Your first question might be: “what the heck is the “Internet of Cars?!” It’s a fair one. The Internet of Vehicles (IoV) just might be the next milestone in the tech zeitgeist, with designs to integrate vehicle-to-vehicle, vehicle-to-roads, vehicle-to-human and vehicle-to-sensor mobile interactions. The internet-based technology is expected to equip vehicle users with better and easier-to-use navigation, road safety and location sharing tools along with other functionalities of their smartphones including entertainment apps, web browsing and (hands free) calls. Sounds like something that should be coming from Silicon Valley, but in actuality it is China that could be emerging as one of the biggest forces at its forefront.
Currently ranking as the largest market for automobiles—with 24.6 million units sold in 2015—along with having the highest number of internet users in the world, China is ripe for securing a hefty slice of the IoV revolution. And it’s already well underway.
Already, several Chinese internet/technology companies have embarked on clinching deals with the biggest automobile firms in the world. Chinese internet behemoth Baidu has managed to get automakers including Hyundai, BMW, Mercedes, Ford, Audi and Volkswagen to install its ‘CarLife’ in their units sold in China. The search engine company also teamed up with an insurer for a usage-based auto insurance project.
In 2014, Alibaba purchased Chinese interactive mapping and navigation firm Autonavi for $1.5 billion, and is looking forward to joining hands with Chinese automaker SAIC. Also, Audi has revealed plans of incorporating Chinese internet company Tencent’s WeChat app into its vehicles to allow location sharing. French automobile maker PSA Peugeot-Citroen will reportedly collaborate with Alibaba for wi-fi features in their cars sold in China, and is also planning to install apps to detect gas usage and vehicle location.
The “connected vehicle” market also spells ample opportunity for mobile service providers. Connectivity features in cars could require more data usage and faster internet speed—meaning more revenue-earning avenues would be available for internet/cellular service providers. To cash-in on this promising market, China Mobile and Deutsche Telecom partnered in October 2014 to provide 4G-based vehicle information services to connected drivers.
China to Take-On U.S. Tech Giants
According to estimates by Statista, the number of connected cars in China would touch more than 44 million by 2020, and would therefore surpass the estimated U.S. levels of around 31.8 million. Revenues in the connected car market are expected to grow at CAGR +44.9% in China over 2016-2020, which is significantly faster than the +27.6% predicted for the U.S. market.
Fuelled by a growing tech-savvy domestic population (around 60% of Chinese customers are willing to change car brands for better connectivity features as revealed by a McKinsey survey) coupled with regulatory curbs on foreign technology (such as those on Google Maps and Apple’s iBooks and iTunes movies), Chinese tech firms can potentially give a tough competition to their foreign counterparts in its domestic market. The ‘Made in China 2025’ government initiative unveiled last year stated goals to boost domestic technology and innovation in China, which included 80 percent of domestic automobile entertainment systems and 100 percent of the nation’s satellite navigation system market, to be owned by Chinese companies by 2030.
Furthermore, with the possible expansion of China-made car exports in emerging regions like Africa and Asia, in addition to an expected development of its own operating system (akin to Ios/Android), China’s footprints in the internet-connected ecosystem could transcend borders in coming years. That could add to the competition among global powers in the tech space.
Bottom Line for Investors
Armed with government support to stem entry of foreign players, China’s domestic technology sector is brimming with potential for the automobile space, exacerbated even more so by a large and growing tech-savvy consumer base. But that’s not to say that the U.S. technology industry is doomed under Chinese competition.
For one, China’s prosperity in the tech-auto sector would likely be more concentrated in its domestic market, potentially leaving the long-standing U.S. technologies to cater to a larger and rapidly growing global market, just as the U.S. successfully did after websites like Google were blocked by China.
Globally, more than 97% of the smartphone market comprises iOS and Android operating systems—something that could likely be translated into consumers’ choice of connectivity systems on their car dashboards. Moreover, in China millions of customers who are long accustomed to using Apple or Android products on their smartphones may not be willing to change so easily.
Something to keep an eye on will be how quickly U.S. tech companies bring innovative and remarkable products to market, and who creates the superior applications. So far, the U.S. has proven time and again to have the best and deepest ability to shape the landscape, and China’s isolationist approach may just be the thing to keep it that way.
With new markets emerging like the “Internet of Cars,” one thing is evident—the market landscape is constantly evolving. This can make staying up-to-date on the state of the market an on-going battle. To help guide your investing decisions, check out our just-released Stock Market Outlook Report. This report is filled with updated facts, eye-opening forecasts and reveals some encouraging signs on where the market is headed. Learn more by clicking on the link below…
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