such as drivability, handling, and safety features will nolonger be selling points.
The vital 'brain'
And if safety features are no longer an important feature, there will be no need to stamp or laserweld superstrong car bodies or to pass stringent collision tests.
Thus the safety technology barriers will be lowered for car manufacturers. The most importantpart of the car will be the "brain", and the embedded Telematics Control Unit, the "brain", tofacilitate access to the internet.
Giant IT companies such as Google or Apple are better positioned in this kind of technologicalcompetition, since they have experience of computer hardware and software integration, and ofdeveloping 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 andowning a car will become less important.
This long-term future is terrifying for the traditional auto industry, because that will mean the worldwill 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 beable to leverage their advantages in what will be the new selling points. For traditional autocompanies, "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 isstill a long way to go. Most global auto companies have strategic plans or road maps to transitioninto technology companies.
During this transition era, the key will be to grab the big data of the cars and drivers first, and thento develop different levels of autonomous driving technologies.
The precondition for having access to big data is to have an embedded telematics TCU systemin the car first.
Today's embedded telematics services have been developing for more than 10 years in Chinabut 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 firmlyrefuse to pay extra for them. Thus the installation ratio of embedded telematics in new cars wasless 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'sCarPlay and Baidu's CarLife have become popular with consumers as they allow the maps onsmartphones to be used without any extra annual fees. Such systems are expected be part ofmore 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 arethird party devices they cannot integrate with a vehicle's CAN-BUS deeply enough forautonomous driving.
Therefore, from an industry point of view, only an embedded TCU system can do the job. At thesame time, automakers are planning to reduce the services provided by call centers and shiftinstead to cloud systems for more self-service experiences, so that the annual fees can bereduced or eliminated.
It is estimated that embedded TCU systems will be available in the coming two to three yearsfrom all the traditional automakers.
Interestingly, in this regard, it is industry needs instead of consumer demand driving connectedcars and smart cars forward. And policy does not play a major role here since there are noregulations about telematics in cars in China (although there are some in the commercial vehiclesector).
Autonomous driving remains at the experimental stage due to the technology currently availableand the legal risks should there be an accident, but many startup entrepreneurs backed byventure capital have announced ambitious plans to "build" smart cars: electric vehicles withadvanced driver assistance systems and car connection features.
VC darlings
While they do not have experience of developing or manufacturing cars, they do have a goodunderstanding of how to tell stories to venture capitalists. Connected, autonomous, electric carsare definitely a favorite for venture capital.
Not long ago, one smart car company's executive in charge of manufacturing complainedinternally: "I have only two questions: first, why does this company want to manufacture a car inthe first place? Second, how will it sell this car to the market? Till today, I don't see any seriousdiscussion about these two questions!"
Obviously, this executive is a traditional car guy; he does not understand capital market rules ortrends.
However, it's 2016, not 2046. We are not in the ideal driving environment of Intelligent TransportSystems yet, therefore manufacturing smart cars still has the high barriers associated withmanufacturing a traditional car as the general assembly processes, such as stamping, weldingand coating, cannot yet be bypassed. A good understanding of capital markets is far fromenough.
Whether by a traditional car company, or a new startup or an IT company, the hope is there willbe more "quiet" smart car technology development in China; more doing and less talk
