• OEMs and suppliers continue to brainstorm on how to properly monetize the opportunities that AI presents.
• Collaboration in the software-defined vehicle (SDV) era is a must in the face of increased competition from compelling user experiences provided by Chinese OEMs.
• Data ownership and management continue to drive infotainment decisions with regard to Apple CarPlay and Android Auto as OEMs try to balance initial consumer desires and data collection for vehicle improvement.
• Connectivity is slowly becoming a consumer option with the proliferation of eSIM.

Many of the sessions on “Day 1” at the Reuters Automotive USA 2024 conference revolved around the software-defined vehicle (SDV) era and the desire to take SDV functionalities to ICE and hybrid vehicles. SDVs present a plethora of opportunities to improve customer experiences, besides allowing tighter integration of artificial intelligence (AI) into various aspects of the vehicle. OEMs have been searching for ways to monetize AI in their vehicles, but the puzzle remains unsolved due to consumer perceptions of data security. At the same time, some solutions are beginning to gain traction with virtual assistants in the cockpit.

Analyst takes

• SDVs ideally are powertrain agnostic but have lately been closely linked to EV platforms. This has been mainly due to the opportunity that new platforms present to OEMs to reimagine powertrains and electrical architecture. Software use dramatically increases in EVs, but the key benefits of SDVs can equally apply to ICE and hybrid vehicles.
• Autonomous driving and digital cockpit are two areas independent of powertrain choice that will have the highest requirement for software to manage operations and features. With recent stagnation in the EV market and increased focus on hybrids, the new platforms OEMs are developing should incorporate multi-powertrain options.
• OEMs looking to extend the use of existing platforms that lack an SDV approach may find it difficult to implement the software and associated operations and features.
• Generative AI (GenAI) voice assistants may become the bridge between vehicle occupants and the plethora of features enabled by AI, connectivity, e-commerce and more.
• Existing voice assistants struggle with at least one key performance attribute – natural language processing, making their wider acceptance difficult. This, along with the challenges of speed and recognition, can be overcome with AI technology. It will also introduce more functionality and the ability to deal with complex user queries.

• Further, features can be tailored to the occupants’ needs, thereby increasing the monetization of services offered. The feature delivery can be facilitated through voice assistants in a way that reduces friction between the user and the services provided.

  

  Chris Feuell, CEO, Chrysler/RAM
  Source: Counterpoint Research

At the conference, much was said regarding Chinese OEMs’ performance forcing automotive conglomerates to think deeply about how they can connect with customers at a deeper level and create unique experiences. One example that was brought up was a feature that uses the camera system responsible for ADAS functionalities to recognize users, including children, to automatically load applications to the rear seat infotainment module, such as educational lesson plans or pick up where those children left off. That type of connection with the end user by Chinese OEMs is reminding legacy automakers that they have a long way to go and some introspection is needed.

Analyst takes

• Chinese OEMs have clearly been leading the development of features that improve the user experience. Legacy automakers face challenges both internally and externally to close the gap.
• Internally, legacy automakers have not been set up as software companies but as hardware-first manufacturers. With the move towards SDVs, large-scale operational and cultural changes are required to create experiences that consumers desire. VW and its struggle with Cariad in moving towards software-driven vehicles demonstrate this internal hurdle.
• Externally, in contrast to legacy automakers, the majority of Chinese consumers tend to be early technology adopters. This means Chinese consumers are more willing to experiment and more forgiving when things go wrong. Western consumers are more skeptical about the value provided by new features and have high expectations in terms of feature execution. If the feature is not easy, effective or enjoyable to use, they are unlikely to use it again.

KPIT Notes on shifts in automotive market
Source: Counterpoint Research

Data ownership and management also frequently came up in conversations at the conference. The data collected from SDVs presents many opportunities for OEMs to improve their vehicles over time. However, the ownership of this data continues to create a conflict between customers, companies like Apple and Google, and OEMs. Customers want the technology to work seamlessly with their vehicles. However, this creates a scenario where OEMs relinquish the rights to that data when integrating Apple CarPlay and Android Auto. It is a choice between the future potential to satisfy customers and meeting immediate needs.

In a panel discussion, a Volkswagen representative noted that the company is now pursuing the option of maintaining consumer choice in connectivity. This move signals that the days of AT&T keeping a stranglehold on the connected car market may be coming to an end as OEMs are choosing customer satisfaction over long-term exclusive partnerships. This is being facilitated by the proliferation of eSIM technology in the automotive industry. It presents an opportunity for Verizon and T-Mobile to gain ground in the space.

Analyst takes

• The question of data control is a very difficult one for OEMs and technology players. The technology players are increasingly pushing their services into the car, whereas the OEMs are ensuring they hold back to crucial vehicle data that can benefit them in the future.
• What has not happened is the OEMs converting this data into revenue streams. Some like Volvo are happy to concede data to enhance customer appeal inside the car and instead focus on what they do best – enhancing the experience through the car brand, be it through offering insurance or maintenance. GM has gone quite the opposite way, restricting Apple CarPlay and Android Auto while developing its own Ultifi infotainment software.
• On the other hand, Chinese smartphone giants Huawei and Xiaomi have ventured and built their own branded cars to expand their connected ecosystem.
• As we head to the future, the tensions over data ownership will give way to the emergence of a different mix of solutions – more tech player-OEM cooperation, more OEM-based solutions, and yet more tech players entering the car space. The consumer will not only be the winner but will play a huge role in deciding the winning solution. The eSIM introduction is another step forward in consumer choice becoming a primary driver for in-car connectivity.

Marcel Barwanietz, Head of Product Satisfaction, Volkswagen Group of America
Source: Counterpoint Research