Search Follow us
26 October 2017

Tokyo Motor Show

The star of the Tokyo Motor Show is an electric sports vehicle designed by Toyota which has at its heart an assistant which neither Honda nor any other automaker has any chance of ever creating themselves.

The star of the Tokyo Motor Show is an electric sports vehicle designed by Toyota which has at its heart an assistant which neither Honda nor any other automaker has any chance of ever creating themselves. The best hope is for automakers to license or buy an assistant from elsewhere meaning that it is unlikely to provide them with an exclusive, differentiating product. The problem is that digital assistants require a high level of AI in order to function properly which is a skill that none of the automakers, not even Tesla, posses.

Speech recognition depends on several factors. High word accuracy has largely been achieved by most speech recognition systems, but it is one thing to know what the user said but quite another to know what he meant. Another factor is understanding what it is the user is asking for regardless of word order or manner of speech and the ability to understand context and circumstance. It is quite clear that not until machine understanding reaches this stage that voice can have any hope of providing a user interface that would obviate the use of a screen and be really useful in a vehicle. The two leaders in this space (Google Assistant and Amazon Alexa) both rely heavily on screens and both have products with screens either in the market or in development. This is particularly relevant in the automotive industry where for the foreseeable future, the driver will have to have both his hands and his eyes occupied elsewhere. Furthermore, it is clear that all of the user interfaces designed by the car makers, Apple and Google are not appropriate for use in the vehicle.
This is a main reason why users still predominantly use their smartphones for digital services in the vehicle meaning that the best infotainment unit is still the one in the driver’s pocket, which represents a very serious risk for the car makers long-term. This is because all of the value-added services that they are hoping to provide are likely to be delivered via embedded systems in the infotainment unit. Consequently, unless the vehicle’s embedded infotainment unit can compete effectively with the smartphone, there is a real risk that all of their digital aspirations will come to naught. In this case, the net result is likely to be the big ecosystems taking over the digital experience in the automobile causing the automakers to become little more than handsets on wheels.
This is a bleak outlook because we think that the automakers badly need revenue from digital services to help offset the weakness in their traditional business likely to be caused by the migration to electric vehicles. Failure is not an option for those that wish to survive.

Disclaimer - Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. This document may contain materials from third parties, which are supplied by companies that are not affiliated with Edison Investment Research. Edison Investment Research has not been involved in the preparation, adoption or editing of such third-party materials and does not explicitly or implicitly endorse or approve such content. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of publication and is subject to change without notice. While based on sources believed reliable, we do not represent this material as accurate or complete. Any views or opinions expressed may not reflect those of the firm as a whole. Edison Investment Research does not engage in investment banking, market making or asset management activities of any securities. The material has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.