Can't seem to find a link without a paywall, thus copy and...

Can't seem to find a link without a paywall, thus copy and paste.
Food for thought, just general bullishness and not necessarily materials advances in EV space. But boom is coming.

By Steve LeVine August 15, 2021 The Electric is a new premium publication from Steve LeVine focused on one of the most-important and least-covered transformations on the planet: how next-generation batteries, electric vehicles and autonomous driving will shape the future of business, cities, wealth and geopolitics. Our paid beta begins on September 12, at which point we’ll no longer be offering The Electric for free. Already, many of our 100 available beta seats are taken. To subscribe at our discounted rate, please click here or email [email protected]. Photo: Courtesy Tesla The Age of the EV App Store Has Arrived. Now What? Last month, Dan Ives, a technology analyst with Wedbush, added what most would consider a decidedly non-tech company to the stable he covers—General Motors, whose share price he forecast would surge 50% over the coming year. GM was no longer a stalwart of a bygone industrial Detroit, but “a broader disruptive technology play that can start to trade at multiples similar to the likes of Tesla,” Ives argued in a report. GM, in his view, had figuratively moved 2,400 miles west to Silicon Valley and joined the ranks of high-flying tech companies. For several years, Big Auto has been trying to replicate the year 2008. That’s when Apple launched the App Store and transformed how merchants and ordinary people carry out commerce. Among Apple’s key innovations was the cash-cow 30% cut, the now-standard commission from gross sales that app developers and merchants pay internet platforms for the privilege of selling their stuff on them. As a rising number of vehicles have connected to the internet, tripling since 2015 to 196 million globally, legacy automakers like GM, Ford and BMW have sought to rake in monthly fees for services like cell phone and navigation support. The initiatives have almost wholly fallen flat, however—motorists have pushed back or simply not subscribed. But the onset of the new age of electric vehicles is reviving these efforts. The feeling among carmakers, big tech companies like Apple and Google, and app developers seems to be that, packaged as part of the decade’s shift to EV mobility, motorists are likely this time to pay for at least some services in the cars they buy. There won’t quite be a 30% cut, but the revenue could be substantial. I have spent the last couple of weeks speaking with early developers of software services and apps for EVs and other connected vehicles, and I think they are right about this coming consumer shift. Here’s why: I came across apps that offer apparent real value and are not mere novelties. I saw business models that already work and other early ones that look compelling (more on that below). Chiefly, Tesla, which has led the way on EVs, is doing so again in this area. Venkat Viswanathan, a materials science professor at Carnegie Mellon University, told me that when he and his wife go to charge up their Model S, they hope and pray it will take a long time so that while they wait they can play Polytopia. They paid for a $1,500 premium upgrade to their infotainment system so they could access this game, among others. This is evidence of the type of infectious interest that apps must generate if motorists in large numbers are to pay for them. Moreover, contextually and historically, we are living in an age in which subscription models are all the rage—think of streaming services. People are accustomed to handing over their credit card to pay monthly charges for new technology and entertainment, a category EV apps fit into. At this stage, the apps that especially caught my eye fell firmly into two categories: business-to-business software that aggregates data and resells it to enterprises such as insurance companies, and entertainment services. Wejo and Otonomo have racked up a pantheon of major automaker clients with one-stop–shopping apps that organize and market their data, and both have gone public this year in blank-check mergers. And Smartcar has stepped into the void with a platform on which app developers can create and enable their products, serving as an intermediary between them and the automakers (more on these companies below). All the major streaming services—Netflix, Disney+, Hulu, Twitch, Spotify and so on—are offering automobile apps, understanding that motorists will want to take their viewing habits on the road, regardless of how much time they have available to play or watch. And of course, there are the gaming apps already mentioned above. The winning business model is monthly subscription fees. The History The year 2008 was pivotal in building this confidence about what’s coming. As discussed above, in a much-watched live announcement in March 2008, Apple CEO Steve Jobs unveiled the App Store, a place where software developers small and large could feature their businesses and hope to be embraced by every iPhone owner on the planet. Google quickly followed with Android Market, which morphed into Google Play, and apps became how businesses and consumers around the world organize. But another key event also happened around that time. Pushed by China’s voracious appetite for raw materials, the price of oil soared for the first time above $100 a barrel. Among the industries absorbing a hit was airlines, which collectively would lose $26 billion before the year was out. So it was that in May 2008, American Airlines, which was keeping fares in check but seeking other ways to claw back revenue, announced a daring $15-a-suitcase fee to check baggage. No one knew how passengers would respond, but the other airlines decided to quickly follow suit. As it turned out, passengers griped but, perhaps aware of the industry’s flood of red ink and not seeing avarice behind the change, ultimately went along with it. Over the years, the airlines—though until Covid-19 they had climbed back into profitability—have tacked on charges for much of what had made them feel like a rare luxury: food service and booking a specific seat. Passengers seem to have all but forgotten that all of this was only recently free. The airline comparison is important because one of the biggest knocks against the rise of an app ecosystem in EVs is the belief that motorists, accustomed to getting everything as part of the original sticker price, won’t go along with the added monthly fees. History suggests otherwise. As discussed above, Tesla is showing the way to a somewhat similar transformation in the motor car. For three years, Tesla has charged a fee to buy its full self-driving feature, raising it most recently to $10,000 and last month offering an alternative $199 monthly subscription fee for those not wanting to cough up the larger amount to own the service outright. There is the $1,500 to $2,000 fee to upgrade to “premium connectivity,” on top of a $9.99 monthly subscription fee, to play Beach Buggy and Fallout Shelter and watch the streaming services. Tesla doesn’t break out recurring revenue from such software sales, but Ives estimates it at about $575 million of the company’s second-quarter profit. “Tesla will sell a $45,000 car, then $10,000 in incremental software services,” Ives said. When I asked him about the other automakers, he said that given Tesla’s singular success thus far, they will all try to follow in its path. The New Entrants A slew of small developers has produced apps for EVs and other connected vehicles. Most so far revolve around the operation of the vehicles themselves, such as finding a parking space, paying for EV charging and getting a break on auto insurance based on your driving habits. The smartphone industry has sought to keep the apps confined to automobile operations. Android’s developers’ guide for cars, for instance, limits these apps to “navigation, parking and charging.” An example of the new possible is Recurrent, a Washington state-based startup that monitors the data from lithium-ion batteries in order to constantly assess the value of the EV in which they are installed. Up to 40% of the value of an EV can reside in the battery itself. But at this early stage of the EV industry, car sellers haven’t caught up with how to assess a battery’s wear and tear, and thus how to price a used EV. Recurrent gets its data from about 5,000 EVs of 26 makes and models and sells its subscription reports to car dealers, said Scott Case, Recurrent’s CEO. Among the things that Recurrent’s app checks are a battery’s exposure to heat, how often it is fast-charged and how it is charged generally. Does the owner, for instance, wait until the battery is almost completely empty and then charge it to 100%, or adopt a more gentle regime of charging to just 30% of the battery and recharging to 70%? Case cited a 2013 Nissan Leaf he was assessing. It had just 19,000 miles on the odometer, and the EPA range was 75 miles. But the battery could muster just 35 miles of range. Checking the EV’s history, Case discovered that its owner lived in Southern California. “The battery was just cooking,” he said. “The car wasn’t worth too much despite the low mileage.” The EV apps are bound to spread to other uses and, whether they should or not, motorists will use them while they drive. We know this from how Tesla owners have shown off using Autopilot hands-free and even sleeping with the feature in control, despite ample public warnings that it is not capable of fully autonomous control of a vehicle. So drivers will subscribe to play games and watch movies. Another feature that could balance safety and this daredevil probability is voice-activated apps. Bret Scott, a vice president at Wejo, the GM-backed U.K. company that packages data provided by automakers, described one such possibility: a voice-activated app that would allow an EV motorist to charge a car and, across the street, pick up a cheeseburger—all ordered and paid for in advance before actually getting off the freeway. “What if the app can tell you which Burger King to go to because the line is shorter there even though it’s further away?” Scott said. It’s true that people are in their vehicles far less time than they are not, reducing the ability for EV apps to create a value proposition. But that doesn’t change their desire to get on with their lives even while they are driving, Scott said. “People are in their car for 48 to 50 minutes a day,” he told me, “and they want to be connected like they are the other 23 hours.” Headwinds One thing that could stunt the in-car–app industry is how automakers are attempting to build it out. Unlike Apple and Google, the automakers have not created platforms where independent developers can create and offer their products and services. Instead, they have largely sought to do it all themselves. Some are trying to seize on the opportunity by building their own platforms across vehicles. But it’s early days. Smartcar, the Mountain View, Calif., startup mentioned above, launched in 2015 as a platform for vehicle app developers in the U.S. and Europe. Sahas Katta, Smartcar’s CEO, told me the platform works with 22 brands that have 72 million vehicles on the road. Their customer is the app developers, who are charged a monthly fee per car using the app, ranging from $1 to $5. Turo, a vehicle rental app, is among those using the Smartcar platform. “You lock and unlock the car using the app, right from your iOS or Android,” Katta said. “That wasn’t possible without our technology. When the rental day ends, the screen will disappear on your phone.” Critics say the automakers are deliberately keeping app development in-house with the objective of raking in all the revenue themselves. If so, that violates one of Jobs’ App Store tenets—that it’s smarter to open up to the crowd. Tesla hasn’t opened itself up either—at least yet. But while the legacy automakers attempt to replicate Tesla’s success, one thing the last decade should have taught them is that they aren’t Tesla. To win this time, they should trust the crowd.