IMS predicts auto apps explosion in North America
Within the next five years the North American marketplace can expect to see around 50 percent of all new car radios featuring downloadable apps according to a new report from IMS Research (now part of IHS Inc.
IMS is forecasting that connected head units will represent more than 50 percent of the total new car head unit segment in 2017 and that 92 percent of them will feature apps. The research firm says that every major vehicle manufacturer in the North American market either has a system in the market featuring apps or is in the process of building an app-based head unit for future vehicle models.
However, manufacturers should approach this market with some trepidation. A recent consumer survey undertaken by IMS Research revealed that only 34 percent of consumers would be willing to pay for apps in the car. This represents a large disconnect between the number of systems in the market and the number of people willing to pay to download content.
Given the low consumer support it may be that some vehicle manufacturers are developing these systems for simplicity. Vehicle manufacturers realize that, in order to move away from traditional car radios that can be easily replaced they must offer a product that can remain fresh for the typical lifecycle of a new car. With the explosion of apps and smart phones in recent years, a software-based app approach lends itself well as a solution to this issue.
The biggest question currently being asked by many people within the industry is whether the app business model is a sustainable one. The big issue that no one has yet been able to address is whether vehicle manufacturers will be able to continue to support app development and maintenance over the life cycle of a car (typically 10 years), especially with direct revenue generation from apps likely to be very low. It is clear that this is one of the largest pitfalls the industry has to overcome in the coming years. If it doesn’t, it risks alienating many second- or third-hand owners.
Luckily, there is a light at the end of this tunnel. A few pioneering companies and standards bodies are helping to assist with smart phone app integration. These include Airbiquity and Livio Connect, while the Car Connectivity Consortium is also trying to boost adoption of the MirrorLink standard, which would allow normal smart phone apps (albeit with a vehicle centric user interface) to work within the car.
While some of these solutions may not offer vehicle manufacturers the total user experience control that they really desire they will help to reduce the financial pressure on manufacturers of maintaining a host of brand specific applications. This is achieved by allowing consumers to use their existing apps from mobile app stores through their in-car display.
Despite the unconfirmed consumer demand, the general industry direction is still leading IMS Research to forecast strong growth opportunities for companies involved in this space, as vehicle manufacturers continue to push forward with app based head units. For the North American market sales of such head units are forecast to grow from 2.2 million in 2011 to 11.6 million in 2019. As these units will likely feature a combination of OEM specific and smart phone apps, the potential for developers on both sides is very strong.