More Computer Than Car?

We’ve come full circle, haven’t we?

Five decades ago, computers were the size of cars. Now cars are morphing into computers on wheels.

It’ll probably be the most impactful pairing of hardware and software of my lifetime.

The auto industry is in the middle of reinventing itself and the cars it offers. The driverless car has garnered most of the attention. The electric car is a close second, thanks to Tesla.

And the connected car? It’s a distant third. Not much talked about.

But it should be. It’s the most important car category of the three.

Gartner Research has forecast that new vehicles equipped with data connectivity will increase from 6.9 million per year in 2015 to 61 million per year in 2020.

The total number of automobiles equipped with data connectivity by 2020? Around 250 million, says Gartner.

Connectivity is also a critical technology enabler of self-driving cars. It’s essential that we trust our cars when they’re driving autonomously. But this isn’t about that. 2020 is two to five years before driverless cars are set to take off!

As far as user experience, it will completely shift attention away from the look and drive (getting from point A to point B) to more typical internet user elements:

  • Personalization
  • Convenience
  • Entertainment
  • Infotainment
  • Device integration
  • Usefulness.

And it will help restructure the market. Electronics make up 80% of the innovations in today’s cars. How companies connect their cars will go a long way in determining winners and losers.

Fascinating Battle Ahead

You have the well-known and powerful incumbents: Apple’s CarPlay and Google’s Android Auto.

And the second-tier incumbents: NXP, a leading automotive semiconductor maker, and Qualcomm, which announced a new connectivity platform this past February.

Next is the blue chip challenger Microsoft.

It’s been working with companies like BMW, Ford, Nissan and Volvo. Volvo is using Skype in its 90 Series cars. Nissan is using Microsoft’s connected vehicle platform built on the tech company’s Azure cloud. And in late March, Microsoft agreed to license its patents for connected cars to Toyota.

Then there’s the chipmaker challenger Intel. Its strategy consolidates several functions like entertainment and navigation into a single microprocessor.

At CES (Consumer Technology Association) 2017 in Las Vegas, Intel said it had developed 5G infrastructure chips that will bring connectivity to self-driving cars… and that it was working with BMW on cars of the future.

Intel Car

Intel is looking ahead to connected self-driving cars.

A Matter of Perspective

Microsoft says car connectivity is at its core “a software challenge.” Of course.

Intel puts chip technology at the forefront. It says that 5G bandwidth has the “latency, the speed, to be able to support what’s called ‘V-to-X.’ Vehicle to vehicle, vehicle to infrastructure, vehicle to pedestrian.” Naturally.

And that’s just the first act.

The second act is connectivity supporting driverless cars. This is where AI (artificial intelligence) plays a big role. NVIDIA says that in AI alone, it’s working with 1,500 startups – the bulk of which are related to the auto industry.

I’m not surprised. As usual, startups are driving much of the critical innovation…

  • Automatic has created an app and plug-in adapter to turn vehicles into connected cars.
  • TowerSec, bought by connected car supplier HARMAN this past January, develops firewalls for both engine control units and vehicle telematics systems.
  • Ford acquired Livio Radio to improve the connectivity of its vehicles.
  • Connected car app Zendrive uses smartphone sensors to measure drivers’ behavior.
  • Karamba Security protects connected cars from cyberattacks.
  • OpenCar has built an in-car app platform that it hopes will challenge CarPlay and Android Auto. It was acquired by Inrix.

The competition among these startups is fierce. The competition among the biggest connected auto players to access the best startup technology is just as fierce.

The legacy companies vying for supremacy in the connected car sector will all be seeking out startup technology to gain an edge on their peers.

Early investors should approach the sector though their eyes. Who has the most sought-after technology that could help them win the day?

Good investing,

Andy Gordon
Founder, Early Investing