Making money from connected cars
By: Richard Fouts
Tags: Self Driving Cars, Connected Cars, Smart Cities, Carplay, Tesla

As automobiles become the ultimate connected mobile device, several money making opportunities will emerge.

Connected cars offer opportunities beyond the auto sector.

The auto ecosystem is forecast to generate $600 billion annually by 2025, as business leaders in retail, insurance, healthcare, media and entertainment team with auto makers to make money from connected vehicles.

How?

For Auto OEMs, over-the-air (OTA) updates offer both savings and revenue. Tesla drivers can opt to update their brakes through an over-the-air (OTA) software facility (which also saves them a trip to the service center). Tesla also cross-sells upgrades through its free trials of value-add services (for example, its assisted driving system). We expect all automakers will step up their OTA capabilities to offer similar services and to make their vehicles safer. OTA will also improve other experiences such as recall compliance and warranty repairs.

Mobile phone services such as Apple Carplay and Android Auto move smart phone functions to the car’s built-in display, enabling drivers to get directions, make calls, send and receive messages, and listen to music, while staying focused on the road. Google’s Waze offers turn-by-turn navigation, travel times and route details. Intel has invested billions in its connected car initiatives eager to join the movement to turn cars into the ultimate mobile device.

Retail commerce. One research study forecasts $265 billion will be transacted over connected car eCommerce platforms by 2023. Amazon is expecting to be the biggest beneficiary having introduced Alexa Auto, which comes with a dashboard mount and runs on its own real-time OS. GM’s in-vehicle app also enables retail transactions as does China’s joint venture between SAIC Motor and Alibaba.

Advertising, targeted marketing and entertainment. In the near future, drivers will get offers for discounted fuel as sensing technologies reveal their tank is nearly empty (making such offers appear more like value-add content versus ads). In entertainment, SiriusXM satellite radio continues to grow its 33 million subscriber base. Uber’s agreement with Spotify and Pandora lets consumers listen to their playlist when using its ride-sharing services. Wi-fi enabled vehicles will let you watch Netflix, Amazon Prime, and Hulu shows while on a long road trip.

In insurance, usage-based programs are emerging from data gathered through onboard diagnostics devices. We expect increased adoption of other technologies, such as telematics devices to influence driving behavior and to help reduce insurance fraud. Telematics will also be used to coach drivers in fuel efficiency, safety, and predictive maintenance (as well as advice regarding insurance upgrades or the best time to sell their car).

How are automakers dealing with the connected car’s business issues?

Investment increasing in security and privacy. Auto executives are starting to dedicate security and risk leaders to manage the cyber-security of connected cars (cybersecurity was the top focus area for automotive CIOs in Gartner’s 2019 survey of technology executives). Standards (including ISO/SAE 21434 and the UN Task Force Cyber Security UNECE WP29) are also maturing. In consumer privacy, auto marketers are crafting brief, easy-to-understand agreements that explain how connected car data will be anonymized and monetized, and how consumers will benefit.

New organization structures are evolving. The ability to capture data from vehicles, analyze it, route it and store it is beyond the capabilities of most auto IT organizations. That needs to change, since most auto OEMs lack the organization infrastructure to deliver updates over-the-air. Skilled OTA developers will also be in demand. Moreover, technology managers in the auto sector will need to develop ongoing plans for continuous software updates (versus just responding to bugs and problems). Partner agreements are also being amended to specify how a supplier’s software will be updated.

Auto consortiums are addressing storage issues. By 2025, vehicle data could generate 10 exabytes per month (10,000 times larger than the present volume). As a result, the auto industry will invest billions of dollars in data centers to store and process connected-vehicle information. In response, the Automotive Edge Computing Consortium is designing new networking and storage architectures to make it easier to store and act on connected-car data. Automakers are also working on filtering strategies to acquire not all data, but the right data.

In conclusion

A connected economy is stimulating billions of dollars in value-add services, particularly the automotive sector, as powerful connections blur traditional industry lines. As a result, marketers should aggressively look at how innovation in adjacent sectors can be exploited for new growth opportunities.