Connected Car Market Trends [2021-2026]

The global connected car market is projected to reach USD 20.5 billion by 2026 from an estimated USD 9.8 billion in 2021, at a CAGR of 15.9% from 2021 to 2026. Factors such as the rollout of stringent safety regulations, adoption of high-end and luxury cars, and growing adoption of integrated connectivity are expected to drive the demand for connected cars.

The study involved four major activities in estimating the current size of the connected car market. Exhaustive secondary research was carried out to collect information on the market, the peer market, and the parent market. The next step was to validate these findings, assumptions, and sizing with the industry experts across value chains through primary research. The bottom-up and top-down approaches were employed to estimate the complete market size. Thereafter, market breakdown and data triangulation processes were used to estimate the market size of segments and subsegments.

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Market Dynamics

DRIVER: Increased demand for enhanced user comfort, safety, and convenience

An increase in ADAS features in cars is the primary driver for the connected car market as these features ensure enhanced levels of safety. Governments in various countries are also focusing on mandating various ADAS and safety features. There are various ADAS features mandated in Europe and the US. For instance, Anti-lock Braking System (ABS) has been mandatory for all new vehicles sold in the EU since 2004, and Electronic Stability Control (ESC) became mandatory in 2014. Autonomous Emergency Braking (AEB) has been mandatory for all commercial vehicles sold in the EU since 2015. Similarly, connected car features such as e-call are mandatory in all new cars sold within the EU since April 2018. As various ADAS and other safety-related connected car features are mandated by governments, the overall demand for connected cars has increased.

OPPORTUNITIES: Emergence of various technologies such as 5G and AI

The enhanced user experience for all connected cars depends on wireless connectivity. Many telecom industry players are developing 5G to increase the safety and efficiency of connected cars. According to the international 5G automotive associations, 68% of accidents can be avoided with the upcoming 5G technology. For instance, the EU and South Korea have signed a deal to work together on 5G development, while both have promised USD 782 million and USD 1.5 billion, respectively, in funding for local 5G projects. In the UK, USD 78 million of funding has been commissioned for a 5G research facility, known as the 5G Innovation Centre (5GIC). With the increasing use of sensors and other technologies that collect data, AI will be key to making sense of everything. Some automobiles already use AI for Level 3 autonomous driving, but for the industry to reach Level 5, major enhancements need to be made to the cars as well as the infrastructure.

“Autopilot service in ICE service market projected to register highest from 2024 onwards”

The introduction of autopilot would minimize driver intervention. As autonomous technology nears Level 3 & above, it would help achieve the automaker’s goals of commercializing fully autonomous vehicles for consumers by 2024. Rapid advancements and developments in autonomous vehicles are expected to spur the growth of the connected car market. ZF unveiled its coASSIST level 2+ driving system in January 2020 in a price range of under USD 1,000. The company introduced its coASSIST Level 2+ semi-automated driving system on the 2020 Dongfeng Aeolus Yixuan, which was launched late in 2020. This marks the first launch globally of coASSIST, which delivers advanced safety and convenience functions. ZF also offers copilot, a scalable ADAS solution for level 2+ to level 4 driving systems, which it co-developed with NVIDIA. More such affordable ADAS solutions would significantly boost the connected car market in the coming years.

Integrated connectivity expected to register highest CAGR in global connected car market

The integrated form of connected solutions enables the driver to access features and services safely with the help of integrated devices, such as smartphones. The connected car market for the integrated form is expected to increase with the increase in the penetration of smartphones. Integrated solutions are likely to remain updated as their functionality depends on mobile technologies. The integrated connectivity segment is expected to grow at a significant rate in the future as cars can get connected through integrated devices with a negligible cost of hardware and subscription. Also, with everyone now carrying a smartphone and the growing demand for enhanced comfort and convenience, ad-hoc systems are being developed by software developing companies to allow useful interactions with brought-in devices. An integrated approach allows the use of up-to-date technology and the finest customization to driver’s preferences. It is, however, difficult to provide a seamless user experience, and several driver distraction issues arise when an interaction is needed with handheld devices while driving. Moreover, the solution is less safe and reliable since automakers have no control over the applications used by customers. The most common widespread solutions for integrated systems are MirrorLink, Applink, Apple CarPlay, Android Auto.

Asia Pacific expected to lead globally connected car market during the forecast period

One of the key drivers for the Asia Pacific market is the increased demand for infotainment and navigation services, particularly in China, Japan, India, and South Korea. The tech-savvy population in these countries demands a better and connected driving experience. The demand for connected cars in Asia Pacific is driven significantly by the strong economic growth, growing population, and rapid urbanization. As safety regulations have been made in Japan and South Korea, the connected car market in these countries is anticipated to increase in the coming years. Growing demand for premium and luxury cars with enhanced comfort and performance is expected to drive the adoption of connected car services. Thus, considering the above-mentioned factors, the connected car market is expected to witness significant growth.

Key Market Players

The global connected car market is dominated by major players such as Continental (Germany), Bosch (Germany), HARMAN (US), Airbiquity (US), and Visteon (US). These companies have strong distribution networks at a global level and offer an extensive product range. These companies adopt strategies such as new product developments, collaborations, and contracts & agreements to sustain their market position.

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