The AI Boom Is About to Make Cars Even More Expensive

The rapid advancement of artificial intelligence (AI) is set to transform the automotive industry, potentially increasing the cost of new cars. Many modern vehicles, including the Ford Mustang Mach-E, BMW sedan, and Tesla Cybertruck, are equipped with features that allow them to park themselves, thanks to advanced sensors and computer systems.

Automobiles manufactured after April 30, 2018, in the United States are legally required to have a backup camera and screen, marking a shift from traditional vehicles requiring drivers to parallel park.

These screens serve as more than just rearview mirrors, providing access to various functionalities such as hands-free calls, navigation, and even gaming. Mercedes-Benz has introduced a 56-inch display, dubbed the "hyperscreen," while other manufacturers are following suit, equipping their vehicles with increasingly sophisticated electronic features. However, this growing reliance on technology comes at a significant cost.

Cars, like laptops, rely on microprocessors and RAM to execute computations. Karl Brauer, executive analyst at iSeeCars, explains that each vehicle requires a baseline level of technology, driving up the overall cost. The RAM shortage, caused by AI companies demanding large amounts of memory for their data centers, has exacerbated the issue. As a result, other consumer electronics, including phones and laptops, have also experienced price increases.

The roots of this technological evolution in automobiles date back to the 1970s when new emissions standards necessitated electronic systems for managing ignition and fuel injection. Over the years, software has progressively infiltrated every aspect of vehicle operation, from power windows to adaptive cruise control and antilock brakes. Regulators now evaluate cars based on both their crashworthiness and electronic safety systems.

The advent of electric vehicles (EVs) has played a significant role in pushing the industry towards greater digitalization. Tesla, in particular, has been instrumental in popularizing large in-car touch screens and over-the-air software updates. Today's vehicles often feature driver-assistance features, internet connectivity, and even support for AI applications like ChatGPT. BMW has taken this a step further by offering customized climate control settings for each passenger and the option to install screens in seat backs.

Automakers are transitioning from numerous small control units to fewer, more powerful central computers that manage all software functions. These central computers, which run AI workloads, require advanced automotive microprocessors from companies like Nvidia or Qualcomm, potentially accounting for 20% or more of a vehicle's cost. The memory shortage, colloquially known as RAMageddon, will likely raise vehicle prices by a small percentage, averaging around 4%, or approximately $2,000 on average.