ADAS Revenues Now Rather than Autonomous Cash Later

The long and winding road to the upper levels of autonomy, namely Level 4 and Level 5 vehicle automation, are far in the future.

That means automakers should be thinking more about how to drive revenue through ADAS rather than placing future bets on fully self-driving cars. In order for carmakers to successfully drive revenue from ADAS features however, they’ll have to start moving towards a model whereby these types of features, from automatic emergency braking to self-parking, are available for purchase on a wider range of vehicles.

Mike Ramsey, senior research director of automotive and smart mobility at research firm Gartner, says automakers should take a close look at Toyota, which he noted has been very active in promoting ADAS features at any trim level for not very much money. “They’re not forcing you to get the highest trim level to get the safety systems,” he said. “What many of the other OEMs have done is only made the ADAS features available at the top end of the market.”

He said by adopting this scheme of ADAS features solely for premium models, automakers have limited the amount of revenue they could be taking in. “They’ve taken the perspective that if you want this $3,000-$4,000 option, you have to have all this extra stuff and it works out to if you want these capabilities, it costs $10,000-$15,000 more to the base model,” Ramsey said. “That really limits the market but this will change because OEMs will start implementing things like AEB and lane keeping in a much broader array of vehicles.”

There are also the benefits to automakers that economies of scale bring because when the technology proliferates across vehicle lines, it will become less expensive to implement. Ramsey pointed to navigation features as an example of a feature that used to be a top trim level option and which now available on base models. “OEMs got more revenue when it was spread across the market, as that technology proliferated,” he said. “Right now, the most advanced systems are only available on a tiny handful of systems and I do think that, over the next five years, almost all of the revenue related to automation or driver assistance systems is going to be in safety and comfort and almost none of it will be in the full autonomy area.”

Adi Pinhas, co-founder and CEO of Brodmann17, a developer of perception software for automated driving, said ADAS functions are not an obscure feature in the car but highly visible to the consumer.

Because of this, they have become an important differentiator for automakers and these functions are highly attractive to drivers because they promote safety, such with automatic emergency braking, convenience with self-parking and fuel savings while employing adaptive cruise control. “These premium functions cost in the hundreds of dollars,” he said. “The required hardware for Level 4-Level 5 cars costs in the order of $20,000, which is not practical for passenger cars and so you have situations like with Daimler, which recently announced that it will stop developing Level 4-Level 5 passenger cars.”

Pinhas noted all carmakers see these ADAS functionalities in Tesla models and understand that automated driving is the future and they have to close the gap. Furthermore, once drivers have these ADAS functions in their car, they would look to have these same functions and more in his/her next car. “So, again, it’s a gap that all automotive OEMs need to close with BMW, Audi, GM and others,” he said.

One of the additional challenges automakers will face when using ADAS to drive revenue derives from the often confusing terminology they use to describe their features. “There’s no good naming convention, so when people are shopping for them, they have no idea what the features do,” Ramsey said. “It’s extremely difficult to tell if the car has them or not, or how to search for them.”

He argued that if there was more of a common naming system for these technologies, there would be a much wider proliferation of them, because the benefits of features like AEB are “significant, and proven”. “There could be very significant benefit in terms of revenue from ADAS features but automakers are not realizing it, because these features are not packaged in a way that allows the entire market to take advantage of them,” he said.

Pinhas also agreed with that sentiment, noting in many instances, the use of different terminology for ADAS technology is owing to partially supported functions and beyond. “This creates dangerous confusion, as is the case with Tesla’s automated driving capabilities being called ‘Tesla Autopilot’,” he noted.

He pointed out the autopilot terminology over-inflates the function of the technology and severe accidents have happened because consumers expect it to be able to control the vehicle without constant manual control, which is not the case.

Overall, Pinas argued that ADAS technologies can be a strong revenue driver with electronics now being the main differentiator in the car. “Beyond that, the European New Car Assessment Program (NCAP) is publishing new standards every year,” he noted. “If an automotive OEM would like to keep its five star safety rating, it needs to support these ADAS functions.”

He explained some regulators are also considering safety features like AEB for elderly drivers. “So, for automotive OEMs, it becomes less about the few additional hundreds of dollars needed to install AEB in their cars and more about their ability to sell the cars at all if they don’t meet these requirements,” Pinas said.


One comment

  1. Avatar Holger Loebel 3rd April 2020 @ 12:14 pm

    Interesting article. Focus on the revenue side is important but only one side of the coin. Having an eye on the development efforts is the other. Especially in software development, the use of standardized software libraries can significantly reduce efforts.

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