The business opportunities driven by Vehicle-to-Everything (V2X) technology were expected to be one of the main development drivers for future cars. However, past analyses from research institutes appear to have been overly optimistic, as V2X implementation has fallen well below expectations.
According to a recent analysis by automotive research firm S&P Global Mobility, the actual achievement rate is less than 5% of the forecasted target, presenting a harsh reality check for the industry.
S&P data reveals that automakers previously estimated they could generate business opportunities worth about US$200 billion from automotive software, services, and data. However, currently, they can only generate about US$6 billion in revenue from connected services and paid updates, a realization rate of just 3%.
Challenges in meeting V2X expectations
Several factors contribute to this significant shortfall. Firstly, automakers need a deeper understanding of drivers' and passengers' demand orientation. S&P believes that V2X is not competing with other cars but with every connected device within a consumer's home.
Additionally, supply chain sources point out that the networking infrastructure for V2X is still not effectively established, which is a key factor in the failure to meet expected business opportunities.
Mainstream automakers in Europe and the US are still exploring how to generate and effectively monetize data from drivers and passengers. The costs of developing and maintaining software seem to be higher than expected, and generating benefits is not as smooth as anticipated.
However, the potential business opportunities remain promising, encouraging companies to persist and push forward.
Automakers' responses and future prospects
In response to these challenges, automakers are increasing their spending on data services. BMW stated that its R&D spending would peak in 2024, partly due to in-vehicle data generation, such as connectivity, software stacking, and autonomous driving.
Tesla announced a US$10 billion investment in AI training and inference, allowing drivers to obtain higher-end driver assistance systems through subscriptions.
Volkswagen has faced significant challenges with its software division, Cariad, leading to delays and competitiveness issues in many new car models across its various brands. Despite several adjustments, including partnerships with Horizon Robotics and XPeng in China and a US$5 billion investment to acquire software IP from US automotive startup Rivian, the company's software woes continue.
In Europe and the US, obtaining driving data is becoming increasingly difficult, with automakers facing lawsuits and consumer backlash. The scope of usable consumer-generated data may only become clearer after multiple disputes and lawsuits are resolved.
Despite these setbacks, the rapid advancements in related technologies are cited as a reason for optimism. Improvements in connectivity and AI technologies allow automakers to achieve major savings in R&D costs and focus more on integration, making mid-to-long-term business opportunities still promising.
While the current progress is delayed, industry experts believe that the anticipated benefits of V2X may still be realized in the future, albeit on a different timeline than initially expected.
