5 Connectivity Trends That Will Shape the Future of the Automotive Industry

Innovation is already behind the wheel of the modern automobiles. Yes, smart connectivity is now shaping the automotive sector in a never before way. While some of these technologies are already on the verge of becoming mainstream, there are other technologies that are just on their nascent state and are on the making. Most automotive management services predict that together these technologies will shape the future of the connected automobiles of the future.

Here are the 5 trends that will shape the future of the connectivity in automotive industry.

1. Self-driving cars

Self-driving cars that can run on the road without the intervention of the driver behind the wheel is already a reality with several automakers having come with their respective models of such cars. Already out through several successful test-runs Driverless cars truly holds the future of the automobile in the world. But according to expertise of leading automotive management services, driverless cars in spite of being already a reality, still a decade or so is required for such cars to become public and hit the road as regular vehicles.

2. AI-powered car infotainment systems

The infotainment systems of the modern cars are increasingly getting powerful and responsive and already they are all apt to respond to most regular commands including voice commands. The AI-powered virtual assistants will rule the future car infotainment systems of the cars to respond to passengers and driver in more responsive ways. AI is supposed to be introduced in the car infotainment systems of the future cars in just one or two years from now.

3. Blockchain-Powered Maintenance and Repair

We all are aware how the counterfeit car parts cause performance failure and in the long run damage vehicles. But as of now, in many countries to prevent such counterfeit parts entering the market there is no trusted system in place. In this respect, Blockchain based maintenance and repair mechanism can really play a revolutionary role in authenticating car parts. Blockchain which as a distributed ledger system allows no deletion or tampering of data while offering open and widespread access to data can actually help to authenticate car parts through an easily accessible distributed ledger of car parts.

4. Vehicle-to-Vehicle Connectivity

Vehicle to Vehicle connectivity commonly referred to as V2V technology allows cars on the road sharing information and keeping in touch with each other. On the road, a car can share information concerning speed, traffic, road conditions, any dangerous threats, etc. Automotive management services maintains that such V2V communication not only dramatically improves car safety and security it also actively helps cars avoiding routes that may take longer to reach the destination because of the heavy traffic. Already some cars are having a better in-car communication system and there are already highly equipped fleet management systems in place. All these together will shape the fully equipped Vehicle to Vehicle connectivity system of the future.

5. AR powered maintenance

Augmented Reality technology which already penetrated many industries and niches because of the unique capability of integrating the digital interaction to the real world around. Just like finding the digital game character of Pokemon in a popular AR game like Pokemon Go in an AR powered vehicle repair and maintenance environment the servicemen can render their services with guidance from a digital interface showing each and every part of the car.

A service engineer being able to see the entire car starting from the car seats to the interior features to the engine and bonnet can easily have a guided experience in repairing the entire car. This will help the car industry saving huge on maintenance and services. For customers also, this will ensure more precision, timely service and longer durability of the vehicle.

The Lemon Principle and Market Failure In The Used Car Industry

Imagine if you are shopping for a used car, and suddenly, someone came up to you on the street and assert a bold claim, “The used car market has only low quality cars for sale!” Would you have agreed with this statement?

Well, there are reasons to believe that this statement has got a ring of truth after all!

According to the seminar paper titled The Market For Lemons: Quality Uncertainty and The Market Mechanism written in 1970 by George Akerlof, Professor for Economics at the University of California at Berkeley, the market failure in the used car industry and hence, the assertion that only ‘bad’ cars can exist in the used car industry, can actually be mathematically proven. This paper even won him the Nobel Prize in 2001!

In this paper, George used the term Lemons to denote used cars of poor quality (Lemon is actually an American slang used to represent a bad car), and the term Peaches to denote used cards of good quality. Sellers who sold used cars to the used car market knows full well the quality of the car he is selling; sellers know whether he is selling a Lemon or a Peach to the used car market because he has driven his car before.

Unfortunately, buyers of these used cars are unable to ascertain the exactly quality of the cars; their knowledge of the quality of these used cars are not as complete as that of the sellers. In other words, there exist an asymmetric information between the buyers and the sellers; the sellers know more about the quality of their car than the buyers.

This difference in knowledge and information with regards to the quality of the cars has huge implications with regards to the pricing of the cars and what kind of cars get transacted. Sellers who know full well that their car is a Peach will want to sell their cars at higher prices, while sellers who know full well that their car is a Lemon will be willing to accept a lower price to sell off their low-quality used car.

But because the buyer is unable to ascertain the quality of the car, he will thus be unwilling to pay the full price commanded by the seller who is selling the Peach, and will end up paying somewhere lower than the reasonable price than the Peach commands.

Let me illustrate this buyer-seller dynamic using a short example.

Imagine if you are a buyer of a used car. You met Patrick who wants to sell you his Peach. Because Patrick knows that he is selling a Peach, he will demand a high price (let’s say $20,000) to sell off his car. But because you, the buyer, is unable to ascertain whether this car is a Peach, you are thus not willing to take the risk of paying him the high price of $20,000 to buy the car. You will tell Patrick that since there is a chance you might end up buying a Lemon, you are only willing to pay a lower fee of $15,000 for the car.

As a result, Patrick will not be willing to accept your $15,000 offer for the Peach he has, and the transaction is unlikely to go through.

But if Patrick knows that he is selling a Lemon, he will be willing to part with his car for $10,000. In this case because you offer $15,000, Patrick will gladly sell you his car and the deal gets concluded.

Note that I have simplified this example to show only the gist of the buyer-seller dynamic. $15,000 is the average price buyers in the used car market will end up paying, and is calculated based on the expected value of a pool of cars, assuming that 50% of the cars sold are Peaches and 50% of the cars sold are Lemons, and that after aggregating all the prices of the Peaches and Lemons, the mean price of the Peaches is $20,000, and the mean price of the Lemons is $10,000. This simplified example can be mathematically proven.

Thus, the used car industry has failed because no owners of Peaches will want to sell their high quality cars if they know that on average, they will receive a fee that is lower than what their Peaches justify. But owners of Lemons will gladly sell their cars because on average, they will receive a higher fee than what their low quality cars can command. The Lemons have effectively crowded out the Peaches, the average quality of cars sold has declined to that of Lemons, and that market failure has occurred in the used car market.

Back to the statement presented to you in the introduction of this article, “The used car market has only low quality cars for sale!” On average, and in general, this statement holds true, at least based on the paper written by George Akerlof. George Akerlof termed this dynamic The Lemon Principle.