Connected and Autonomous Vehicles (CAVs): Cost Benefits

Tech providers gaining cost benefits from electronic components and software platforms of Connected and Autonomous Vehicles (CAVs)

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CAVs technology is much hyped recently by media and marketing agencies to pre-set the market demand. However, the direction of demand flow is still insignificant for most of the companies. CAVs offer high level comfort and best driving experience and hence will be treated as a luxury item until a complete shift of industry towards automation. Software platforms and other electronic components play crucial role in achieving the level of extravagance. Unlike human driven vehicles, software platforms will take over the major part in driving vehicle along with entertaining drivers and passengers. In CAVs, software is estimated to account for 40% of the vehicle value compared to 10% in human operated vehicle. This dramatic shift has forced automobile companies to adopt eccentric strategies such as mergers & acquisitions with software companies, stack sharing, and outsourcing to position themselves in order to thrive in this changing dynamics of automotive industry.

Giant with high revenue and huge resource availability are likely to go with backward integration strategy by developing their own software platforms or merging up with suppliers. Smaller companies are expected to outsource the software development to maintain future sustainability.

Owing to the large dependency on software and electronic component in CAVs, the technology providers, software developers and even the car makers have ample opportunities to grow their business both horizontally and vertically.

The advent of Artificial Intelligence (AI) technology has also created opportunities for technology providers in the field of safety, entertainment and comfort. Companies operating with AI technology are gaining high competitive advantage in the production of CAVs. Funding and investments in AI platform providing companies has recorded a histrionic rise from past 2 years. Post the technology giants such as Apple, Google, and Intel invested in AI based start-ups, collaboration, mergers, acquisitions and partnerships with AI technology providers has become a trend in this industry. This strategic transition in automotive industry is expected to be large profiting initiatives to the technology companies. Moreover, the expected rise in the software prices are said to further fuel the growth of software companies and indirectly benefiting the tech firms. To conclude, the high dependency of future automobile industry on software integration and embedded electronics is expected to create high revenue opportunities for tech suppliers and software providers.

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