LONDON — Telefónica Digital today published the Connected Car Industry 2013 report, featuring contributions from eight of the world’s largest car manufacturers and Machina Research. The report provides first-of-its-kind insight into the car industry’s biggest transformation in over a century, detailing the opportunity, challenges and blue-print of how car manufacturers and telcos need to work together in the form of a 10-point action plan.
The Connected Car market will achieve mass-market penetration in the next few years, seeing the number of vehicles with built-in connectivity increase from 10 percent of the overall market today to 90 percent by 2020. As this change takes place, the report identified four strategic themes: the transformation of the present-day dealership model, how these new services and connectivity will be paid for, concern over opening the car to third party providers, and the role of the mobile operator in powering this seismic change within the industry.
Redefining a century-old business model
Consumer demands around Connected Car services will require transforming a business model which has remained largely unchanged for over a century according to the report. With product lifecycles, payment interactions, and customer service being traditionally measured in years, the Connected Car consumer will require a new service dynamic, more akin to the telecoms industry where such cycles are measured in months.
Service bundles, delivery channels, product pipelines, pricing, and customer support will be heavily impacted, and in some cases new business models will need to be created from scratch as the dynamic between manufacturer, dealer, and customer evolves.
1. Forecourt dynamics
Dealers have historically been able to get a car from sale agreement to delivery time in just 20 minutes. According to the report, the complexity of ‘extras’ and personalization has increased this to an average of 1.5 hours and is only set to go up further as more connected services become available. This has implications on the dealers cost of sale per vehicle, as well as the type of sales and technical skills required.
That however, can be off-set by the advantages a Connected Car sale provides a dealer. For example, automatically alerting customers and service dealerships to poor and failing performance in vehicles, enabling proactive and preventative maintenance requests, and longer-term maintenance agreements.
Additionally, the report identifies a new relationship between car manufacturer and owner once they have left the forecourt. Branded app stores, upgrades to software solutions over-the-air, and on and off-board vehicle solutions will provide them with opportunities to engage directly with car owners and maintain a deeper, longer term and more interactive relationship.
2. Paying the bills
Many of the questions raised in the report concern over who will pay for what in this new Connected Car universe. Consumers are used to a one-off payment when purchasing a car, however car manufacturers have realized selling ‘just’ cars is no longer profitable.
Traditional telematics services have had low data usage, however Connected Car services are set to see these levels increase exponentially. Audi announced in January that its 50,000 Audi connect customers had used over 75 terabytes of data since launch in April 2011, four times the contents of the US Library of Congress.
Car manufacturers need to develop innovative pricing models that provide the flexibility and value that consumers demand from comparable services. General Motors has suggested that mobile operators could recognize vehicles as a second device on a customer’s data plan for a low monthly fee, or advertising models could be introduced to part-fund connectivity.
Flexibility in pricing was high on many automotive original equipment manufacturers’ wish lists, enabling tariffs to be developed around the unique uses of Connected Car services.
3. Collaboration is the key to success
The report found that the car manufacturing industry was looking to mobile operators as their partner of choice to not only enable connectivity, but to share their understanding and experience of building stronger and closer relationships with the hyper-connected consumer.
Collaborative teams from the car manufacturing industry and mobile operators need to be established to share knowledge and develop new innovative business models. With the report finding that not only will they be a key-enabler of the new business models required for the Connected Car industry to exist, but also to act as a catalyst for this change.
The report also highlights a number of areas that car manufacturers are looking to mobile operators to address. These include offering global connectivity arrangements, end-to-end services (incorporating software updates, data management, etc), and data pricing.
4. Caution around app ecosystems
Although apps are expected to be part of the ecosystem, with manufacturers like Renault launching their own app stores, automotive manufacturers believe that issues of security and reliability mean Connected Cars are unlikely to become environments for open app development.
Overall, automotive original equipment manufacturers believe that the potential market for apps in Connected Cars will be far smaller than has been experienced in the smartphone sector.