5G Will Transform the Auto Industry and National Economies That Rely on It

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These posts represent my personal views on the future of the digital economy powered by the cloud and artificial intelligence. Unless otherwise indicated, they do not represent the official views of Microsoft.

Last week I argued that 5G networks and edge computing are going to “rewire civilization.” That’s a bold claim, and bold claims require strong evidence.

Today, as evidence for this claim, I want to look at how one very important industry is going to be radically transformed by 5G in the near future. As you can see from the title, I’m talking about the automobile industry, an industry that is of strategic importance to the economic health of nearly every advanced industrial nation, from Europe to the US to Asia. The basis for that transformation is easy to state: the connected car of the near future will have a nearly always-on network connection allowing it to talk to everything and everyone along its way. This is an innovation that will have far-reaching implications not just for the automobile industry, but also, I will argue, for governments grappling with issues of digital sovereignty.

The idea of connected cars did not of course begin with 5G. The automobile industry has been connecting cars for years. Millions of cars on the road today from brands such as GM, Tesla, and BMW have 4G cellular connections that transmit data for entertainment, vehicle maintenance, and emergency calls. But 5G will take that connectivity to the next level with a new standard known as V2X, or vehicle-to-everything, which is built into the latest release of the umbrella 5G standard just published in July.

Pre-5G standards for vehicle connections were designed to handle messages of a few hundreds of bytes and were only guaranteed to reach 90% of receivers in a 300-meter radius within a few hundred milliseconds. But 5G V2X’s developers say it will allow vehicles to transmit or receive gigabytes per second with 99.999% reliability and latencies of just a few milliseconds. So it’s something entirely new.

5G V2X (vehicle-to-everything). Source: Qualcomm

As the illustration above suggests, 5G V2X will do much more than today’s 4G connected cars. In addition to broadcasting their speed and location, V2X-equipped vehicles will be able to negotiate with other vehicles on the road and with traffic signals. For example, they will take turns at stop signs, signal lanes changes to each other, coordinate safe left turns (or safe right turns in nations like the UK), synchronize with green lights, learn about and adjust around traffic jams or poor road conditions, and platoon with other vehicles for energy efficiency. And you won’t have to look at your phone to check for those dreaded red lines on the highway map anymore. Your car will learn this information directly and offer you advice on better routes.

5G Vehicle Safety Benefits. Source: Synopsys

5G V2X will not only connect your car but many of its individual components as well. Italian tire manufacturer Pirelli is designing a 5G-connected automobile tire known as the Cyber Tire, which will contain sensors, a microprocessor, and a 5G radio in a device the size of a coin. The Cyber Tire will share real-time data about tire pressure, temperature, tread depth, and acceleration. It will also sense water and ice on the road and even send warnings about these conditions to other vehicles nearby.

Remarkably, V2X will even let one vehicle see with the eyes—or rather, with the sensors—of other vehicles. For example, a car passing a semi-truck in limited visibility might ask for and receive the feed from the truck’s forward video camera or other sensors such as lidar. V2X will also help us along the path to driverless vehicles. For example, autonomous trucks may soon drive from city to city along highways without human assistance, but then call on remote human drivers connected over 5G to navigate the last few miles to the final destination in dense urban traffic.

Initially, 5G networks will be limited to urban areas because 5G's mid-band and high-band (millimeter band) frequencies don’t carry as far as the low-band spectrum used by current 4G networks. But 5G is also compatible with low-band spectrum and eventually, it will be rolled out to many rural areas, especially along major highways. And because V2X allows for direct communication with nearby vehicles and/or infrastructures without passing through a cell network, many of its safety and traffic management features will work anywhere.

The 5G V2X revolution isn’t going to happen overnight, but it won’t take decades either. It’s going to unfold gradually between now and 2030. Industry observers like McKinsey believe the coming decade will see a transformation of the business of mobility as radical as the one that occurred between 1900 and 1920 when a world of horse-drawn carriages gave way to one dominated by the titans of the automobile industry.

The new auto-oriented features in the 5G protocol stack are being designed by a remarkable global collaboration among the world’s carmakers and the telecom operators and semiconductor firms who are building 5G networks. Launched in 2016, five of the 5G Automotive Association’s eight founding members are European: Audi, BMW, Daimler, Ericsson, and Nokia. Today the 5GAA counts more than 130 members, including nearly every big player from the relevant industries in Europe, the United States, China, Japan, and Korea.

The 5G V2X future for road transportation will require much more than 5G networks and connected cars. It will require a whole new infrastructure for data management embedded in road systems and cities. Building this infrastructure will require an unprecedented degree of collaboration between industry and government. Legislators, regulators, and urban planners will be kept very busy designing and deploying the V2X revolution.

Perhaps no region in the world has more at stake in the coming transformation of the auto industry by 5G than Europe. All industrial sectors together account for only 19% of GDP in the US, but 28% in Germany and 25% in the EU as a whole. In Asia, industry’s weight is even greater: ranging from 28% in Japan up to 40% in China and South Korea. But European Commissioner for the Internal Market Thierry Breton argues that “Europe is the world’s top industrial continent” because European industry adds more value by controlling more of its own intellectual property than Chinese industry. Breton believes that “the European data economy is a pillar of our new industrial strategy.” He sees 5G-connected cars and their associated network and data infrastructures as critical components of Europe’s strategic autonomy:

“Autonomous cars will generate terabytes of data that can be used for innovative mobility-related services and for repair and maintenance. Innovation in this area requires that car data are shared, in a secure and well-framed way. Europe has everything it takes to lead the ‘big data' race, to the benefit of European businesses, their employees, and the consumers.”

Policymakers on other continents will certainly agree with Breton that the coming transformation of the auto industry enabled by 5G is of vital strategic importance to national economies. The next ten years will be an exciting time for everyone who travels on the world’s streets and roads.