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China: Google and Apple on the sidelines in connected car battle

30 January 2015 IHS Markit Automotive Expert

As showcased at CES, car manufacturers and technology companies are converging in providing solutions for connected cars, betting that consumer demand for in-car connectivity services will continue rising. According to IHS Automotive forecast data, by 2021 more than 72% of passenger vehicles will be connected. In fact, the connected car movement in the global auto industry has been so rapid recently that connected cars are rolling into our streets faster than expected.

Different competitive landscape in China
China is also riding the wave of the connected car. However, the competitive landscape is quite different there. In other parts of the world, Apple's CarPlay and Google's Android Auto are expected to succeed and become the leading smartphone apps integration solutions for OEMs. But in China, as foreign technology companies, Apple and Google are facing many regulation barriers placed by Chinese government in recent years, which restrict them gaining dominant power and gives chances for other players, including MirrorLink and the Baidu, Alibaba, and Tencent (BAT) trio to grow and win.

MirrorLink last week announced its expansion in China with the appointment of a Regional Vice President of China/APAC to facilitate MirrorLink partnerships and deployments. Currently in China, several domestic Chinese OEMs such as Guangzhou Auto, as well as global OEMs like Honda have provided MirroLink solutions. Just last week, Shanghai-Volkswagen entered the space with the launch of new 2015 Volkswagen Lamando featuring MirrorLink onto the Chinese market as well.

As of January this year, the three biggest internet companies in China, the members of the so-called BAT trio - Baidu, e-commerce powerhouse Alibaba, and social media giant Tencent, have all entered the connected car domain, with products aimed to fend off domestic competition as well as catch up with products of Apple's CarPlay and Google's Android Auto systems.

Baidu CarLife
Chinese internet search giant Baidu launched its first software for the in-car infotainment platform, called CarLife, in Beijing and announced a partnership with Hyundai to sell connected cars with CarLife in China. Baidu's CarLife will first be showcased in April on the Hyundai Sonata.

According to Baidu, CarLife is an open platform for maximum interoperability between a wide range of smartphones and cars. It works seamlessly with Linux, QNX or Android on the IVI infotainment end, and Android and iOS on the smartphone end. Its interoperability can cover up to 95% of smartphone users on the market, states Baidu. CarLife users only need to have a USB cable or WiFi to link their smartphones with the in-vehicle infotainment screens, in order to access all of the connected car services based on Baidu Maps.

Baidu back in April 2014 launched a similar product named CarNet in China. The product can integrate smartphone apps into in-vehicle infotainment screen via a simple USB cable, enabling mobile voice search, map location search and other related mobile applications on both screens.

General Motors, Volkswagen and Audi also have signed strategic partnerships with Baidu to sell connected cars in China with Baidu software, in addition to partnerships formed earlier with BMW and Mercedes-Benz. Baidu also was one of the two members (Alibaba was the other) behind Ford's open-source SmartDeviceLink (SDL) initiative in China, which is driving the Ford SYNC AppLink 3.0 to allow projections of a compatible navigation app from a smartphone onto the in-vehicle touchscreen.

Alibaba officially acquired Chinese leading map and mobile navigation supplier AutoNavi last April with USD 1.5 billion, indicating its big ambition in gaining a foothold in the automotive market. AutoNavi mapping and mobile navigation capabilities are now integrated into Alibaba's mobile commerce services.

Alibaba also signed a partnership agreement with SAIC on co-developing connected cars. The connected car collaboration will build on top of SAIC's current connected infotainment system, InkaNet, which is available on SAIC's Roewe and MG models for navigation, remote diagnostics, internet radio, and other services. The partnership with Alibaba will enable SAIC to use Alibaba's AliYun operating system, its mapping and music services, as well as big data and cloud computing technologies in the automaker's future products.

Tencent last year also released its first connected car hardware product Lubao box. Unlike Baidu and Alibaba to work directly with OEMs, the Lubao box is an aftermarket plug-in product. However, Tencent's influence to automotive OEMs should not be overlooked, as Tencent owns the most popular social network app named WeChat, a Whatsapp type of networking mobile application. According to Tencent's press release, as of August 2014 WeChat has 438 million active users with 70 million outside of China.

Why Apple and Google will not dominate
Apple and Google will not dominate the Chinese market, mainly due to the growing online constraints derived from new government regulations and policies to protect the domestic tech and telecom companies. Regulations for acquiring an Internet Map Service license, for example, has many criteria, including one to demand local partnerships, and another one to store data within China's border. Also a new rule requires companies that sell computer equipment to turn over their source code to Chinese banks. This will force foreign tech and telecom companies to give the government "back doors" to their hardware and software.

It is hard for global internet companies like Google and Apple to comply with Chinese government regulations for internet censorship, as doing so will lead to policy violations for other markets. Consequently, Google moved out of China and Apple Maps in China has to rely on a partnership with AutoNavi. Google services including Google Maps are constantly disrupted, resulting in a very bad user experiences for the Chinese consumers. In addition, many popular Chinese device makers use forked versions of Android, similar to Amazon's Fire OS, which will likely not be compatible with Android Auto.

Picking up where Google and Apple left off, Baidu Maps and AutoNavi (now owned by Alibaba) navigation are the most popular mobile navigation apps now for Chinese consumers. The core of the IVI app ecosystem is around the mapping services. Essentially all IVI apps and services are built on top of the mapping layer and rely on the location-based data. Even CarPlay or Android Auto may have much sleeker design and better HMI design, yet with mapping services not readily available in China, which is particularly true for Google's case, it is clear why many OEM partners there are turning to Baidu and Alibaba.

IHS Insights based on upcoming consumer survey
In China, the majority of smartphones on the market are Android based or based on open source Android. According to our to-be-published Consumer Survey, in China, about 33% of 1005 valid new car intender survey respondents own an Apple device, 29% Samsung, 10% Huawei, and 8% Xiaomi.

In this regard, open IVI platforms such as Baidu CarLife and MirrorLink present strength, as they are device independent, and can widely integrate with third-party apps, and support iOS, Android and all other OS systems on smartphones. On top of that, unlike Apple and Google waiting to gain Chinese government's approvals, MirroLink has secured Chinese government support with the China Academy of Telecommunication Research Lab of Ministry of Industry and Information Technology being one of their members.

Another reason to believe why MirrorLink will be more prevalent over Apple Carplay and Google Android Auto in China is that the latter two platforms are aimed at higher-end car owners. Among the Apple users in China, only 21% own vehicles priced below RMB 169,999 (USD 27,203), which means 79% of Apple users own middle to high-end vehicles priced over RMB 169,999 (USD 27,203), according to our survey findings. The same can be seen for Android devices from Samsung, with 71% Samsung users owning vehicles priced over RMB 169,999 (USD 27,203). For domestic handsets such as Huawei, Xiaomi and many others, on the contrary, the majority of users have lower-end vehicles. In a word, the lower to middle-end vehicles should consider providing MirrorLink solutions.

By Celina Li, Senior Analyst, Automotive Technology, IHS Automotive

Posted January 29, 2015


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