Car makers are transitioning into tech companies
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February 3, 2012
In case you haven't noticed it yet, there are some definite changes in some industries. Traditional companies that used
to make a product are still making the same line of products, but with a few twists. Take car makers for example.
They still make them, but car makers today are slowly but surely transforming themselves into, part car maker, and part tech
company. Literally. Let's face it, cars today almost run as much on electronics as on pistons.
At this year’s Consumer Electronics Show in Las Vegas, there was a new category of product making its debut as consumer
electronics, and it was the automobile. There have always been many cars on display at the show, but historically these were
merely containers for aftermarket consumer electronics such as radios, high-end sound systems, DVD players, speakers, on-board
TVs, lighting, GPS navigational systems, etc.
What was different this year was the big automaker themselves had booths of their own to demonstrate the integrated electronics
and infotainment systems they are building into all their car lines.
And these high-end, screen-based infotainment systems are not just destined for flagship luxury cars or SUVs, either. Surprisingly,
many of the most innovative systems are targeted at lower-end, more budget-minded cars.
The argument for this from a Chrysler representative at the show was that “The young car buyers today are the most tech
savvy, and they aren’t happy to be left out of the car technology revolution, so we don't have any other choice than to adapt.”
Another explanation for more integrated technology is the U.S.' CAFE standards, which require average fuel economy for a
manufacturer’s annual produced fleet to meet specific mileage minimums like 30.2 miles per gallon in 2011, up from 18 mpg in
1978.
Car manufacturers today have an incentive to move buyers into smaller cars, but still want to retain the profit margin
of the bigger, more luxurious vehicles.
To be sure, the United States is currently seeing a big surge in the 'Euro-Style' of smaller, reliable, sporty but luxurious
cars and small sedans. And part of the trend is the placement of attractive infotainment systems across most car lines.
But perhaps one of the biggest catalyst for the steep rise in elaborate infotainment systems and connected cars is the
automaker’s realization that they are getting shut out of their own home turf by smartphones and aftermarket devices.
It’s hard to upsell an expensive in-built GPS map system when Android phones offer free turn-by-turn navigation, with
more recent street data, street level photographs, traffic data, better destination search technology and decent quality
voice input.
It’s also hard to sell satellite radio when smartphones can stream Pandora music, or OnStar-style emergency service when
AAA has an app for that that runs on most smartphones.
The car makers see the risk of losing their role in the lucrative infotainment market, and you need to understand that
they are required to build better systems, get their technology more up-to-date, and to place those systems in the whole
product range, and not just high-end vehicles.
As an example, Ford CEO Alan Mulally had a keynote speech at CES in which he talked about the integration of consumer
electronics and auto design. “The automobile has always been, and continues to be the all-time mobile application,” said
Mulally. "Ford has been early to make the shift," he added.
He surprised many when in his 2009 CES keynote Mulally said “We are a car company, but we are working to think and act
like a technology company.”
And if this year’s CES was any indication, Ford is no longer alone. Now Mercedes-Benz, General Motors, Chrysler, Audi
and even Kia were all investing big on sending the message that they are rolling technology platforms that can surround
the traveler in safety, connectivity, voice interaction, entertainment and useful information.
Dieter Zetsche, Chairman of Daimler AG and the Mercedes-Benz brand, said “Just like a smartphone can be so much more than
a means of communication, a smart car can be so much more than just a mode of transportation.”
The automakers all demonstrated this vision with concept and production cars. They used disembodied dashboards and consoles
to demonstrate their touchscreens, user interface controls and countless other displays and heads-up projections.
Source: The Consumer Electronics Show (CES).
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