(Yicai Global) April 21 -- As vehicle manufacturers feel the pinch from the ongoing price war, software will become a major earner in the industry, Yicai Global learned from several industry insiders at this year’s Shanghai Auto Show.

“There is no doubt that software will drive the car industry forward in the future,” Zhang Renjie, chief executive officer of German vehicle manufacturer Volkswagen’s unit VW-Mobvoi, told Yicai Global. “Hardware will not be profitable, while software services will bring greater added value.”

Auto manufacturers are being squeezed as rivals lower their prices to boost sales. Cheaper models are the trend at the Shanghai Auto Show. BYD’s new mini electric car, the Seagull, for instance, is selling for around just USD10,000.

Tesla will put sales over profits, CEO Elon Musk said yesterday, implying that the world’s largest electric vehicle maker will keep lowering its prices to seize market share.

The California-based firm is due to release its automatic driving software Full-Self Driving this year to offset the pressure on profits, Musk added.

Automotive software sales could reach USD50 billion by 2030, according to a report by US consultancy firm McKinsey & Co. The car software market is set to grow at a rate 9 percent faster per year than the overall vehicle industry by 2030.

Sensing the opportunity, many AI and software firms including SenseTime, ThunderSoft and Navinfo have a presence at the Shanghai Auto Show and are displaying their new smart driving solutions.

Volkswagen is also betting on software. The Wolfsburg-based company is working with Horizon Robotics, ThunderSoft and other Chinese tech firms to develop intelligent solutions for the market.

Editor: Kim Taylor