Disconnect Grows Between Cars and Consumers
- By CDOTrends editors
- April 26, 2022
Global carmakers continue to make significant investments in connected technology, but consumers still seem reluctant to adopt the subscription payment model the industry relies on.
Technology intelligence firm ABI Research has completed a survey which shows that while connectivity will be available in more than half of the new vehicles sold in 2022 and more than 70% by 2028, the ratio of paid subscriptions will contract by 20% over that time.
Carmakers are committed to connectivity because of benefits in fleet management, reduction in warranty costs, and the convenience of Over the Air (OTA) updates, but they are struggling to recoup these costs, particularly on the sale of cheaper vehicles.
The lure of free trial periods is yet to translate into stickiness among consumer subscribers, even though the industry is committed to deploying software-defined vehicle platforms and betting on the revenues it hopes will be delivered.
Manufacturers such as Stellantis — the conglomerate formed from the Fiat-Chrysler merger — Ford and GM have collectively targeted a goal of generating US$20 billion in software and services revenue by 2030, at least 13 times what is generated today.
“The reality signals that it will be challenging,” said Maite Bezerra, Smart Mobility and Automotive Research Analyst at ABI Research.
“Due to the prevalence of high traffic phone data plans, end consumers have little motivation to pay for connectivity and rarely renew subscriptions after the free trial period, which carmakers are constantly extending.
“This is especially true for infotainment services that compete with free phone mirroring.”
The average trial-free period in the U.S. is increasing from three to six months, in Europe from one to three years. In China, many manufacturers offer free-for-life connectivity.
The investments are continuing despite the revenue challenges. Stellantis recently announced a partnership with Qualcomm Technologies to use its Snapdragon Platform to support its STLA Brain and SmartCockpit platforms to be phased in from 2024, beginning with the Maserati marque.
In South Korea, Hyundai Motor Group is accelerating the development of an automotive operating system, aiming to complete its second-generation OS for the integrated management of electronic control units at some time this year.
Tesla is the acknowledged leader in integrated OS for its vehicles, enabling the easy upgrading of its cars through OTA technology.
Image credit: iStockphoto/Volodymyr Kalyniuk