Isolated Car to Connected Car: Transportation from the 20th to the 21st Century

In the 1950s and 1960s, cars took hold of the United States. Car use and sales, as indicated by registration, boomed from 25.8 million cars in 1945 to 52.1 million cars in 1955 and finally 75.3 million cars in 1965. Indeed, Americans bought cars to drive towards the post-war American dream, roaming free of bounds, each person having his or her own car. Gas prices certainly didn’t hold anyone back…

But if the 20^th century car brought freewheeling independence, the car of the 21^st century is diametrically opposed: connected to the Internet (connected car and infotainment), to other cars (V2V) and to the environment (V2E); shared transportation, tethering individuals with mobile technology that allow for car sharing, ride sharing and the like.

Indeed, innovation is running wild in the transportation sector and investors are duly taking note. CTG’s i3 data shows the value and importance companies are according to transportation-related innovation.  Equity investments over the first half of 2014 total $2.8 billion across 72 deals, with the Uber deal accounting for $1.2 billion of that. This is almost triple the investment made in the second half of last year, or roughly equivalent to the total investment made over the previous 18 plus months.

In particular, the market growth and investor excitement in the car sharing, ride sharing and related industries is self-evident. And jaw-dropping. CTG’s i3 shows that over 2.190 billion dollars have been infused into this sector through growth equity investments in companies providing cleanweb mobile solutions and private car services like Uber, Xiaoju Technology, Lyft and SilverRail. Indeed, the trend is largely a race for brand dominance as well as, to a lesser extent, competing business models (RelayRides and BlaBlaCar garnered investments of $25M and $100M respectively).

The market energy that is still entering the public space is in the connected car and V2X technologies. Even if Google gets all the headlines for their autonomous car pilot, entrepreneurial innovators on our radar and well-established corporations in our network both recognize the countless steps needed before getting to a stage-4 autonomous car.

In the next three to seven years, innovators are focusing on developing automotive-specific tools to make the car more connected. To make the car more connected, companies are doing everything from building better supplier-targeted HMI like DiSti Corp or head’s up displays like Mishor3D, or consumer facing parking apps like Parko and Parknav. These are some of the software and hardware solutions that will make the car feel more connected. With the interfaces left for software giants like Google, Apple and Microsoft, along with internet connectivity packages with national wireless providers.

But the real step towards a “smarter” car will undoubtedly come from the providers of solutions that increase car sensors, radio connectivity, and automotive grade semiconductors. Laser scanning like what Ibeo Autmotive Systems is developing will empower the V2E space. V2X and V2V communication hardware like Cohda Wireless or the automotive-grade semi-conductors like Autotalks are deploying.

Look for more innovators trying to jump up to speed in these markets that help supply OEMs with the hardware and software they need to develop the connected and “smarter” car. But the overall market potential is enormous. IHS Automotive predicts the global annual production automotive market to top 21 million units in 2021, with global production already growing 21-million units since the crunch of 2009. And if every car will be connected in multiple ways by 2025 (GSMA and SBD), and cars are well on their way to autonomous driving – with 92% of new car sales in 2030 having at least level 2 self-driving automation (according to the US National Highway Traffic Safety Administration (NHTSA), this includes combined function automation like adaptive cruise control and lane centering), the space to be filled leading up to that is in car-enabling sensors, V2X communication tools.

To be released in mid-August, our 2Q14 Quarter Innovation Monitor report on the Transportation sector will take a deeper look at the investments that are funding the next round of innovators.