4 trends changing the global competition for self-driving cars

The progress toward connected cars and autonomous vehicles is being spurred by four interrelated trends. All of these are leading to changes in what cars are and how they’re used, according to the PwC report Connected car report 2016: Opportunities, risk, and turmoil on the road to autonomous vehicles.

Radically new technology at low prices

Technological innovation is accelerating, particularly the quality of connectivity (based on fifth-generation wireless technology able to stream data from the cloud in near real time); the computing speeds required to operate artificial intelligence and steer a self-driving vehicle; the evolution of complex low-cost sensors that can make a car act as if it is aware of its surroundings; and the software that binds all of this together.

Innovative companies, both established automakers and new entrants from the technology industry, are investing accordingly in new technologies and new services. This is especially true in the premium market, where carmakers like BMW and Tesla are pushing technology to the limit, but other kinds of connected vehicles are being developed as well, including low-cost urban “pods,” robo-taxis, even 3D-printed buses.

New high-tech entrants drive faster

Non-traditional tech companies are not just offering new services as add-ons to automobiles. They are gaining traction in the very technology that makes cars run – and in so doing, they are disrupting the traditional vehicle technology value chain. Mobileye, for example, offers entire “system-on-a-chip” solutions for advanced driver assistance systems, and Nvidia makes systems for dashboard functions and autonomous driving and mapping.

Meanwhile, Apple is reported to have invested as much as $10bn in an iCar, while Google is working on an entire operating system for connected and autonomous cars. Google’s own self-driving cars have already driven more than 1.5 million miles.

These and other new entrants operate differently from traditional automakers and suppliers, with a greater willingness to test new ideas and speed up product development cycles.

Their data-centric business models are different too, being far more dependent on revenue from ongoing services and the sale of information. As such, they have the potential to significantly change not just the car itself, but how the entire industry operates.

Who will be where in the supply chain from foundry to customer? Who has the right to win? Many new players have identified the car as the most attractive place to enter this industry.

New mobility concepts and increasingly urban customers

The tastes and interests of potential car buyers are undergoing a substantive shift. Urban residents in Western markets appear to be losing interest in owning their own cars, a trend exacerbated by their desire to move to urban areas, where cars simply aren’t a requirement, and where public transport and ride-sharing apps can easily fulfill their needs, the report said.

Millennials face affordability issues; some live with their parents or in shared households and put off home ownership for this reason. Although car sales are reaching all-time highs in the U.S., affordability of automobiles remains a key limitation for future growth.

The movement toward car-sharing and ride-sharing services will be driven in large part by the dramatic reductions in transportation costs that are expected with connected cars.

Meanwhile, in China — where members of an enormous and growing middle class still dream about owning their own cars, making them by far the largest new car market in the years to come — new drivers already expect highly sophisticated levels of connectivity and services in the cars they buy.

Evolving regulatory and policy constraints

Policy and regulations typically lag behind technological progress, at least in the beginning of a new phase. For example, seat belts were first offered as options in 1949, but legislation requiring their use did not appear until 1970, in Victoria, Australia.

We may expect regulators to respond to the new technology with laws ensuring the safety of driverless vehicles, once that technology is available, the report maintained.

However, cities are providing momentum by discouraging the use of private cars, especially those not driven by electricity, either through public policies such as congestion pricing and additional bike lanes or by regulating emissions directly.

These trends explain why automakers have been investing so heavily in connected technologies, new ride-sharing services, and other transportation options, including such deals as Toyota’s investment in Uber, VW’s in Gett, and GM’s in Lyft. And it explains the entry into the market of data-centric digital players such as Google, Apple, and Alibaba, all of which are well attuned to the changing demographic of the driving (and non-driving) public, said the report.

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