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May 16, 2015 01:00 AM

How Apple and Google could reshape the connected car sector

Jennifer Clark
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    Reuters
    Google's self-driving vehicle has caused many automotive executives to wonder whether the Internet giant plans to offer its own products.

    Top management at leading automakers have said they believe that Apple and Google will play a key role in the connected car. The unanswered question is whether they will be partners or rivals to companies such as Volkswagen Group, Fiat Chrysler Automobiles and Renault-Nissan.

    Silicon Valley technology companies have worked as partners with carmakers for years on in-car entertainment systems such as Google with Android as part of the Open Automotive Alliance and Apple’s CarPlay, which help consumers access their phone content as they drive. But in recent months the companies have emerged as potential rivals, as they shift their sights from connectivity services to making actual cars. Google is testing a driverless car. And Apple has indicated it is looking into the auto business, presumably via an electric car.

    ‘Disruptive interloper’

    Top VW and Renault executives who were asked about the potential of competing against Google and Apple at the Geneva auto show in March positioned themselves as partners to the newcomers. Fiat Chrysler CEO Sergio Marchionne, however, said the industry needs a disruptive interloper. “It’s a good thing but when you are one of the guys whose life is being disrupted then you are not necessarily looking forward to the event,” he said.

    The value of the market for connected car services is forecast to grow to 115 billion euros in 2020 from 31 billion euros this year, according PwC. Safety-related features are expected to account for 47 percent of the 2020 total followed by autonomous driving at 35 percent with entertainment features accounting for 13 percent. PwC estimates the demand for digital services in the car to reach 14 billion euros in 2020, of which 9 billion euros will be related to value-added services linked to mobility and travel.

    Industry watchers say that one way Apple and Google could reshape the connected car sector is by using their substantial financial firepower to significantly speed up the time it takes to develop new in-car technology. That means they could conceivably develop solutions before automakers do.

    ‘A lot of fear’

    “It has created a lot of fear and it is probably going to trigger an r&d race,” said Max Warburton, automotive analyst at Bernstein Research in a report. “Carmakers are probably going to move much faster now to try to develop connectivity and potentially autonomous technology to make sure they at least understand it can be competitive with whatever gets put forward by Apple.”

    The second way the “disrupters” could reshape the connected car market is in their “break-the-mold” approach. While Volvo is taking a gradualist approach to the self-driving car, introducing features such as assisted lane changing that emphasize safety, Google is aiming to leapfrog traditional carmakers with a totally driverless experience. Technology companies have a quicker decision-making process and are accustomed to thinking outside the box, meaning they could find it easier to outmaneuver traditional auto groups when it comes to new products and services.

    AUTOMOTIVE NEWS EUROPE E-MAGAZINE

    This story is from the current issue of the Automotive News Europe monthly e-magazine, which is also available to read on our iPhone and iPad apps.You can download the new issue as well as past issues by clicking here.

    Automakers are not sitting still. Audi, BMW, Mercedes-Benz, Volvo and Tesla are all working on systems that let cars park themselves. Many have or will offer systems that take over steering, braking and accelerating in stop-and-go traffic jams, which is a first step toward fully autonomous driving. In addition, 10 automakers already offer electric cars.

    “I am very happy that other companies are offering electric cars,” Renault Nissan CEO Carlos Ghosn told reporters at the Geneva show. “It will also be very interesting to see what Apple can develop on top of existing electric car designs and its innovation. I am absolutely not fearful … companies that begin to offer electric cars are allies. They are jointly promoting the technology.”

    Bruce Gain contributed to this report

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