Infotainment and safety features once reserved for luxury cars are now showing up in compact and subcompact models as mass-market automakers increasingly use high-tech features as key selling tools. Automakers are forced to add high-end infotainment and safety systems in compact and subcompact models to stay competitive. Merely offering a simple basic radio/disc player will no longer work. The problem for a number of car manufacturers is that they cannot charge extra for these features. With a price war raging in Malaysia and the rest of the region, a lot is at stake. Volume automakers are desperate to maintain their share of sales. So automakers like Ford are adding technology in a bid to create a cutting-edge brand image.
While all this new technology seems fine, how will automakers recoup the cost of these high-tech features in a modestly priced car? First, suppliers and automakers can count on high production volumes to create economies of scale. This eases tight profit margins if suppliers can count on global contracts. Second, suppliers can offer safety and infotainment systems that allow automakers to add new features simply by adding software. For example, cameras used for lane departure warning also can be used to read road signs. Likewise, they can be integrated into a collision warning system.
Automakers can add new safety or infotainment functions simply by upgrading the software, thus minimizing added costs. For infotainment systems, suppliers that cater to this approach include Harman, Continental, Visteon, Denso and Robert Bosch. For safety technologies, Valeo, Continental, Bosch and Autoliv are among the leading component suppliers.
Such equipment costs automakers several hundred and sometimes even thousands of ringgit to add on a per-unit basis, but the price should decrease to hundreds of ringgit once it becomes widely adopted. Standardization will drive costs down. Effective safety systems such as airbags and ABS became affordable when the industry adopted them on a wide scale. 10 years ago every extra airbag added thousands of ringgit to the cost of a car. Today, compact sedans like the Ford Fiesta can offer 7 airbags and still be priced better than its cars like the Peugeot 207 with just 2 airbags only. The auto industry can’t turn back the clock. High-tech is quickly spreading throughout the industry.
