In the previous column I looked at 2021 trends for autonomous vehicles. This column looks at key technology and business trends in other segments of automotive electronics — namely, BEVs (battery electric vehicles), connected cars and software. The following table summarizes these trends with additional perspectives below. I have used a lot of data from IHS Markit and links to these data sources are included towards the end of the column.
The change in auto sales is the key parameter for all automotive electronics. In 2020, global light vehicle sales dropped to 76.5 million units, a drop of 15% compared to 2019. The good news is that global light vehicle sales will grow by 9% in 2021 to 83.4 million units. U.S. will do slightly better and grow by 10% in 2021 to 16 million units compared to 14.5 million in 2020.
By 2020 (if not earlier), Tesla’s success convinced even the sceptic auto OEMs that BEV is the long-term winner. The result is that 2021will be flooded with BEV model introductions from many OEMs — VW, GM, Ford, Nissan, BMW and many others.
Global BEV sales are forecasted to do quite well with a 28% growth from 2.1 million units in 2020 to 2.7 million in 2021. This is due to BEV model expansion to new segments in most regions, continued purchase incentives and growing competitive pressure. Potential customers are exposed to more BEV positive information including charging infrastructure expansion.
Battery prices has dropped dramatically in the last decade — from $1,000 per KWh in 2010 to around $150 per KWh now. There was considerable industry agreement that battery prices would reach $100 per KWh in 2025. Hence, it was a nice surprise to see that IHS Markit is now forecasting the $100 price point will be reached in 2023 (News Release | IHS Markit Online Newsroom). The $100 price is considered the point where BEV purchase price will have parity with combustion engine autos — at least for some segments.
The rapid battery price declines are caused by improving technologies and the rapid expansion of giga-factories in Europe, China, U.S. and other countries.
SPAC and IPOs
Special purpose acquisition companies (SPACs) are making a big impact on bringing BEV companies public instead of traditional IPOs. In 2020 several BEV companies went public or started going public via SPACs including Fisker, Nikola, Lordstown Motor, Arrival and Faraday Future. January 2021 is starting with at least two more startups getting on the SPAC path: Lucid and Proterra.
Another innovative BEV startup, REE Automotive, announce a SPAC IPO on February 3, 2021. REE has a modular BEV platform that includes by-wire electronics and OTA software update functionality. The platform is focused on mobility segments from last mile delivery EVs and robotaxis to EV shuttles and EV buses. The investor presentation has lots of data (Investor presentation (ree.auto).
PitchBook has an informative 40-page report called: The EV/Mobility SPAC Handbook (Q1 2021 PitchBook Analyst Note: The EV/Mobility SPAC Handbook | PitchBook).
EV charging companies are also starting to use the SPAC route for IPOs. ChargePoint went public via a SPAC in September 2020 and EVgo started its SPAC IPO in January 2021.
I think other startups in multiple segments of the auto industry are likely to use SPAC IPOs in 2021. An example is Otonomo that announced its SPAC IPO on February 1, 2021. Otonomo is the leading startup with a platform and marketplace for vehicle data.
Domain ECUs are essentially ECU consolidation and are now ready for rapid deployment with cockpit and ADAS D-ECUs as the main segments. Both have significant advantages such as lower costs, weight reduction, lower power consumption and reduced space and cable connections.
Cockpit domain ECU is the leading segment with about a four-year deployment history. 2021 is a growth year and sales could reach nearly 2M unit compared to less than 1M in 2020. Leading suppliers include Visteon, Aptiv, Bosch, Harman, Continental and Marelli.
ADAS is the next domain ECU that the OEMs are starting to deploy. A D-ECU for L2 and L2+ will be more complex than a D-ECU for L0-L1 functionality. It is still early in the growth cycle with few deployments. Suppliers include Aptiv, Harman, Bosch, Continental, Veoneer and ZF.
Connected cars are already a growth segment with 47.5 million connected cars sold in 2020. 2021 growth is forecasted at 20% by IHS Markit to reach 56.8 million. Automotive 5G is in the startup phase with only a few deployments in 2021. 5G market takeoff is expected in 2023. C-V2X is likely to be part of many 5G deployments.
Data monetization of select car information is on its way to be a major new market. The Otonomo investor presentation (EDGAR Filing Documents for 0001193125-21-023903 (sec.gov)) provides lots of new information to show significant market potential. Currently Otonomo gets data from 16 auto OEMs and has over 130 customers. In August 2018 Otonomo collected 2 billion data points per day from 18 million connected vehicles, which increased to 4.3 billion data point per day from 40 million vehicles.
Automotive infotainment is to a large degree taken over by the high-tech industry due to the dominance and content ecosystem of the smartphone. The drivers prefer to interact with content they already know how to manage. The result is that Apple CarPlay and Google Android Auto are becoming dominant for using smartphone apps in infotainment systems. CarPlay is available on over 600 auto models from 67 OEM brands (iOS – CarPlay – Available Models – Apple). Google’s Android Auto is available on over 500 auto models from 60 OEM brands (Android Auto Compatibility | Android).
Automotive voice control is on the same path with Apple and Google’s voice systems being popular due to their smartphone usage. However, Amazon Alexa seems to be the leader and are rapidly being integrated into infotainment systems. Currently, 11 OEM brands have adopted Alexa on over 80 auto models.
A key question is if auto OEMs will see a positive revenue benefit as the infotainment content supplied by the high-tech industry invariably shift to Software-as-a-Service (SaaS) and pay-per-use business models. I believe this is likely and the OEMs will share in these business models—just like the OEMs do with data monetization from car data.
The automotive software market will see lots of growth and changes in 2021. OTA software updates are growing strongly with 26.4 million autos sold with OTA capabilities for at least one software segment. IHS Markit forecasts 34% growth in 2021 to 35.4 million vehicles sold with OTA software update functionality.
Automotive cybersecurity will see major changes in 2021 as new regulation targeting cyber-security risk management become law in many regions. The UNECE WP.297 regulation add cybersecurity and OTA requirements starting in 2021. In regions where applicable, OEMs need to certify use of cyber-security management systems (CSMS) and software update management systems (SUMS). Software suppliers must provide in depth descriptions of all software—from program development to the software use phase to end of the vehicle’s lifetime. Software suppliers must also deliver timely software updates to ensure continued cybersecurity.
Google’s Android Auto operating system has been making progress and had a big design win with Ford on February 1, 2021. This is an extensive agreement between Google and Ford that includes a new group called Team Upshift with employees from both companies. Google Cloud also becomes Ford’s preferred cloud provider. This is another proof that the auto industry is adding business models to leverage revenue opportunities in the auto use-phase—especially software, data from the car and content to the car.
Most of the OEMs are trying to develop their own software platforms to provide additional in-house software expertise and grow their revenue. This will not be easy, and it looks like most OEMs will need help from high-tech companies and/or Tier 1 suppliers. The Ford-Google cooperation is a good example.
Several OEMs, including VW and Mercedes-Benz, are talking about developing a so-called carOS. Some of it probably comes from Tesla-envy as Tesla has developed its software platforms with success. It is unclear what is meant with a carOS and it is confusing for anyone with OS experience and its meaning in IT-related industries.
From my perspectives, carOS is something like this: Software platform to manage domain ECUs including cockpit, infotainment, communication-cloud functions (OTA, cybersecurity, data, content), driver assist functions, powertrain (BEV or ICE), future AV functions and anything else software-related in an auto. I plan to do a future column on this topic.
Cloud software impact
Cloud software is growing in importance in the auto industry across multiple segments. The impact first came in the car use-phase via telematics functions such as eCall and remote diagnostics. Cloud software expanded to content usage such streaming music and smartphone apps integration. It is now impacting the create-phase or software development stage — especially AI-based software. Amazon AWS and Microsoft Azure are the leaders in automotive cloud software, but Google Cloud is getting a boost with its Ford deal.
An interesting example of growing cloud impact is the Fusion Project. The key is that AI-based applications are never done and can be improved with additional data and cloud-based software is becoming the preferred implementation approach.
The next stage of cloud software impact will come from business model expansion by leading OEMs to create new revenue streams from SaaS and pay-per-use during the 10 to 15-year use-phase of most cars. The high-tech industry is happy to assist and cooperate with the auto industry as this new future develops in the next decades.
There is currently a chip shortage in the automotive industry and production volumes have been lowered in the first quarter of 2021 and are likely to continue in the second quarter and probably the third quarter. IHS Markit estimates about 670,000 fewer light vehicles will be produced in the first quarter of 2021 due to chip shortages. The shortage is primarily due to bottlenecks at TSMC for microcontrollers (MCUs). The shortage is likely to end in the third quarter of 2021.
Apple car questions
Apple continues to be in the news with lots of rumors about a future Apple car. The rumors have been consistent for a month with several stories focusing on production plans, which increases the probability of this happening in four years or so. Hyundai and Kia are the likely production partners for Apple.
I will end this with my iCar speculations. A key question is what features an iCar will have. There is no question that it will a BEV. Will it be an AV? That is much more uncertain. I believe the AV technology is only ready for goods AVs, robotaxis, fixed route AVs and autonomous trucks by 2025. Apple could enter these segments with autonomous trucks being the least likely candidate and robotaxi being most likely.
The iCar will certainly be software-defined with an Apple carOS and will have chips and hardware designed by Apple. The iCar will be integrated into Apple’s ecosystem from iPhones and iPads to watch and all Apple services. Eventually, there will be a consumer iCar with L4 capabilities, but this is much later than a BEV or robotaxi.
I have extracted data from multiple public documents from IHS Markit and they have a wealth of information that I did not cover. Here are the links to these documents:
- Light vehicle sales: News Release | IHS Markit Online Newsroom
- Connected cars and 5G: https://ihsmarkit.com/Info/1220/auto-connected-car-trends.html/
- Top 10 Auto Tech Trends to Watch for in 2021: Top 10 tech trends to watch for 2021
- Managing the 2021 automotive chip famine: semiconductor shortage crisis | IHS Markit
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