The connected car market is on the cusp of rapid growth, but major hurdles remain. That is the key finding from the Connected Car Industry 2013 report published in June by Telefonica Digital. While connected aftermarket devices and factory fit solutions such as GM’s On Star have been available for many years, the last two years has seen a crystallization of many OEMs connected car strategies that should see connectivity as increasingly the norm for new vehicles from 2015.
Machina Research forecasts that by 2022 there will be 700 million connected cars and a further 1.1 billion connected aftermarket devices globally. However, much work still remains to be done if the automotive industry is to hit those targets. The first challenge is the disconnect between mobile and automotive industry lifecycles. The car and mobile industries have to work increasingly closely to make the connected car a reality.
In the short term this is causing a little friction due to the very different heritages of the two sectors. The automotive sector is a century-old, well-established global business with multi-year lifecycles, while the mobile sector is something of a young upstart, typically with a national or regional outlook and very rapid turnover in new products and services. While the mobile industry is keen to learn the lessons from the automotive sector in terms of provide a more robust and global service, there is also much that the auto sector can learn from mobile, particularly in terms of generating revenue from a long-term relationship with their customer.
Automotive OEMS are prepared for regulation such as eCall, but they would hope to do more than just meet the mandate. While OEMs will fight for their preferred options, there is no doubt that they will meet the regulatory requirements. However, in many cases, top-down imposed mandates encourage OEMs to only do what is necessary to meet their obligations rather than leveraging the opportunity to create something bigger. Built-in versus brought-in connectivity continues to divide OEMs.
The oldest debate in the Connected Car world is whether connectivity should be provided via an embedded (‘built-in’) modem, or via handset tethering (‘brought-in’). Both approaches have merits but Machina Research expects that ultimately a dual approach will dominate. The Connected Car will lead to many forms of disruption in the automotive sector. The very essence of the automotive industry is potentially changed by connectivity. The one-off transactional business model that has characterized the automotive sector since inception is potentially threatened by, for instance, shared ownership schemes from companies such as Zipcar. OEMs need to evolve to become providers of transportation, as with the BMW/Sixt joint venture DriveNow, rather than simply sellers of automobiles. One small example is how the interaction with the customer at the dealership is evolving. There is now much more of an imperative, and burden, on the dealer to educate the driver on all the connected features in the vehicle, rather than just hand them the keys. About the report The Connected Car Industry 2013 report was published in June 2013. It included interviews with connected cars experts at eight automotive OEMs as well as forecasts and analysis of the sector from Machina Research. http://websrvc.net/2013/telefonica/ Telefonica%20Digital_Connected_Car2013_Full_ Report_English.pdf.
The full version of the study is available to OEM members of the Connected Cars Thought Leadership Network. For further information on participating in the CCTLN, contact matt.hatton (at) machinaresearch.com