Demand for 'connected cars' in China

Automakers offer Internet access and integration with smartphones in cars to woo tech-savvy Chinese drivers

A visitor tries out the Connected Car Solutions System at the Qualcomm exhibition booth at the 2016 Global Mobile Internet Conference in Beijing this month.
A visitor tries out the Connected Car Solutions System at the Qualcomm exhibition booth at the 2016 Global Mobile Internet Conference in Beijing this month. PHOTO: EUROPEAN PRESSPHOTO AGENCY

BEIJING • China has the youngest premium car buyers in the world and their tech-savvy demand for "connected cars" - coupled with the country's regulations - is driving international carmakers into the arms of domestic Internet giants.

Growth is slowing and competition intensifying in the world's No. 1 car market, but it also boasts Mercedes-Benz buyers with an average age of 37 and Audi customers even younger at 36. In contrast, the average Mercedes buyer in the United States was above 54 years old, according to analyst IHS Automotive.

China's "Internet-savvy" cohort is the youngest premium customer group in the world, Mr Hubertus Troska, China chief for Mercedes' parent Daimler, said at the Beijing Auto Show this week.

Carmakers are racing to offer "connected" car services, which include in-car Internet access, entertainment systems, and easy integration with smartphones, traffic lights and other vehicles. The global market for such connected-car technology will be worth about €123 billion (S$188 billion) by 2021, according to consultancy PwC.

With more than 600 million smartphone users, China's consumers particularly prize such features. As many as 60 per cent of Chinese drivers would switch car brands solely in order to have complete access to data and applications inside their vehicle, according to consultancy McKinsey, compared with only 20 per cent of Germans.

Whereas Apple's Carplay and Google's Android Auto are taking off in the rest of the world as the leading car smartphone apps, China requires certain "adaptations", Mr Troska said. For a start, many Google services - including its crucial maps application - are blocked in the communist-ruled country.

"As foreign technology companies, Apple and Google are facing many regulation barriers placed by Chinese government in recent years," Ms Celina Li, senior analyst at IHS Automotive, said in a note. That leaves the field clear for local players such as Chinese Internet giants Baidu, Alibaba and Tencent, she added.

Audi will start integrating "Baidu CarLife" into some of its models in China this year, it says, while Volkswagen and GM have also announced plans to adopt the China-specific operating system. A locally designed rival to Apple and Google software, Baidu CarLife offers music streaming, smartphone integration and access to Baidu maps - the dominant player in China.

Fellow domestic giant Alibaba, which in 2014 purchased Chinese interactive mapping and navigation firm Autonavi for US$1.5 billion (S$2 billion), is collaborating with China's leading car manufacturer SAIC.

Audi also announced at the weekend it will be working with Tencent, which operates the country's hugely popular messaging service WeChat, to allow location-sharing in vehicles.

"In China, it's very common to send your location (to your friends) in your WeChat: You will use it in your car and have your destination automatically sent if you want," said Mr Intakhab Khan, Audi's director of electronics in China.

Global and local players are vying for Chinese market share over price, quality, and innovative offerings.

BMW has enabled some vehicles to use several popular Chinese apps, including microblogging platform Weibo. And all vehicles sold by French carmaker PSA Peugeot-Citroen in China will be connected via 4G SIM card by 2020 - compared with 20 per cent of its current upmarket DS range.

PSA will also equip some cars with a Wi-Fi hotspot in collaboration with Alibaba and offer an app to remotely check the vehicle's location and petrol levels.


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A version of this article appeared in the print edition of The Straits Times on April 30, 2016, with the headline Demand for 'connected cars' in China. Subscribe