The Battle for the Future of the Car

For all the fuss over the metaverse, artificial intelligence chatbots, and the like, the most impactful technological shift currently underway may be much more tangible. The cars of the future won't be just about self driving and electric powertrains, they'll be akin to computers on wheels that can be upgraded and improved on the fly, like a mobile phone. That shift is already shaking up the $4 trillion automotive industry.

"Never mind ChatGPT," writes Eric Savitz in Barron's latest cover story. "The next big computing platform has already arrived—and it’s sitting in your driveway."

So-called “software-defined vehicles” packed with more powerful microprocessors, huge touchscreen displays, and wireless network connectivity promise to unlock new business models for automakers. Many may be subscription based, changing the economics of selling cars to a longer, recurring-revenue based relationship.

Eric writes:

The progress comes not a moment too soon for car makers. They have been losing ground in their own cockpits, where Apple and Alphabet’s Google increasingly control the entertainment and navigation experience.

“They aren’t just selling a car,” says [Dipti Vachani, senior vice president of automotive and Internet of Things for Arm Holdings, the SoftBank Group–owned chip-design house.] “They can own a customer experience for years, and they need to monetize that. It’s almost a matter of survival for them.”

Sure enough, after years of welcoming Apple and Google into their cockpits, car makers are now pushing back. Last month, General Motors said that its future EVs, starting with the 2024 Chevy Blazer EV, would no longer support Apple’s CarPlay or Google’s Android-based phones. GM will instead offer its own system based on an embedded design of Android Automotive, which will be preinstalled in the car, with custom versions of Google Maps, Spotify, and other applications.

“We will be moving beyond phone-projection systems, namely Apple CarPlay and Android Auto,” GM said. 

Mercedes, meanwhile, expects to generate billions of dollars in revenue by 2025 from MB.Connect, the German auto maker’s mapping, navigation, and vehicle-monitoring platform, and MB.Drive, the company’s autonomous-driving platform. Other auto makers are following a similar path.

Automakers pulling back some control over their products from Apple and Google is an effort to avoid the fate of the personal computer industry. While Microsoft dominated the operating systems and other providers took over key software, PC makers like Dell Technologies, HP Inc., and Lenovo lost pricing power and relevance in the market.

The best way for investors to benefit from the auto industry's shift to computers on wheels may be through the chipmaking arms dealers, Eric writes. Nvidia, Qualcomm, Micron Technology and others all have specialized products for automobiles and analysts cite the industry as an avenue for future growth.

For the automakers, convincing customers to pay up for subscription services may be a tougher sell, at least initially. Tesla charges $199 a month for full self-driving mode. BMW abandoned plans to charge a monthly fee that unlocked heated seats in some of its newer models. Turns out drivers don't like to pay extra to use hardware that's already installed in their vehicles.

Read the rest of Eric's cover story about the software future of the automotive industry here.