The world’s carmakers are in a new race to roll out Connected Car Programs and use these to differentiate themselves from their rivals.
Tesla may have led the way with several hundred updates of its in-car software in the last two years, but the major U.S., Japanese and European manufacturers are not too far behind.
That is exciting news, but the reality is that the business models for these connected car programs are yet to emerge.
In the U.S., for example, around 80% of new vehicles are sold with connected features. But already manufacturers are discovering that when the “gifting” period for these services ends, less than half of the new car buyers are opting to continue paying for them.
The reality is that as it stands, a majority of consumers are yet to see enough value in the connected services to be moved into a subscription, which is the preferred business model for manufacturers.
Ironically, consumers are increasingly demanding connected services in new vehicles, but many are so far unwilling to pay out of their own pockets. This is similar to the issues faced by the media industry, which has struggled for many years to get readers to accept paywalls.
This creates a dilemma for the carmakers. Should they factor the lifetime cost of connected services into the vehicle's upfront cost?
This is easier to justify for some prestige marques, whose customers are preferred to pay more for their vehicles. But the equation is different for mid-market manufacturers who seek to differentiate on price.
And it's not as if the connected services are one-off installations with minimal maintenance. By their very nature, they will incur ongoing connection and data charges from communications companies which someone, or somebody, has to continue to pay.
If carmakers absorb this cost, they will continue to subsidize not only new car buyers for the length of their ownership but also second and third owners too.
Rebranding connected services
There is no one answer to this dilemma, but at the core of the issue is the need to make connected services essential to the consumer.
Part of that is a marketing, education, and customer engagement exercise during the gifting period so that when it expires, more consumers will be prepared to subscribe.
Then there is the nature of the services themselves. Some of them, such as entertainment and even remote locking, might be seen as ‘nice to have, but not essential’ by owners.
Other services, such as eCall services, can actually save lives, and these present the services to focus on as carmakers turn connected services from an option and a novelty into a necessity.
In Australia, solutions provider Intelematics — a subsidiary of the historic road service organization RACV — has developed a product called ASURE which has been installed in new Toyota vehicles from November 2020.
ASURE combines geolocation, automation, and 4G connectivity technologies and enables the vehicle itself to place a call for help.
The system sends a data packet to first responders who are able to interpret the information, make a decision on the seriousness of the incident, and dispatch the right assistance within minutes.
In one recent example, Intelematics Safety and Security call center received an Automatic Collision Notification call from a vehicle involved in a high-speed accident on a remote stretch of rural road 30 kilometers from the closest town.
The driver initiated this call but lost consciousness 20 seconds later, but the ASURE interface was able to give emergency services the right information to find the accident scene.
Flexible platforms in demand
The ability to notify first responders automatically in the event of an accident and let them know the precise location of the vehicle is a significant advance in road safety and is perhaps the 21st century equivalent of the seatbelt.
As it stands, most of the connected car features in today’s vehicles are installed by OEM’s at the point of manufacture.
This is understandable in the current market but is limiting. As smart cities develop and as the connected car market matures there is likely to be a wave of innovations from third parties which can enhance the value proposition and help carmakers differentiate.
This will require flexible platforms which developers can access through APIs to get their products and features into vehicles.
This will drive customization and could also help the market mature to the point where customers can select the services they want, and — critically — are prepared to pay for.
As the market matures, we could also see sustainable and innovative business models emerge, which may even be separate from the OEMs but provide them with a revenue stream.
That’s all to come, however. eCall is not even mandated in Australia, as it has been in Europe, but regulators are expected to give it the green light soon.
This regulatory push, motivated by safety considerations, could be a catalyst to a whole new range of connected services, coming soon to a vehicle near you.
Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and DigitalWorkforceTrends, and the editor of NextGen Connectivity. His fascination is with how businesses are reinventing themselves through digital technology and collaborate with others to become completely new organizations. You can reach him at [email protected].
Image credit: iStockphoto/aogreatkim