Many tech and auto companies believe that connected cars are destined to conquer the roads soon and pave the way for self-driving cars to replace human drivers. To better understand this fledgling industry, let's highlight four key numbers investors should be familiar with.
75% of all shipped cars by 2020
The percentage of new cars shipped with Internet connectivity will rise from 13% in 2015 to 75% in 2020, according to BI Intelligence. Research firm McKinsey estimates that connected cars could account for 22% of all vehicles on the road (not just new cars) by 2020, up from 10% in 2015.
$55,000 average price tag
BI Intelligence also reports that the average selling price of a connected car is currently $55,000, since the current market tilts "toward the luxury category." However, that cost will likely decline in the future as more competitors enter the market and technological costs decline. Research firm PWC reports that German automakers BMW, Volkswagen/Audi, and Daimler's Mercedes-Benz are currently the top three most connected automakers in the world.
Key hardware players to watch in this market are NVIDIA (NASDAQ:NVDA) and Qualcomm (NASDAQ:QCOM), which are aggressively expanding into the connected car market with new application processors. Last year, Mercedes Benz, Audi, Porsche, Bentley, and other automakers all showcased concept connected cars powered by NVIDIA's Tegra processors. Qualcomm has been selling its new Snapdragon A chips into the same market.
A $123 billion connected-car market by 2020
PWC forecasts that the value of entire connected car market will grow from 31 billion euros ($34 billion) to 113 billion euros ($123 billion) between 2015 and 2020. PWC splits that market into six categories -- driver assistance, safety, entertainment, well-being, vehicle management, and mobility management.
PWC estimates that the driver assistance and safety markets will be the largest, together accounting for over 70% of the market by 2020. A key player to watch in that market is Mobileye, which provides 90% of the world's major automakers with collision avoidance systems. These systems, which tether cameras
and radars to braking systems, are expected to pave the way for the production of semi-autonomous and autonomous vehicles.
Another key area to watch is the in-car entertainment business, which is expected to account for about 9% of the market by 2020. Key players to watch here are Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), which have introduced competing dashboard mirroring platforms for iOS and Android devices. As more connected car manufacturers adopt these two platforms -- Apple's CarPlay and Google's Android Auto -- connected vehicles could essentially become extensions of smartphones.
A higher number of connected cars on the road will also allow leading telcos like AT&T (NYSE:T) to expand their wireless networks beyond mobile devices. Last quarter, AT&T added a million connected cars to its network, and signed a new connectivity deal with Ford that could connect "at least" 10 million more cars over the next five years. AT&T also introduced a Wi-Fi device last year which converts older cars into Wi-Fi hotspots tethered to its wireless network.
A $42 billion autonomous-car industry by 2025
Boston Consulting Group believes that autonomous features built upon those foundations will enable driverless cars to navigate crowded city streets by 2022. The firm estimates that by 2025, the driverless car market will be worth $42 billion (excluding the base price of cars) -- up from practically nothing today.
It also estimates that the price to add driverless tech to vehicles will range from $2,000 to $10,000, and will decline between 4% to 10% within the first decade as adoption spreads. The firm notes that many parts of the fully autonomous car industry will still overlap with the connected and semi-autonomous markets, making it an extension of the $123 billion market in PWC's estimates.
Two major ecosystem players to watch in driverless tech are Google, which has already been test-driving its driverless cars, and Apple, which is rumored to be developing its own driverless car. Both companies could tether those designs to its aforementioned mirroring systems. Last October, Tesla Motors launched its "autopilot" service, which adds computer-assisted parallel parking, steering, lane changing features, and other features to its electric vehicles. Those upgrades could eventually bridge the gap between semi-autonomous and fully autonomous vehicles.
The connected road ahead
Looking ahead, connected cars could become the next ecosystem battleground for Apple and Google. NVIDIA, Qualcomm, and other chipmakers will expand away from mobile devices and battle it out in car infotainment systems. Telcos will profit from vehicles being connected to upcoming 5G networks alongside mobile devices, while smaller tech players like Mobileye could be gobbled up by larger players.
The connected car market is still in its infancy today, but tech investors should be familiar with these early adopters and the underlying trends to spot long-term investment opportunities.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun owns shares of AT&T and Qualcomm. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Ford, Qualcomm, and Tesla Motors. The Motley Fool recommends Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.