Car Wars – III: Software Proliferates In The Car

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Broadly, there are two vectors along which we can trace the recent evolutionary path of cars,  hardware and software. In the first article in this series, we discussed in brief the shift from the internal combustion engine powered cars to all electric battery powered vehicles. In this article, we talk about the other vector — software.

Initially, a car was a machine for used for personal transport. However, as it gained mass appeal and acceptance, consumers wanted more reliability and efficiency. As a result, manufacturers integrated microprocessor, called electronic control units, with embedded code to control some of the simplistic functions such as controlling the fuel injection into an engine to improve efficiency in a car. However, software has been gaining a more and more important role in cars to the extent that a car now has over 100 million lines of code at the embedded (hardware) level. While most of initial hardware-software integration was at a lower level, it has since migrated to application level with emphasis on improving user experience and car usability. Companies such as Google, Apple and Tesla are eying this application (layer) level software to supplement the existing car technology. To limit the scope of the article and keep it in context to the ongoing series of Car-Wars articles, we briefly explore the advancements in this application level software.

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Transformation From Embedded To Application Software

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Initially, most of the functions in car the layer of interaction between the driver and the car was a bunch of levers and handles, i.e., mechanical. ECUs, with application-specific software, were integrated into these mechanical units to improve efficiency, fault tolerance and detection. As users demanded more functionality and improvement in their experience, the data from these ECUs were displayed on the dashboard and control for some of these levers and handles were made available through a series of buttons on the dashboard via electronics. Over time, as the cost of computing came down, controllers and processors came to be used to govern not only ignition and braking systems, but dashboard and entertainment systems as well, thus migrating from the embedded domain to application (user) level software.  Just think of the way your gear box evolved from being an mechanically operated lever to paddle buttons mounted on a steering wheel controlled through ECU to being abstracted away through software in a Tesla (NYSE:TSLA) Model S. The screen interface sits on top of an embedded operating system called Vehicle Management System (VMS), which gives real time information to the user about the state of various subsystems of the car. [1]

Currently, three dominant embedded systems exist in the market – QNX (which is Unix based), Windows Embedded and third party variations of Linux kernel. Most car manufacturers tend to add their own proprietary user interfaces on top of these systems. However, these systems aren’t intuitive and offer a bad user experience. As a result, Apple (NASDAQ:AAPL) and Google (NASDAQ: GOOG) decided to step in with their own respective user interfaces named CarPlay and AndroidAuto, which sit at the application interface level of the embedded system and offer a much improved user experience. But these systems have limited functionality and only offer a way for the user to access their smart phone screens on the car’s display unit.

Tesla, however, has leapfrogged other auto companies with the introduction of their proprietary firmware VMS, which integrates all three of the above layers in the same unit. Tesla’s firmware abstracts away all of the car’s functionalities into software and allows the user access to the car’s power train, energy storage components and warning systems on a screen. Additionally, it is also the layer at which the user can access the car’s infotainment systems. All in all it is a significant improvement over management systems of competing cars. Nevertheless, Tesla only forms a small part of the overall car market. Most cars still run on internal combustion engines that either deploy QNX (50% cars) or Windows embedded. These cars form a huge addressable market for Android Auto and Apple CarPlay. In fact, according to IHS Automotive, 31 million cars were will be using Android Auto and 37.1 million will be using Car Play by 2020. [2]

Capabilities of CarPlay and AndroidAuto

Android Auto and Carplay allow the user to project a customized version of a compatible smart phone onto the in-car display after the phone has been plugged into a car via USB. This facilitates use of smart phone native apps such as Google Maps, Apple iTunes and third party offerings such as Spotify, Pandora, iHeartRadio on the car’s infotainment system in addition to receiving and making phone calls. They also enable a driver to control some car features such as the air conditioning through voice (Google Now and Siri). The current state of these systems means that AndroidAuto and CarPlay are basically an interface that allows the user to be able to access the smart phone in another place in a convenient manner. But in the future it is possible that with greater integration of the car’s hardware with these management systems through the development of an operating system for cars. This will basically make the car a part of the smart phone ecosystem. Put this way, it is easy to see why companies like Apple and Google are interested in cars.

From Apple’s perspective the car would be an accessory to the smart phone. Consider a car running on iOS, with all its hardware integrated into the operating system. All of the car’s functionalities are available to the user through software. Moreover, all the capabilities of this software are exposed through APIs which can be accessed by third party developers, who build apps on top of them. These apps would allow you to extend the capabilities of your car similar to the way applications that run on the smart phone allow you to extend the capabilities of your phone. If these apps were only accessible through your smart phone interface, then a critical factor in the purchasing of your car would be the smart phone you have. In this way, Apple can extend its market size and lock in customers for a period much longer (8-10 years) than the typical replacement cycle of a smart phone (2-3 years).

The same line of reasoning can be applied to Google. However, from Google’s perspective there are other things of interest. Google can open the car’s operating system to developers who can then build third party apps that gather data generated by the car. This will enable the company to gather data on consumer behavior in cars and use that data to better target and sell ads to said users, basically extending their core ads business from the smart phone to the car. Google’s Open Automotive Alliance, launched last year, with Honda, Hyundai, GM and chip maker Nvidia is just the first step towards this evolution. [3] We will talk about the potential opportunities for Google in more detail in another article in this series.

Read our previous articles in this series about Google, Apple and Tesla:

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Notes:
  1. A Silicon Valley Approach To Vehicle Software, Tesla Motors []
  2. IHS Automotive Identifies Consumer Trends for Apps and Technology in New Vehicles, according to New Global Report, IHS, April 2015 []
  3. Google launches the Android-based Open Automotive Alliance with Audi, Honda, GM, and more , TheVerge, January 2014 []