Autonomous Vehicle Engineering - November 2021 - 3

The Navigator
Can OEMs really double revenue with services?
The phrase " data is the new gold " has
become something of a mantra in many industries
in recent years, but especially in automotive. Earlier
this year, Ford laid out its plan for Ford+, much
of which is built on new revenue streams enabled
by connected vehicles. Similarly, during General
Motors' recent Investor Day, CEO Mary Barra
described a course for doubling the company's
annual revenue to $280 billion by the end of the
decade. While such pronouncements often cause
Wall Street analysts to get starry-eyed (as is their
intent), they may not be entirely realistic.
Guidehouse Insights projects that by mid-decade,
nearly all new vehicles will include embedded
data connectivity. As recently as five
years ago, Ford was still touting the
bring-your-own-device approach for
its Sync platform, but it has shifted
its strategy and now builds 100% of
its new vehicles in North America
with a 4G LTE modem. Most OEMs
also are bundling several years of
basic connectivity services into the
price of the vehicle to ensure that
customers get used to the idea of
having that capability.
With the increasingly massive data stream
OEMs salivate
at the near100%
margins
that Apple and
Google derive
from each iOS
and Android
transaction.
going into and out of vehicles, automakers are
practically salivating at the thought of being able
to replicate the near-100% margins that companies
like Apple and Google derive from the 15%-to-30%
cut they take from every transaction that happens
on a mobile device using iOS or Android.
The problem for the auto industry is that
vehicles are far more costly than phones and
prices have spiked this year as production has been
slashed by chip shortages. In Sept 2021, average
transaction prices hit an all-time high of $45,000.
Automakers like the idea of delivering features
on-demand, providing customers with flexibility.
However, enabling that content requires certain
hardware to be built in, regardless of whether the
customer chooses to pay for the feature separately.
This approach is only going to push prices higher,
exacerbating the problem.
GM also recently launched a vehicle software
platform called Ultifi, with the goal of attracting
third-party app and service developers to support
it as an alternative to a system like Android
Automotive. Unfortunately, app developers have
limited bandwidth, especially the independents
that often create the most compelling innovations.
If every automaker has its own platform, it seems
highly unlikely that more than a few developers will
choose to support them.
Ford has had its Sync Applink
platform for more than a decade and
has even open-sourced it as Smart
Device Link (SDL). Only Toyota has
released an infotainment system with
SDL support and few developers have
released versions of their apps that
use the interfaces that enable control
of those apps from the vehicle.
A fragmented ecosystem of
brand-specific, incompatible vehicle
software platforms is not a pathway
to widespread developer support. Look at how
many WebOS, Blackberry and Windows Phone
devices and apps are used in 2021. Without developers
creating compelling apps and services - and
a real value proposition for consumers that makes
vehicles more affordable, rather than more costly -
it's hard to see how this " pot of data gold " is going
to evolve into a real business.
Platforms like Ultifi do have some real utility
in helping automakers create software-defined
vehicles that are more flexible and potentially more
appealing to customers. If that does happen, simply
selling more vehicles - rather than recurring-revenue
bundles - may be the real path to bankable
revenue growth. ■
Sam Abuelsamid
Principal Analyst,
eMobility
Guidehouse Insights
sam.abuelsamid@
guidehouse.com
AUTONOMOUS VEHICLE ENGINEERING
November 2021 3
Autonomous Vehicle Engineering - November 2021

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