The automotive market is witnessing a profound transformation, driven by the rise of electrification, advancements in autonomous driving, and the shift towards software-defined vehicles. This revolution has raised a pertinent question: Can technology and consumer electronics companies make a substantial foray into the automotive market and potentially venture into car manufacturing themselves?
Electric vehicles are rapidly gaining traction, with a projected 23% of new car registrations in 2023 being electric, including hybrids. Furthermore, battery-electric cars have experienced remarkable growth, with a 4.8-fold increase between 2020 and 2023, as highlighted in IDTechEx’s report, “Electric Vehicles: Land, Sea, and Air 2024-2044”. Additionally, the advent of autonomous features has led to Level 2 autonomous vehicles becoming commonplace, while Level 3 vehicles are now hitting the roads. This is complemented by a notable trend towards software-defined cars, enabling over-the-air updates, subscription-based new features, and a burgeoning software-related revenue stream for automotive OEMs. The “Connected and Software-Defined Vehicles 2024-2034: Markets, Forecasts, Technologies” report by IDTechEx forecasts software-related revenue for software-defined vehicles to exceed US$700 billion by 2034.
The automotive industry is in the midst of a metamorphosis, evolving towards electrification, autonomous capabilities, and software-defined vehicles. This paradigm shift is manifested in Tesla’s disruptive impact, redefining car purchasing and ownership models. The industry is moving from traditional dealership-centric models to direct online sales, remote servicing through apps, and seamless over-the-air updates. Notably, this shift is not limited to Tesla, with industry incumbents beginning to embrace similar approaches to stay competitive in the evolving landscape.
This transformation has created significant opportunities for tech players to expand their footprint in the automotive sector. An example of this is the strategic collaboration between Hyundai and Amazon, which reflects the potential synergy between automotive and tech giants. Similarly, Sony has ventured into a joint venture with Honda, leveraging its expertise in AI, entertainment, and augmented reality. As the internal combustion engine gives way to electrification, tech companies are eyeing a broader role, potentially even venturing into vehicle manufacturing.
However, the convergence of the automotive and tech industries presents inherent challenges, primarily stemming from their divergent strengths. For smaller startups attempting to enter the automotive arena, the struggle often lies in reconciling state-of-the-art technology with the intricate nuances of high-volume, quality-controlled manufacturing. Despite these obstacles, major tech players are strategically positioned to navigate these challenges, evidenced by partnerships and initiatives by companies like Huawei, Foxconn, and Xiaomi to develop and produce electric vehicles.
The interplay between automotive OEMs and tech giants, each with distinct strengths, raises the critical question of which route is more arduous: automotive firms adapting to emerging technologies or technology giants mastering mass-market automotive manufacturing. The answer likely lies in a blend of partnerships, developments, and potential displacements in the long term. It is evident that the automotive market stands on the cusp of a momentous evolution, laden with formidable challenges.
Market Capital Research 