Reasons for Tesla’s 6-degree price cut and GM’s dismissal of Apple...The real gold of electric cars is 2.6 trillion car software assets

For drivers, it is very natural to connect a mobile phone in the car and connect to Apple's CarPlay or Google's Android Auto. In the blink of an eye, the communication, navigation, music and other functions of the mobile phone can be synchronized with the car.

General pushes its own software

Will refuse to load Apple and Android systems

However, General Motors, the largest car dealer in the United States, made a decision in early April that broke the market glasses, announcing that future electric models will no longer be equipped with CarPlay and Android Auto, but will be exclusive to its own in-vehicle system Ultifi.

Take CarPlay, which has a relatively high market share, as an example. At present, 98% of new cars in the United States have installed it. Why should GM risk confronting the majority of Apple users and push its own products?

What GM is looking at is the automotive software market with amazing potential. Only by winning the platform can it seize the opportunity and turn software into a new revenue engine.

According to the forecast of the consulting firm McKinsey, the automotive software market will reach US$84 billion (approximately NT$2.6 trillion) in 2030, and the value of software in a vehicle will also increase from about 10% today. to 30%.

Apple has sensed this business opportunity early on, so it announced at the Developers Conference (WWDC) last year that CarPlay will be fully upgraded, from simply extending the mobile phone to the car, and evolving into a car system that is fully integrated with the vehicle hardware. Seats, and even the dashboard, can be set by themselves through CarPlay and monitor the vehicle status. Audi, Ford, Honda, Mercedes-Benz, Porsche, Nissan and more than 10 car dealers are listed on the first wave of the list.

This is a crucial step for Apple to enter the auto market. If it can capture the market share of in-vehicle systems, subsequent users will naturally download related car applications (Apps) from Apple's platform. The strategy of the car factory is to concentrate on making cars by itself and hand over the software to technology companies like Apple. It can also use this to attract consumers and consolidate market share by focusing on seamless integration.

However, the in-vehicle system determines which car software the user uses. If a car manufacturer gives up developing its own system, or is replaced by a third party, it is tantamount to giving up the software pie to others.

Tesla is a representative of the opposition camp, and has never opened up CarPlay and Android Auto to introduce its own system.

GM now chooses to keep up with Tesla's footsteps, and the fat and water will not fall into the fields of outsiders. To this end, GM is actively improving its software capabilities. Not only has its own self-driving system Super Cruise reached the level of hands-free steering wheel and automatic lane change, but it also invites software developers to use its own platform to develop apps. In addition to basic in-vehicle entertainment, broadcasting, and news, there are also functions such as advanced vehicle status tracking, fleet management, and route planning, and it has gradually formed its own ecosystem.

"These features can't be delivered through CarPlay and Android Auto, we have to create them, we have to convince consumers that it's better," GM Chief Financial Officer Paul Jacobson told the Wall Street Journal.

In 2021, about 4.2 million GM car owners, or a quarter of the total, are willing to pay for car app subscription services, bringing GM $2 billion in revenue.

Global manufacturers are not relentless in reducing prices

Selling software and services is the source of profit

GM is not the only party involved in the war. Major manufacturers such as Mercedes-Benz and Volkswagen are also building their own in-vehicle systems. Another reason why car dealers have joined the software war is because in the era when electric car dealers are competing with each other, the price war has quietly started, and the only way to maintain profits in the future is software.

Taking Tesla as an example, it has lowered the price of electric vehicles in the United States six times this year, with a cumulative drop of up to 25%. The financial report for the first quarter was not good, with a 24% year-on-year profit drop, but CEO Musk did not care , expressing that "the decline in profits should continue to cut prices in pursuit of sales."

The price war is fierce, but Tesla's full self-driving (FSD) service has not been lowered. Last year, the price was raised twice. It is a third of the price of Model Y. Musk said at a recent meeting that it is expected to achieve true full self-driving this year, and that is the source of profit creation. "Technically speaking, we are the only sales vehicle that can make almost zero profit now, but in the future we will create considerable profits through self-driving. Profitable car dealers.”

Morgan Stanley estimates in 2021 that if Tesla's total sales can increase from 1.5 million (editor's note: currently about 1.9 million) to 35 million to 40 million within 10 years as expected, At that point, Tesla's software revenue will exceed its hardware revenue.

This is also the calculation of GM, which is currently planning to build a "Netflix-level" subscription empire to increase revenue. GM estimates that subscription services could generate $20 billion to $25 billion in annual revenue in 2030, about 10 times the current amount. On the other hand, last June, GM's best-selling affordable electric car, the Chevrolet Bolt, also cut the price by $6,000 to maintain market competitiveness.

Hyundai Motor also said that about 30% of future profits will come from software services, while its electric car model Kona was only reduced by 9% at the end of last year. This model of reducing the price of vehicles and switching to software is being staged among major car dealers.

Today's car software battle is just like the iPhone back then. Apple insists on developing iOS by itself. Now relying on its exclusive platform, although mobile phone sales will only more than double in the 10 years to 2022, software revenue will However, it has grown by nearly 4 times, and the number of subscriptions has increased by 29 times. Although it is difficult for mobile phone manufacturers to replicate the iPhone’s experience in creating an exclusive platform, it may be worth taking a gamble on the new battlefield of electric vehicles.