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Connected Car Connectivity Growing As Cars Get Smarter

Highlights

(3G/4G LTE) systems reached nearly 41 million by year-end 2018, an increase of 22% year over year

The auto industry must innovate around the technology for mass-market adoption

The total installed base for new vehicles with in-vehicle infotainment, or IVI, systems is expected to grow 30% in 2019

Cars with 5G wireless technology are in the testing phase, and with low latency and faster downloading speeds, the connected car could be one of the biggest beneficiaries of the new wireless standard. But first, local administrations and telecom companies must build the infrastructure for 5G to prosper. 5G is still a few years away for connected-car manufacturers who want to provide the technology in their vehicles, and a hybrid 4G/5G system is more likely.

Connected cars certainly offer more than just added entertainment in the dashboard. Cellular vehicle-to-X, or C-V2X, technology encompasses the connecting of vehicle sensors to driving data such as speed, location, traffic, other cars, and anything else that could be conceived in this driving ecosystem.

At the January 2019 CES show in Las Vegas, Ford Motor's connected-car Director Don Butler said the company will equip the entire lineup of Ford cars with 5G modems in anticipation of a 2022 rollout, despite the industry standard for 5G connected automobiles being still undecided.

The installed base of U.S. vehicles with embedded in-vehicle cellular (3G/4G LTE) systems reached nearly 41 million by year-end 2018, an increase of 22% year over year from just over 33 million in 2017. Most of the estimated in-vehicle cellular installed base in 2017 was made up of basic 3G telematics systems, but in 2018 the 4G LTE installed base surpassed that of 3G. The introduction of 5G wireless networks will negatively impact 3G in connected cars as automotive original equipment manufacturers, or OEMs, increasingly move away from the older, limited-ability bandwidth.

While 5G networks' transmission speeds help vehicle-to-vehicle (V2V) and V2X communications by boosting efficiency and safety, the auto industry must innovate around the technology for mass-market adoption. 4G LTE is expected to be the primary connected-car wireless network, which we estimate should surpass 80% of total in-vehicle cellular systems in 2024.

The total installed base for new vehicles with in-vehicle infotainment, or IVI, systems is expected to grow 30% in 2019 as reliability and usability continue to improve as automakers make strides in creating proficient connected-car systems for consumers.

Among the wireless providers, AT&T Mobility is the leader in terms of connected-car support. In 2018 we estimate AT&T added over 8 million connected cars to its network, a 25% increase from just over 6 million net adds in 2017. In the first quarter of 2019, we estimate AT&T added just over 2 million connected cars, up over 13% from the first quarter of 2018.

Toyota Motor Corp. has been the most notable holdout against external software makers for years, but the automaker announced early in 2019 that 2020 models of the 4runner, Tacoma, Tundra and Sequoia will feature Alphabet's Android Auto. With nearly every auto manufacturer offering some form of one or both of Android Auto or Apple's Apple CarPlay, it is likely Toyota could not develop a connected dash to compete with the two heavily funded and frequently updated platforms.

Other notable automakers that have added Android Auto capability since our last analysis include Jaguar, Land Rover and Mazda. The Android Auto website says over 500 vehicle models are supported, an increase of 100 models since March 14, 2018. Apple CarPlay lists the same 500-model figure, an increase of about 200 models since March 2018.

Google announced in May at its I/O developer conference that Android Auto will get a summer update to its interface that includes enhancements to the navigation bar, more music controls, a new notification center, easier-to-read fonts and a darkened background feature. The Android Auto interface will also have the ability to adjust to bigger screens and make use of that extra space with more directions, apps and other controls.

Apple announced at its Worldwide Developers Conference on June 3 that Apple CarPlay is getting a design refresh with better Siri support in iOS 13. CarPlay will get a new dashboard that can show multiple apps, and the Music app will be more prominently featured to show album art, favorites and new-music discovery. The updates highlight the resources backing ongoing development of both Android Auto and CarPlay.

Fiat Chrysler announced in June that it plans to deploy a new mobile wallet in the second half of 2019 for 2019 and 2020 Chrysler, Dodge, Jeep and Ram vehicles equipped with connected services. The system is called the Uconnect Market Platform and can be updated over-the-air. The system can be used to order food, make reservations and pay for gas or parking. Fiat Chrysler is ramping up connectivity features with a goal of having all new Fiat Chrysler vehicles connected by 2020.

E-commerce platforms for connected cars are becoming more popular with automakers as technology evolves. General Motors launched Marketplace, a GM commerce platform, in 2017. Hyundai Motor America announced in 2018 that it was working on an in-vehicle commerce platform.

Autonomous cars are being developed, tested and improved by many major automakers and tech companies such as Google and Apple. Demand for autonomous cars will likely start with commercial vehicles and passenger vehicle transportation with adoption coming outside of the forecast period. Improvements in safety and reliability are still needed to make autonomous cars a preferred way to travel.

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