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Market Drivers for Automotive HMI Evolution

This market research report was originally published at Tractica's website. It is reprinted here with the permission of Tractica.

As vehicles grow increasingly connected and become packed with sensors, artificial intelligence (AI)-based technologies have the potential to play a significant role in the human-machine interface (HMI). Voice-enabled smart assistants for car controls, infotainment, and more will likely become the leading HMI in the coming era of the connected car. With momentum and regulatory demand (such as Europe’s New Car Assessment Program [NCAP]) for driver and occupant monitoring, emotion recognition and gesture recognition will become more prominent elements of HMI.  With increasingly sophisticated computer vision algorithms, on-board compute power and next-generation windscreen and other displays technology, 3D Augmented Reality (AR) will increasingly become an integral component of the connected car experience.   Fast-forward several years to when humans become passengers and vehicles become moving entertainment centers in the autonomous vehicle era, and these AI-based automotive HMI technologies will prove invaluable and morph into different use cases.

Tractica’s upcoming Automotive Human-Machine Interfaces report examines the market ecosystem and conditions for AI-based automotive HMI, including global market trends, drivers, and barriers. It also explores the use cases and AI technologies related to AI-based automotive HMI and provides profiles of key industry players and market forecasts through 2025. In this blog post, we will look at some of the market trends and drivers. In a subsequent post, we will look at market barriers.

Understanding the Connected Car to Autonomous Car Spectrum

For the connected car, AI-based HMI is focused on driver controls, driver/occupant monitoring/safety, and infotainment. For Level 5 autonomous vehicles, AI-based HMI focuses on occupant monitoring and infotainment.

Most experts agree that we are now on a spectrum; in other words, there will be no rapid switch from a market of connected cars to a market of autonomous cars. The connected car market will, with the help of aftermarket devices, grow rapidly and sustain for a number of years, then slowly decline. The fully autonomous vehicle era will likely grow more slowly due to regulatory and technical challenges before it eventually eats away at connected car market share to a point where autonomous vehicle transportation represents the majority of the automotive market.

Disrupted Market Ecosystem

To streamline the automotive manufacturing process, OEMs have traditionally relied on Tier 1 vendors that provide complete systems, such as infotainment or powertrains. But technological innovation is hampering that system, particularly for automotive HMI, because HMI innovations require cross-functional expertise. For both OEMs and Tier 1 vendors, siloed groups must work with other groups or divisions to create workable solutions, slowing a slow process down even further. There are signs that for automotive HMI, OEMs are bypassing Tier 1 vendors to work directly with solutions providers.

Hyperscaler Motivation

The list of hyperscalers that are key players in the field of intelligent voice assistants for cars is substantial and includes Alibaba, Amazon, Apple, Baidu, and Google. These are all companies with the most sophisticated and proven consumer voice assistant technology in the world. However, it is important to understand the revenue drivers for these tech giants, which allows you to understand how they fit in the automotive HMI ecosystem. Neither Apple nor Google are selling their voice assistant technology for automotive uses; rather, they use their voice assistant technology as a way to sell other things. Apple uses the technology to sell third-party goods and services, and Google uses it for search advertising. Because OEMs don’t benefit financially and, maybe more importantly, are not viewed by consumers as part of the customer relationship for Carplay or Android Auto, the relationships between OEMs and Apple and Google will remain frosty.

Amazon is developing a different kind of relationship with OEMs, whereby it is seeking to integrate Alexa into car systems and potentially be paid as a solutions provider. Furthermore, Amazon is the only Western hyperscalar with the current potential to sell its own device (Alexa Auto) in the aftermarket, which makes the Alexa Auto device a revenue stream for Amazon. Alibaba and Baidu are following a similar path as Amazon, seeking to build partnerships with OEMs and Tier 1 vendors and to be compensated for those partnerships as solutions providers.

Population Continues to Shift into Cities

According to the United Nations, “55% of the world’s population lives in urban areas, a proportion that is expected to increase to 68% by 2050.” This trend, widely recognized by the auto industry, is a key driver for the autonomous vehicle era. Autonomous transportation systems make more sense both logistically and economically for last-mile transport in urban settings than for long trip transport in rural/suburban settings. And autonomous transportation systems will rely heavily on AI-based automotive HMI.

Robo-Taxis

The potential rapid emergence of robo-taxis will be a key driver for AI-based automotive HMI. In many markets, particularly those with robust mass transit systems, low speed, last-mile trips provided by robo-taxis are a practical autonomous vehicle use case. The number of global companies that are working to build solutions in this space is significant and includes Baidu, Alibaba, Tencent, Didi, Uber, Lyft, Waymo, Daimler in partnership with Bosch, Ford, and GM via Cruise, just to name a few. Robo-taxis are Level 5 autonomous vehicles, which require AI-based automotive HMI to operate. Therefore, substantial investments will be made in these technologies in advance of live robo-taxi deployments.

China

The leading market for AI-based automotive HMI will be China due to the urgent need for evolved last-mile transportation in the country’s dense urban cores. According to China Investment Corp., Chinese drivers are spending more than 70 hours per week stuck in traffic. Moreover, according to TomTom, 22 of the top 50 cities ranked highest for traffic congestion globally are in China.

Most of the country’s car travel consists of shorter, low speed trips in taxis or with ride-hailing services. China’s ability to move quickly in terms of smoothing the path via regulation will also jump-start the robo-taxi market in the country. Consequently, three significant players, IFlytek, Baidu, and Alibaba, are battling to equip OEMs and Didi Chuxing, the massive ride-hailing service that controls about 90% of China’s ride-hailing market, with voice assistant solutions and technology.

Reduce Distracted Driving Accidents

Regulators are becoming increasingly concerned about the number of driving accidents caused by distracted drivers. In Europe, the voluntary New Car Assessment Program (NCAP) standard is calls for driver monitoring in vehicles starting in 2020. The CDC reports that every day 9 people are killed and 1,000 injured from distracted driving in the U.S. OEMs, Tier 1 vendors, and solutions providers are aggressively developing driver monitoring systems for new vehicles not only to meet potential regulatory requirements, but also because consumers potentially see driver monitoring as a desirable feature.

Shifting Consumer Desire for Privately Owned Vehicles

Consumers are rapidly shifting their automobile habits. Ride-hailing services are a legitimate alternative to owning a car for some consumers today. As the price of ride-hailing continues to decrease, the number of consumers who eliminate a privately owned vehicle will increase.

In the U.S., an increasing number of young people don’t have driver’s licenses. According to a study by the University of Michigan’s Transportation Research Institute, the number of Americans under the age of 45 with a license declined between 1983 and 2014. In addition, the number of Americans ages 45-69 with a license has declined since 2008.

Consumer value propositions in regard to cars are shifting as new generations focus on lifestyle in the vehicle. In an article called “Style Not Power Will Sell the Cars of the Future, Says DS Autos” published on October 18, 2018, TU-Automotive editor Paul Myles wrote:

DS believes the ‘need for speed’ that used to sell vehicles to the older generation of car buyers no longer exists among the emerging consumers particularly with the growth of urban populations around the world … He said the lifestyle qualities of the DS brand will become the main marketing strength among consumers in the digital age who will value their time in the vehicle more as a pleasurable experience rather than as some sort of frenetic desire to race away from the next set of traffic lights.

Carmakers Shifting to Technology and Mobility Providers

Auto OEMs are fundamentally beginning to shift their businesses because in any type of outlook, private car ownership is expected to shrink. At the same time, as vehicles become smarter and increasingly connected, OEMs are being forced to fuse hardware and software to provide the types of products and services consumers want. In a post from August 27, 2018, TU-Automotive reported:

Just look at Volkswagen, which announced a $4Bn investment last week to transform itself into a device and software company. ‘To deal with [the changing transportation landscape], we need to reinvent the automobile,’ said Michael Jost, VW’s chief brand strategist. VW’s stance is hardly novel. Many carmakers have now stated their intention to shift from traditional carmakers to champions of technology and mobility and who can blame them? As more people flock to cities, the need for personal cars is dropping, especially in the age of Uber and Lyft. Why pay soaring insurance rates and deal with dinged up bumpers and street parking when you can summon a ride within minutes on your smartphone and can rent a car or share one whenever you need to get out of town?

5G Connected Cars

5G cellular networks will gradually roll out around the world during the next 10 years. While most experts believe one of the key use cases for 5G will be the enablement of autonomous transportation, there is also the prospect of nearer-term improved connected cars. Thus, consumers may be less inclined to rely on their smartphones as their de facto in-car smart assistant. In a post published on January 18, 2019, VentureBeat described this potential trend:

Between autonomous cars and ambitious plans to integrate cars directly with cities’ vehicular networks, the C-V2X concept – short for ‘cellular vehicle-to-everything’ – envisions cars having continuous cellular data links to other cars, pedestrians … This is part of the reason Apple and Google have been working on autonomous vehicle technology projects for years. They and the companies that supply them with key components, including Samsung and Nvidia, are well aware that direct 5G integration into vehicles could be a complete game-changer for customers: Your smartphone in the car could become almost irrelevant if the vehicle already has its own data services. Looking towards the future, Apple COO Jeff Williams called the car ‘the ultimate mobile device.’

Mark Beccue
Principal Analyst, Tractica