Let me clarify upfront, I do not think ‘Smartphone on Wheels’ is an apt metaphor for an automobile, whose inherent responsibility remains safe transportation of humans from A to B, with near 100% reliability. That said, the introduction of iPhone in 2006 certainly inspired the idea of a platform that can transcend its initial intended function and keep growing to support many digital services in our life.
Perspective is a bit different in China, where the auto industry came off age almost at the same time as the smartphone, and the relationship between the two devices is much closer and symbiotic. The NEV (new energy vehicle) brands in China, such as Nio or Xpeng, many of whose founders are from the software industry, have been proponents of a strong intermingling of the automobile and smartphone, aligning with a market where consumers’ desire and excitement for the latest features stand out more than anywhere else.
But the story has now entered a new phase.
Auto OEMs are building their own custom phones. Nio, one of the new EV makers unveiled in September three high-end smartphones, custom designed to be used exclusively with its EVs, with built-in 30 car-specific functions. In many ways, Nio has been emulating both Apple and Tesla, developing its EV technologies in-house, from vehicle OS (Tianshu SkyOS), to Lidar chips to battery swap systems and autonomous driving. Introducing its own phone seems to be the latest step.
Here is the big question. Do consumers need a phone designed around their cars? It is a novel value proposition and it will be interesting to see if the current NIO users (over 50% of whom are iPhone users while the other uses flagship Android phones) will find it compelling to adopt or switch to the new Nio phone.
In the same vein, Geely group recently unveiled smartphones that are customized to connect to its Lynk & Co. branded cars. Polestar, another Geely brand, also plans to debut its own smartphone in December of 2023 while launching its latest SUV Polestar 4. The smartphones come from Xingji Meizu, a technology subsidiary of Geely.
May be, someday we will see a Tesla phone in the US – as has been alluded to by Elon Musk in social media.
Telecoms Pivoting to Smart Cars:
There is also a reverse development – smartphone manufacturers building cars!! As of August 2023, Xiaomi Corp, the world’s third largest smartphone brand by shipments, has won the approval to build and launch its own EVs in 2024, with a $10 billion investment, spread over a decade.
Xiaomi’s new investment and EV venture is not the only example of a telecom tech enterprise getting into automotive business. Huawei, an electronics and telecom giant in China, (currently under US sanctions) is also reinventing itself, by expanding to smart cars. Huawei partnered with several automakers, such as Chery, BAIC and others to produce its new EVs, under Aito brand. Aito cars will feature Huawei’s Harmony OS system – developed as an alternative to Android, and feature its HiCar app platform, allowing consumers to access in-car entertainment and remotely check the vehicle status. One of Huawei’s smart watches can also be used as a car key for the Aito branded vehicles.
According to a recent article in MIT Technology Review*, Chinese consumers expect the new vehicles to be tech products, not unlike smartphones. Automakers are catering to this trend. And now smartphone makers and technology enterprises are jumping on the bandwagon to launch their own versions of smart cars. In other words, Chinese auto OEMs aren’t just becoming tech companies, Chinese tech enterprises too are becoming auto companies, building their versions of an automobile.
What’s Next?
It seems competition and zeitgeist are pushing both Chinese OEMs (especially the EV makers) and technology companies to build and introduce technology-loaded cars with attributes of a smartphone on wheels. Where will this go is anybody’s guess. Will this take innovation to new limits, will it jeopardize vehicle safety or will it financially wipe some players out of the market? The entry of telecom players such as Xiaomi and Huawei may also be worsening the capacity glut along with slower demand. There is also concern among investors with mounting losses for OEMs such as Nio. There are also the issues of data security, privacy invasion and safety breaches in these vehicles.
We will keenly be watching the trajectory of this trend.
*China’s car companies are turning into tech companies, by Zeyi Yang; MIT Technology Review, August 16, 2023