Is it possible that car manufacturers in the future will start to earn not so much from the sale of cars as from that of ... software products? And even turn their vehicles into a kind of subscription platform for various applications? It is unlikely that many in the automotive industry would answer this question in the affirmative today.
However, there is a manager who is convinced that this will happen. Moreover, according to him, the described scenario will be a reality not in the distant future, but by 2024. His name is Jensen Huang, and the small detail is that he doesn't actually run a car company, but the American graphics card and processor giant Nvidia. In a recent interview with Automotive News Europe, he predicted the scenario described above.
How can one know better
as a head of an IT company, than many managers in the automotive sector how their own industry will develop? And isn't his statement just a marketing ploy to draw attention to Nvidia's entry into car technology? Many believe it is not.
Huang's forecast focuses on one of the four major characteristics that have already begun to change our perception of the concept of the car - autonomy, electrification, sharing and connectivity. The matter concerned is the last of them, which according to some analysts is already turning cars into the next big application platform, after personal computers, smartphones, tablets, game consoles and other classes of devices.
Nvidia is already preparing to take much of this market with its software-defined car platform and its partnership with giants such as Mercedes, Hyundai, Audi and VW. The software will soon define the cars themselves and it's not impossible for them
to be sold at cost
and the revenue for manufacturers to come from subscription packages for applications, Jensen Huang is convinced. He added that these changes would become a reality within the next four years. They will gradually turn cars into a subscription service, where instead of buying horsepower, you subscribe to various services, functionalities and content. And in the long run, instead of paying a lump sum for a car, you will pay a monthly fee for it.
This change is likely to be helped by changing attitudes towards cars, especially among the younger population. Unlike previous generations, where getting the first personal car, especially for boys, has always been an important event, today more and more young people have no interest in it at all and prefer to use shared transport or other alternative methods. All this will greatly facilitate the change of attitude towards cars and their perception as a subscription service.
Nvidia's founder and CEO has gone even further in his predictions, calculating how much automakers will gain if their business model changes. According to him, a company that sells 10 million vehicles a year at cost will have revenue of about 50 billion dollars from the sale itself, but will receive significantly more from the monthly software subscriptions.
Virtually all popular digital services can be offered in cars. Updating the car's functionality is just the beginning. Even today, companies such as Tesla allow the software of their vehicles to be updated remotely, changing in practice the very capabilities of the vehicle. It is not excluded that in the distant future its owner will be able to choose different parameters such as maximum speed and pay the respective monthly subscription. You want a city car mainly to get to work - you pay a lower package and it will be able to go up to 100 km/h. You have a more active long-distance trip on the highways - you change the subscription and get a higher speed.
however, will give access to much more functionalities. Through them you will be able to subscribe to music applications such as Spotify, for movie platforms such as Netflix and HBO, for game services such as Stadia. Of course, with the proviso that all these features should not interfere with the driver and some of them will be available only to rear seat passengers. The introduction of more screens and better sound in the new car models will facilitate the process.
Drivers themselves will also be able to take full advantage of this change. They will have access to all kinds of applications for cartography, climate monitoring, information on urban traffic and what not. With the advent of another important trend - autonomous cars - the role of the driver will gradually disappear and all passengers will be in a position to enjoy the entertainment, work or educational applications that are included in their subscription.
According to Jensen Huang's own forecasts, by 2030 we can expect 20% of road vehicles to be fully autonomous (so-called level 5). However, they will be responsible for about 50% of all kilometers traveled. The reason is that among them there will be many trucks, buses, buses, taxis, as well as smaller robotic means of delivery. And they will take over most of the transport activities and will be able to work 24 hours a day. However, most of the passenger cars will still be at level 2 autonomy in ten years, he added.
Over the last decade, the automotive industry has become accustomed to technology visionaries talking about how its business model will change. From Google, through Apple, Alibaba and Amazon - companies in the digital segment with interest in the industry are growing. That is why the statements of another IT rock star are hardly the most significant event for the industry. However, Nvidia's vision for the future of the sector could be a key aspect of the carmaker's strategy to help them maintain their leading position in it, instead of shifting much of the added value to online giants.