Introduction
Despite pricing adjustments and some automakers pulling back on underperforming models, EVs had a very good H2 2023, with sales soaring in three critical automotive markets: North America, Europe, and China. With the impact of early adopters on EV demand finally receding, what the trend in sales numbers reveals is that demand for EVs from mainstream automobile buyers remains on a strong growth trajectory. That is very good news for automakers, their technology partners, and the ecosystem of infrastructure and service providers investing in the opportunity to address the needs of EV owners and operators, but where are we on advanced driver assist systems (ADASs)?
It can be a bit difficult to split the automotive market between two distinct but often intertwined technology segments: EVs and software-defined vehicles (of which ADAS is a significant segment), but for the sake of understanding the new market dynamics of the automotive industry, especially as they relate to key market opportunities for technology vendors, we have to get a bit granular and talk about ADAS by itself.
Software-Defined Vehicles, ADAS, and the New Technology Stack
Broadly speaking, the software-defined vehicle can be broken down into several technology segments working together to create a complete technology stack: Cockpit solutions that involve Infotainment, ADAS, connectivity, and a central vehicle system management platform. Due to its complexity, real-world and real-time performance requirements, interoperability, and reliability needs, to say nothing of scale and lifecycle considerations, building such a complete stack has posed a significant challenge for automotive OEMs. Were it not for critical technology partners, it is unlikely that incumbent automakers would be in a position to compete against Tesla today, and neither the EV market nor the software-defined vehicle market would look as promising as they do as we roll into 2024. In the semiconductor space alone, the push by every major silicon player, from NVIDIA and Qualcomm to Intel and AMD to drive the development and adoption of automotive platforms signals just how significant the market opportunity is.
Tesla continues to enjoy a first-mover advantage and remains the automaker to beat when it comes to delivering the most advanced and well-integrated software-defined EV on the market, but incumbent automakers and new entrants alike are beginning to catch up: In China, BYD is giving Tesla a run for its money by manufacturing an equivalent number of EVs and offering more models, many of them at a more attractive price than Tesla’s with comparable features. In Europe, incumbents like the Volkswagen Group and BMW continue to hold on to their dominant market shares, in great part thanks to new EV and advanced features that aim to compete against Tesla’s. In the US, despite a banner H2 for Tesla sales there as well, Tesla’s share of the EV market reportedly slipped from 62 percent a year ago to roughly 50 percent today. It is also important to note that Tesla only accounted for 4-5 percent of new US vehicle sales in 2023, most of which come equipped with software defined features, with GM, Toyota, Ford, Hyundai Motors, Stellantis, Honda, and Nissan Mitsubishi holding on to a combined 79 percent of new vehicle sales for the year.
Why Does This Matter?
Tesla’s first mover advantage can be attributed to several factors: For starters, Tesla invested immense amounts of money and time developing its own technology stack, relying on key technology partners to build custom and semi-custom solutions for its vehicles. Second, Tesla did not initially have to cope with a scale challenge, let alone any of the friction points that come with transforming a massive incumbent operation from the ground up. The company could afford to be nimble and focused on very specific challenges, take its time solving them, and learn to scale as needed. Most automotive companies, new or incumbent, do not have that kind of time if they want to be competitive now. This is why technology partnerships have been and continue to be key to every automaker’s ability to catch up to Tesla and compete with its most advanced features—namely in the ADAS segment.
It is not surprising that every market indicator currently points to an acceleration in the ADAS horizon, and consequently to an acceleration of competition in the ADAS segment. An additional challenge—or objective—for automotive OEMs beyond driving ADAS innovation forward, is to create significant differentiation for themselves in the segment.
Scale’s Paradigm Shift: Moving from an SOC Mentality to a Seamless Stack Mentality
And herein lies the challenge: For all the excitement around startups and smaller companies working on innovative solutions that serve the automotive sector, only a handful of technology vendors, and more specifically technology platform vendors, have the experience, resources and scale necessary to serve the needs of automakers at pace and at scale. This gives us a window into which a small handful of technology companies, particularly in the semiconductor and SOC space, are best poised to capitalize on the market opportunity.
One way to look at this challenge is to split technology vendors into two categories: those with a narrow bench of highly specialized solutions, and those with a broad bench of solutions that, when used together, can form the foundations of a complete technology stack. The primary advantages of the latter for automotive OEMs are a faster design cycle for their software-defined vehicles, accelerated speed to market, systems designed to work well together, and the cost savings that come from not only a more efficient and frictionless design process but also from the economies of scale gained from consolidating critical vehicle systems around a single platform designed to deliver full-stack performance. And while picking a few highly specialized solutions to perform critical tasks extremely well makes sense, automakers also need platform partners that can deliver as close to a complete stack as possible to make those custom integrations possible. This is the essence of the kind of system-thinking that accelerates innovation and makes the complexity of software-defined vehicles, and particularly in the realm of ADAS, possible.
Why Qualcomm Looks Poised for a Major ADAS Play
Looking through my short list of platform and technology solutions vendors already well embedded in the automotive industry, Qualcomm jumps out at me as a bit of an outlier in that it comes closest to delivering not only that full, seamless stack, but one with strong pull-in for ADAS across its perhaps better established pillars: Snapdragon Car & Cloud, Snapdragon Connectivity, and Snapdragon Cockpit. The next key opportunity for Qualcomm in its automotive stack, in my view, is its Snapdragon Ride platform.
Qualcomm’s approach to solving system problems might be a key differentiator here. Let us think about some of the core components of an ADAS platform: Localization, 360 surround view perception, object detection, highway autopilot, urban dense traffic driving, data simulation (and cloud reprocessing), real time mapping, driver monitoring …. Taken together, these are not specifically AI problems or sensor problems or GPU problems. These are system problems that require system solutions, and Qualcomm has the scale, the resources and the experience to continue developing systems specifically for the automotive industry in ways that very few companies are currently able to.
A few additional points about the evolving Snapdragon Ride platform that I think are going to alter the ADAS competitive landscape in 2024: The first is Qualcomm’s years of AI leadership in the mobile space naturally translating well to automotive use cases. The second is Qualcomm’s focus on performance per watt across its Snapdragon ecosystem, a factor especially important in the EV space: The more energy-efficient a system is, the less of a drain it is on the vehicle’s limited resources. The impact of this type of efficiency is obviously multiplied when a vehicle is entirely designed around energy efficiency, particularly with energy-demanding, AI and sensor-heavy platforms like ADAS. (Anyone who already owns an EV and has ever made the mistake of leaving it parked in an airport lot for several days has probably experienced how fast even a subtle system like sentry mode can drain the battery.) Performance per watt is a much more critical platform KPI than consumers realize, and Qualcomm offers its OEM partners a definitive advantage there. Third is Qualcomm’s somewhat recent acquisition of Arriver, which not only brings production know-how and years of successful launches but strengthens the capabilities of the platform to deliver safety-grade system solutions—from L2+/L3 functions to checking critical regulatory requirement boxes. The acquisition also helps further elevate Qualcomm from SoC solutions provider to full system provider for yet another reason:
For this kind of system thinking to encompass all of the ADAS needs of automakers, it also has to reach beyond in-vehicle platforms to also solve complex data-driven problems. Consider the challenge of managing an entire end-to-end pipeline of ADAS data, from harvesting/ingestion, ground truth generation, automated annotation and reprocessing on the cloud to verification and validation. (What happens behind the scenes while a vehicle equipped with an urban or highway pilot system is engaged.) To build a complete stack of data-focused ADAS solutions at scale, individual automakers have to first have the know-how to set it up, then have the scale to continuously collect that data and run continuous reprocessing—an early advantage for Tesla, and not something most incumbent automakers necessarily want to spend years having to build from scratch if they do not need to. The production system know-how that Qualcomm started building with the foundation of Arriver takes care of that challenge for them.
Beyond Qualcomm’s system thinking approach to delivering a seamless stack to its automotive partners, I also see two additional market advantages the company enjoys: The first is its ability to execute at scale. We are talking about a company that brings decades of experience helping global, high volume device OEMs bring their products to market on time. Given how risk-sensitive automakers can be, Qualcomm’s track record of helping its partners achieve success seems to me like one of the other primary reasons why so many global automakers have increasingly come to rely on Qualcomm as their technology partner of choice for critical systems. The second is the high likelihood that Qualcomm will be able to continue supporting its partners in the future. With the company’s track record and promise of longevity also comes a rare breadth of partnerships, contributions to major standards and value chain, all of which implies both less risk and a long runway of opportunity.
On that point, Qualcomm’s ability to help drive additional layers of revenue opportunities for their automotive partners, which range from navigation and infotainment to diagnostics, OTA updates and data-related services, seems to be expanding into data. Between Qualcomm’s Car & Cloud and Ride platforms, I see not only just a technology stack play for Qualcomm but new revenue pipelines. One area I will be paying particular attention to in 2024 is the way that Qualcomm and its partners will look to capitalize on the intersection of real-time mapping and vehicle connectivity. Think about it as the business opportunities that a pipeline of real-time, curated maps might provide by way of a richer, safer, more premium ADAS experience. I am especially curious to see how crowdsource mapping will fit in the evolution of Qualcomm’s Ride platform, and specifically how its approach to developing rich, real-time map assets will help create tangible user-facing value for the Ride platform’s perception stack.
All of this to say that the automotive industry, particularly as it relates to how it approaches software-defined vehicles today, is moving on from the component, socket and SOC thinking that characterized the first phase of its digital transformation in pursuit of Tesla’s disruptive model: a far more streamlined, mature, cost-effective, more predictable stack and systems model which favors technology vendors that can combine rich IP portfolios, deep automotive and systems design experience, and scale.
Does this leave sufficient room for automakers to develop their own customized solutions and deliver significant market differentiation? The simple answer is yes. On the one hand, the type of seamless stack partnership I just outlined naturally frees automakers to dedicate more internal resources to develop custom solutions and features. On the other hand, because these systems are co-developed and extremely adaptable, a technology partner like Qualcomm can even help the automakers it partners with develop and implement differentiated solutions on top of its automotive platforms. Though it may be a bit too soon to tell, keep an eye on how Qualcomm’s partnership with BMW may signal the next inflection point for automotive industry partnerships.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other Insights from The Futurum Group:
Step Inside the Qualcomm Concept Car with CMO Don McGuire – Futurum Tech Webcast
Qualcomm’s Snapdragon Digital Chassis Will Power the 2025 Escalade IQ
Qualcomm’s Nakul Duggal Discusses Company’s Auto Push at IAA Mobility – Futurum Tech Webcast
Author Information
Olivier Blanchard has extensive experience managing product innovation, technology adoption, digital integration, and change management for industry leaders in the B2B, B2C, B2G sectors, and the IT channel. His passion is helping decision-makers and their organizations understand the many risks and opportunities of technology-driven disruption, and leverage innovation to build stronger, better, more competitive companies.
