Sunday 7th June 2020

How connected cars can generate more value for all parties

Published on August 10th, 2018

The connected car is a different breed from its forbears. When we drive it away from the dealer, we are no longer leaving the car manufacturer behind, nor the astounding number of other companies that go into creating a connected car says Michael Deittrick, SVP digital strategy and chief digital officer, DMI.

These companies play various, and often complementary, roles ranging from infotainment head units (IHU) to telematics providers and wireless integrators for the over the air (OTA) delivery of real-time software updates and infotainment.

The role of government

Beyond them, connected cars need the right infrastructure. Ubiquitous connectivity is obviously necessary, but it’s also vital that infrastructure around public services evolves. In the USA, a recent report by SAFE, titled America’s Workforce and the Self-Driving Future Realising Productivity Gains and Spurring Economic Growth (June 2018) estimates that by 2050 (annual), public benefits—including congestion mitigation, the economic impact of accident reduction and the quality of life improvements of accident reduction as well as reduced oil consumption—will be $633 billion (€553.66 billion).

Benefits to consumers, calculated as a combination of the value of time and reduction in taxi service costs, are estimated to be $163 billion (€142.57 billion). The UK has already made progress here, making up to £30 million (€33.41 million) available to UK businesses and research organisations to advance facilities for the development of self-driving vehicles and make the UK the most effective connected and autonomous vehicle development ecosystem in the world.

The government has also announced that it will review the UK’s driving laws in preparation for self-driving vehicles, examining how those that are in place and designed for traditional motoring can support the next generation of vehicles.

The role of business

All successful businesses know that growth is fostered through product differentiation and building brand loyalty. Add to these the ability to monetise valuable services enabled by the connected car, and the autonomous vehicle industry will evolve in leaps and bounds—particularly when considering the size of the potential market.

Let’s look at loyalty first. Previously, the usual single measure of success in the auto industry was the number of vehicles sold. Automakers recognise the immense opportunity connectivity offers across the entire automotive service lifecycle, to provide experiences.

They range from seamlessly delivering entertainment to real-time safety alerts as well as updating various features through excellent data management behind the scenes. Product differentiation is key: applications must not be walled in or they could struggle to integrate with other connected car features and so become limited. Open source is the best approach because its lower overheads mean more profitability, which in turn attracts better engineering talent, leading to the development of better products for consumers.

Personalisation is another way to differentiate: just as we all have different apps, media preferences and settings for our mobile phones, so drivers like will want a personalised in-car experience and would potentially even like their cars to understand and react to their needs. Drivers clearly want more than in-car apps—they want an experience that is tailored to their needs, and adapts to their preferences.

Adding greater value through use

Michael Deittrick

Continuously updating services and finding timely touch points with drivers gives connected cars longevity. They are no longer at their peak when they roll off the production line then immediately start to devalue. instead they can get to ‘know’ their drivers and tailor the services they deliver, and they can also predict and prevent issues.

Building a sixth sense into vehicles’ performance, is how to reduce warranty risks and prevent failures that would impact drivers. Through the deluge of connected data, car makers can create a sort of crystal ball that provides immediate insight into their products, which at the same time translates to their businesses.

This brings us to monetisation of connected car services. To start with an example of just how important this market is becoming, GM’s OnStar produced a new revenue stream with margins that were five times what they earned from their core vehicle business – impressed?

Through enterprise APIs, automakers can create holistic services. For example, device data about a critical engine part failure can automatically: trigger a business process for customer services to send help; schedule an appointment with the mechanic of choice; inform the engineering system to make future product adjustments; and log the liability in financial records.

And it’s not just the maker of the vehicle that can benefit. Third parties, such as insurance companies, merchants and service providers, can all use connected data to provision services, gauge risk and deliver valuable and timely targeted offers. One example of this is telematics for vehicle fleets where managers can get instant access to data to make their drivers safer and vehicles more efficient.

More than enough pie

The in-vehicle potential of connected cars is rich, with an audience that commutes over an hour a day on average, there is more than enough pie to go around. The only limits will be safety, bandwidth and privacy – all areas where, rightly, government should take a lead and appears to be doing so in several countries.

The only other requirement will be imagination and a keen understanding of just what drivers and their passengers find truly valuable. Once the novelty of connected services wears off, it will be the quality of the service that makes it valuable. As we found with radio, TV and even books, content is and will always be, king.

The author of this blog is Michael Deittrick, SVP digital strategy and chief digital officer, DMI.

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