Foreign Direct Investment in Latin America and the Caribbean 2017

Foreign Direct Investment in Latin America and the Caribbean • 2017
Chapter II
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1. The digitization of the industry
(a) Spread of connected vehicles and the arrival
of autonomous vehicles
The technological revolution is producing huge and rapid advances in wireless connectivity,
artificial intelligence, low-cost hardware (cameras, sensors, radars) and software that
unites all these elements. Innovative firms, both car manufacturers and suppliers, as
well as new participants from the technology industry, are investing heavily to deliver
new applications, features and services. This dynamic is placing special emphasis on
the high-end segment, led by Volkswagen, BMW and Tesla. Similarly, new prototypes
of connected vehicles are starting to appear for specific applications, such as large
mining trucks, robot taxis, buses printed using 3D technology, and small, low-cost urban
autonomous vehicles (known as “pods”). 14
Electronics are penetrating the automotive industry as never before, and very fast
(see diagram II.2). The first digital engine control modules were introduced in the 1980s.
Today, an average car contains about 60 microprocessors (four times more than 10 years
ago), along with over 10 million lines of software code (more than half of the number of
lines of code used in a Boeing 787 Dreamliner) (CAR, 2014). A decade ago, electronics
and software accounted for no more than 20% of the total cost of a vehicle; today the
figure has risen to 35% (PwC, 2016g). In a state-of-the-art car with a conventional internal
combustion engine, the electronic component represents about 40% of value-added,
and the proportion can reach 75% in electric or hybrid vehicles (Scuro, 2017). By 2030,
the cost share is likely to exceed 50% (WardsAuto, 2016). Furthermore, nearly 90%
of automotive industry innovations in 2015 included electronics and software in areas
related to safety, connectivity and entertainment (ConnectorSupplier, 2016).
The largest vehicle manufacturers, along with their suppliers, have focused on
traditional areas such as quality and safety, and have used “infotainment” systems
to differentiate their products. 15 Users want to be connected and have convenient
to access their personal content anywhere, anytime, on all of their devices. In this
scenario, cars are rapidly becoming another node in the network, allowing for more
comfortable, safe and efficient journeys (see diagram II.2).
The production of connected automobiles is growing rapidly. 16 Between 2015
and 2020, the production of new cars equipped with data connectivity —via a built-in
communications module or a connection to a mobile device— is forecast to increase
from 6.8 million to 61 million units, or from 10% to 75% of the total (see figure II.20)
(Gartner, 2016). With this rapid incorporation of intelligence, by 2018 one in every five
vehicles will be able to discern and share data on their mechanical status, positioning
and environmental conditions (Hewlett Packard Enterprise, 2016). The dramatic increase
in vehicle connectivity will imply a significant increase in the value of the world market
for components and related services, from € 30 billion to € 170 billion between 2014
and 2020 (McKinsey, 2014).
Electronics and
software account for
around 35% of the total
cost of a vehicle today.
14
In mid-2016, the United States firm Local Motors presented a small self-contained, electric, 3D-printed and partially recyclable
shuttle-bus called Olli. The firm claimed this was the first self-driving vehicle to use the Watson Internet of Things (IoT) cognitive
learning platform, developed by International Business Machines (IBM), (The Verge, 2016a). In late 2016, NuTonomy, of Singapore,
became the first company to publicly test autonomous taxis, thus beating Uber, the firm that pioneered development of this
type of vehicle (The Verge, 2016b).
15
Many manufacturers have developed their own information and entertainment systems, including dashboard units, along with
the software that runs them and enables them to interact with other devices, such as smartphones.
16
In addition to the basic concept of a connected vehicle with Internet access, new markets have emerged, such as vehicleto-infrastructure
(V2I), vehicle-to-vehicle (V2V), vehicle-to-the cloud (V2C) and vehicle-to-everything (V2X) (Hewlett Packard
Enterprise, 2016).