Emerging Technologies in Vehicle Networking

Emerging Technologies in Vehicle Networking

Telematics is a multidisciplinary and multi-industry field that touches on multiple stakeholders’ interests and is a battleground for competition. The mainstream view currently is that there are three main operational models.

1. The telecom operator-centric operational model

The core technology of Telematics is channel technology, that is, information transmission technology. As the controller of the network channel, telecom operators have unique advantages in the Telematics field, mainly in the following aspects.

(1) From a cost perspective, the one-time construction cost of Telematics services is relatively high, but in the long run, as the number of users gradually accumulates, the operational costs during the actual use process will far exceed the construction costs. A significant portion of the operational costs is generated by call center voice seat service fees and communication/data traffic fees, which can account for over 60% of operational costs. Any telecom operator will provide two basic services, namely communication/data services and call center seat services, and in terms of these two aspects, they have unparalleled advantages in cost, technological maturity, and customer service quality, making it most cost-effective for mobile operators to play the role of TSP (Telematics Service Provider).

(2) From the content perspective, especially in China, telecom operators can more effectively integrate resources from CP/SP (content provider/service provider). As the manager of the “channel,” telecom operators have accumulated numerous content and service provider resources over the years, and Chinese telecom operators can leverage their monopoly position to obtain better CP/SP at lower prices.

Of course, telecom operators also have disadvantages when serving as TSPs, such as the lack of targeted product solutions for upstream OEMs due to the specialization of the automotive field, and the inability to directly recycle and analyze client product experiences downstream. Furthermore, when telecom operators leverage their resource integration advantages to open more service channels and connect with more partners, it increases the complexity of the entire TSP industry chain, reducing communication efficiency.

The operational model of telecom operators as TSPs has obvious advantages, but there are also significant challenges to overcome, such as how to better collaborate with upstream and downstream partners and improve cooperation efficiency, which remains a difficult problem.

2. The automotive manufacturer-centric operational model

First, it must be acknowledged that the dominant position of OEMs in the Telematics field is irreplaceable. OEMs have absolute control over IoV projects, whether in terms of hardware/software resource integration capabilities, precise grasp of IoV product demands, or strong financial support, all of which can support manufacturers in playing the key role of TSP. Many car manufacturers are currently attempting to take over their own IoV projects as TSPs, such as Ford, General Motors, and SAIC, all making moves in this direction. Dongfeng Motor Corporation also hopes to take on the TSP role itself, aiming to enhance its operational and integration capabilities through cooperation with telecom operators and third-party technology service providers.

So, are OEMs really suitable to be TSPs? The answers to this question will vary significantly among different manufacturers. For foreign OEMs, due to years of fierce competition in the automotive industry, the average profit margin for vehicle sales is only 4%, contributing only about 20% of the total automotive industry profit, with 50%-60% of profits coming from after-sales services. This indicates that the automotive service industry is highly developed abroad, and foreign customers recognize the value of services more. Therefore, for foreign OEMs, leveraging their advantages to take on the TSP role would be a promising choice. However, it should not be overlooked that before establishing a complete and effective commercial model for Telematics, these manufacturers will incur high costs.

For domestic OEMs, although competition in the domestic automotive industry is also intensifying, the profit margins for vehicle sales are significantly higher than those abroad, and the new vehicle sales and spare parts sales can generally ensure good profits for manufacturers. In contrast, the current development of Telematics in China is minimal relative to the total profits of OEMs. Therefore, from this perspective, domestic manufacturers should focus more on their established businesses to capture larger market shares and profits, preparing for future competition in the automotive service domain.

On the other hand, looking at the current competitive landscape of the domestic and international automotive industry, the advantages of various manufacturers in traditional automotive technologies are becoming less pronounced, and the R&D of automotive technologies is increasingly converging. Many companies rely solely on brand reputation, and the emergence of IoV concepts has provided opportunities for change. The trends for future automotive development are technology-driven, intelligent, and automated. Although the integration of Telematics may not significantly increase the profit margin of vehicles (and may even reduce it), it will enhance product competitiveness due to increased technological appeal. With the further development of Telematics, it holds the potential to extend the automotive industry supply chain and increase revenues in the automotive sector. It is believed that the primary goal of most manufacturers in developing IoV technology is to achieve this. However, it is essential to maintain vigilance in the face of rapidly advancing technology, ensuring a clear mind and the determination and confidence to stay ahead. This mindset is very suitable for automotive manufacturers when facing Telematics.

3. The third-party operator-centric operational model

In China, several relatively large companies operate as third-party operators, such as Botai, Cheyin.com, and Desay SV, integrating software, hardware, CP/SP, call centers, etc., to provide complete solutions for OEMs, and even offering operational services to guide the advancement of OEM IoV businesses. For example, Botai provides complete solutions and operational services for SAIC, Dongfeng Motor Corporation, and Changan PSA.

Third-party operators have their advantages in the IoV field, focusing 100% on how to excel in the TSP role, which is their greatest strength. In contrast, other TSPs like telecom operators and OEMs have their primary businesses, with TSP being a secondary endeavor, and the responsibilities of TSPs do not constitute their main strategic direction, serving more as a tool to achieve their primary strategy.

However, the disadvantages of third-party operators are also evident. On the one hand, within the entire cooperation framework, whether facing OEMs or telecom operators, they appear quite weak, making deep cooperation challenging. They need to seek support from the first two to sustain their businesses in terms of financial strength, influence, and operational costs. They are genuinely in a position of seeking survival. However, many OEMs are willing to take on the TSP role themselves, downgrading technology service providers (third-party operators) to service or hardware suppliers. In the future, more OEMs may adopt similar ideas, which will compress the survival space for these third-party operators in the pre-installed IoV industry chain. Focusing on aftermarket IoV products may be one of their future pathways (pre-installed IoV products are those installed during the vehicle production process; aftermarket IoV products are those installed after the vehicle is sold), but such products will still face immense pressure from pre-installed IoV products, as pre-installed IoV products can provide more robust functionalities related to the vehicle itself (such as security features). Furthermore, negotiating equal cooperation with telecom operators who hold a monopoly position in China is almost a fantasy. On the other hand, to successfully fulfill the TSP role, third-party operators must consider many factors, including how to use limited resources to complete the overall layout of software, hardware, and services, and engage in multi-party collaboration with OEMs, telecom operators, and CP/SP providers, which is a constant challenge.

Overall, the third-party operator-centric operational mode is unlikely to disappear in the short term, as these organizations or companies are currently the most authoritative and experienced teams in the IoV field. Other TSPs need to learn more from them to independently assume the responsibilities of TSPs, while third-party operators must maintain high levels of innovation to ensure their position in the field.

1. Technological Development

(1) The technology of on-board intelligent terminal products is becoming increasingly mature.

The development of Telematics technology abroad has two directions: one is based on personal handheld devices, and the other is based on vehicle self-contained terminals. Both implementation methods have their technical advantages, but industry insiders generally believe that the vehicle self-contained terminal method will be the future trend.

With the advancement of global automotive electronics technology and the rapid development of mobile intelligent terminal products, the on-board intelligent terminal products in IoV systems have continuously undergone technological advancements and innovations. The on-board computer display can be considered one of the earliest on-board intelligent terminal products. It could only provide partial vehicle-related information. With the comprehensive opening of GPS technology, on-board navigation became the main force of on-board intelligent terminal products. Initially, on-board navigation only provided image information and used a button control system; with the addition of voice systems and substantial breakthroughs in touchscreen technology, the mainstream on-board navigation products in the market now generally feature voice navigation and touchscreen control functionalities. As intelligent voice recognition systems develop, voice control will also become a necessary function of on-board intelligent terminals.

Today’s on-board intelligent terminals integrate numerous cutting-edge technologies, including GPS remote positioning technology, data processing technology, storage technology, voice recognition technology, and capacitive touchscreen technology. These mature technologies provide a solid technical foundation for the widespread application of IoV systems.

(2) Continuous advancements in sensor technology

Sensor technology, aimed at information collection, along with computer technology and communication technology, constitutes the three pillars of information technology. It is the basis for IoV to obtain dynamic information. For IoV systems and the entire intelligent transportation system, it is divided into on-board sensor networks and road sensor networks.

The on-board sensor network mainly refers to the network formed by sensors installed inside and outside vehicles, such as water temperature sensors, oil level sensors, and cabin temperature sensors, which provide users with information about the vehicle’s internal conditions; for example, parking radar sensors, external temperature sensors, and rainfall sensors can provide users with information about the external environment. Both internal and external information will assist users in safe driving.

The road sensor network is used to sense and transmit road condition information, such as vehicle flow, speed, and road congestion status. These sensors are generally installed on roads and roadside facilities.

With the continuous advancements in international sensor technology, many high-sensitivity, compact, and low-power sensors have been widely used in vehicle systems and road condition monitoring. The extensive application of sensor technology provides strong technical support for the effective operation of IoV systems, which integrate and analyze the information obtained from these sensors to provide users with more comprehensive driving services.

(3) Successful commercialization of new-generation communication technology

The fourth-generation mobile communication technology (4G) has been successfully commercialized, with major international mobile communication operators launching their own 4G services, making 4G the primary technology promoted by mobile network operators worldwide, which will dominate for a considerable period. Its most significant advantages over 3G are faster communication speeds, broader network spectra, and lower costs.

With the development of the global mobile 4G network, mobile communication technology has become increasingly mature, greatly improving the stability, timeliness, and transmission efficiency of data transmission. The expansion of channels has led to a massive influx of information. In recent years, the rapid development of mobile internet has seen major internet companies competing for this blue ocean, with most focusing on the entrance of mobile internet, hoping to leverage entrance advantages to expand their user base. The most frequently mentioned entrances are the “three screens”: tablets, smartphones, and televisions. As people’s frequency of using vehicles increases and the time spent in vehicles grows, the navigation and central control displays in vehicle systems will become the “fourth screen” that all parties in the global mobile internet field will fiercely compete for.

The impact of 4G technology on the global IoV industry will be significant, filled with various imaginative possibilities. For instance, real-time road condition information can currently only be conveyed to users through indications and voice via IoV terminals. In the 4G era, users can directly monitor real-time traffic conditions through video. 4G also makes it possible to watch live television in cars.

Combined with open IoV platforms, 4G technology will play an astonishing role in the global IoV industry and will propel the global IoV industry into a new application era.

(4) The gradual maturity of cloud computing technology in the era of big data

The data collected by IoV systems includes not only sensor data but also all data related to vehicle operation and user preferences. On-board intelligent terminals cannot handle the analysis and organization of this massive amount of data, which must be completed by remote servers, commonly referred to as cloud computing. Cloud computing was first proposed by Google’s CEO Eric Schmidt, utilizing internet technology to achieve remote data services, a groundbreaking technology. As humanity enters the era of big data, not only vehicle operation information but also any action by the driver, such as pressing the accelerator or brake, adjusting the steering wheel, or changing the seat, will be collected by the IoV system and sent to the remote server. The remote server analyzes the relevant user data to select the most suitable and valuable services for the user and communicates the results back to the user through the on-board intelligent terminal.

This combination of big data analysis and cloud computing technology can provide users with more personalized services and opens a window for exploring commercial models in the global IoV industry, such as integrating call center services with insurance services, remote diagnostics with on-site service appointments, and location services with merchant services.

2. Development of Services

The current mainstream product features include: satellite positioning, maintenance assistance, roadside rescue, vehicle anti-theft/tracking, automatic collision systems, automatic collision alarms, vehicle condition information collection, personal information reception, multimedia entertainment information reception, call center services and insurance services, remote diagnostics and on-site maintenance service appointments, etc.

3. Development of Competition

In the U.S. automotive market, OnStar stands out. After OnStar was introduced to the market and operated for many years, it achieved good sales performance and garnered a considerable user base with decent loyalty. Ford, in collaboration with Qualcomm, launched the Wingcast in-vehicle internet service to compete with OnStar, but the project did not progress smoothly, and Ford announced the failure of the Wingcast project in 2002, subsequently turning to ATX for cooperation, whose clients include BMW and Mercedes-Benz.

Companies or institutions conducting research on IoV abroad include: General Motors, BMW Group, Toyota, Ford, PSA Group, Volkswagen, TomTom, ATK, Continental AG, Google, Apple, Microsoft, etc.

Currently, the competition in the IoV field has extended to the operating system domain. Regardless of the type of IoV product, its operation must rely on an operating system, and the quality of the operating system will directly affect the user experience. Google and Apple are the two monopolists in mobile terminal operating systems, and their foray into the IoV market has stirred the nerves of many automotive manufacturers. Major manufacturers are eager to align themselves with these tech giants, hoping to leverage their strengths to dominate the IoV market. Google has gone further in the automotive field, establishing the “Open Automotive Alliance” in January 2014. The significance of this alliance is not solely in IoV; it has attracted top companies in the automotive, chip, and software fields, such as Audi, General Motors, Honda, Hyundai, and Nvidia, striving to implement the Android system in on-board intelligent terminals by 2014. The alliance aims to provide an open common platform, similar to how the Android system operates on smartphones, to promote innovation in on-board information platforms.

In 2013, Apple announced its entry into the IoV industry with the iOS in the Car initiative. As the release date for iOS in the Car approached in 2014, Apple officially renamed it CarPlay. By March 2014, related models from Ferrari, Mercedes-Benz, and Volvo already supported the CarPlay system, with over ten other automotive brands, including BMW, General Motors, Ford, and Toyota, expected to support CarPlay in the future. Vehicles equipped with CarPlay can connect directly with users’ iPhones and control the display through the iPhone, allowing users to enjoy in-car life more easily and use in-car information services more safely. The first vehicle featuring CarPlay (Siri) has already been released, as Apple attempts to integrate iOS7 with vehicles, allowing drivers to map iPhone functionalities onto the vehicle’s display screen.

Another internet giant, Microsoft, recognized the potential of intelligent vehicles and IoV earlier and has its unique insights. Microsoft entered the in-vehicle intelligent systems field in 1998, with its WEA (Windows Embedded Automotive) team consisting of hundreds of engineers dedicated to developing in-vehicle systems. Its ultimate goal is to make vehicles a “second home” or “second office.” Currently, automotive brands collaborating with Microsoft WEA include Ford, Fiat, Kia, BMW, and Toyota, with two main collaboration methods:

① Direct in-depth cooperation represented by Ford SYNC;

② In-depth customized development based on the WEA platform through Continental Group, represented by BMW.

Currently, approximately 10 million vehicles are equipped with WEA. At least from this perspective, Microsoft’s future competitiveness in the IoV field will be even stronger.

The entry of Google, Apple, and Microsoft into the IoV market will have profound implications for the future development of IoV, as these globally renowned tech companies possess unlimited creativity and influence, making the future development of the global IoV industry more promising.

4. Development of Business Models

Foreign commercial environments and consumer habits differ from domestic ones, with related companies or institutions abroad engaging in broader considerations regarding business models. Their typical research directions focus on the following aspects: big data analysis, map-based services and commercial promotions, cloud services, insurance analysis, consumer behavior analysis, credit systems, telecom services, national social and personal security, fleet management, etc.

In comparison, the commercial models of IoV abroad are relatively mature, with strong targeting and distinct personalization features, and the segmentation of the IoV market is conducted in detail with clear target markets.

Overall, the IoV industry in China started relatively late. Although the government has recognized the need to develop intelligent transportation systems, and in 2002 approved the “Key Technology Development and Demonstration Project for Intelligent Transportation Systems,” due to key technological bottlenecks that have not yet been overcome, this project has seen little substantial progress. In the vehicle information service market, due to the rapid infrastructure development in recent years and extensive exploitation of natural resources, the commercial vehicle market in China has prospered, prompting early IoV systems to be primarily operated by commercial vehicle manufacturers, mainly providing location information services, fleet safety management, remote diagnostics, emergency rescue, etc.

In recent years, with the explosive growth of the Chinese automotive market, user demand for IoV services in the passenger vehicle market has also increased significantly. In particular, as the most fiercely competitive automotive market globally, major automotive manufacturers, whether joint ventures or independent brands, are striving to create differentiated competitive advantages amidst declining vehicle profits. The IoV system has become the best showcase for achieving this differentiation. Furthermore, with breakthroughs in key technologies in the intelligent transportation system field, primarily IoT technology, the government has begun to vigorously support the development of the IoV industry. However, the IoV industry in China still faces many challenges, especially many critical bottlenecks, such as standardization and business models. If these issues are not adequately addressed, the sustained and healthy development of China’s IoV industry will be difficult. Over the past decade, the Chinese automotive market has developed rapidly and is gradually entering a mature phase. However, for Telematics, it is still in its infancy, basically following in the footsteps of foreign developments, with early movers primarily being joint venture manufacturers, while independent brand manufacturers have gradually joined the research of IoV in recent years.

Key companies researching Telematics in China include: Seg Group, Huawei, ZTE, Botai Group, SAIC Group, King Long Bus, Changan Automobile, Beijing Automobile, Yutong Anjie Tong, Chery Automobile, Dongfeng Passenger Vehicles, TCL, Toyota (China), Shanghai General Motors, and Dongfeng Motor Corporation.

Seg Navigation, one of the earliest companies to explore the Telematics field, has established the first operational network in China, and even Asia, aimed at private car owners, primarily offering services such as security and emergency assistance, serving over 300,000 private car clients. In December 2013, Huawei launched the vehicle module ME909T, officially entering the IoV field. Other joint venture manufacturers continue to conduct in-depth research on adapting foreign IoV technologies to the Chinese market based on their parent companies’ accumulated experience.

The development of domestic manufacturers in IoV can generally be categorized into the following types: first, the first batch of domestic Telematics service providers and device manufacturers represented by Seg Navigation; second, vehicle DVD manufacturers seeking to transition to provide IoV services; third, automotive manufacturers, either introducing mature IoV products from foreign parent companies or independently developing new Telematics products; fourth, telecom operators, represented by China Mobile, who have already launched or are about to launch life information-based Telematics services. Some map providers also hope to build their own service platforms to share the vast market of Telematics.

In terms of technology, services, and business models, the development of domestic Telematics has not surpassed that of foreign counterparts, with more focus on adapting to the characteristics of the Chinese market.

Faced with the numerous Telematics products in the Chinese market, the biggest issue is the lack of collaboration among various vehicle manufacturers and TSPs, leading to low product differentiation, difficulties in launching industry standards, and the fact that most paid services offered by Telematics products have not gained consumer recognition, resulting in very low renewal rates. Telematics products primarily rely on the sales of passenger vehicles to sustain their development, failing to achieve a mutually reinforcing effect with the automotive industry.

In summary, major IoV companies in China should recognize the development trends of IoV over the next decade in their business strategies, namely platform standardization, product differentiation, and humanized services. Initially, they should establish their own Telematics business brand, create a standardized platform for products and services, focus on product differentiation and service humanization, improve product quality and service efficiency, and explore an effective commercial model for Telematics that gains consumer recognition and enhances user loyalty. In the mid-term, they should control costs, leverage the cost advantages of various competitive entities, actively reduce manufacturing costs, and integrate various resources to lay the foundation for future price competition. In the long term, they should consider a concentrated strategy, offering customized services to different users to comprehensively attract various types of users. In response to the entry of IT giants like Apple and Google into the IoV field, the best choice for major IoV companies in China is to embrace open collaboration, jointly develop and apply Telematics products equipped with Android or iOS systems with them. The brand effect, platform resource-sharing effect, and deep integration of vehicles with smartphones and mobile internet brought by these two international IT giants are beyond the reach of any domestic IoV company. This move is of profound strategic significance for the development of Telematics in China.