11-7-2016, Manufacturing Business Technology -- The connected car is already yesterday’s big news, being the buzzing new tech development in the automotive industry for close to a decade now. As the industry approaches mass commercialization of this technology, with manufacturers already having launched their connected car solutions, it is only logical that connected cars are billed as the next wave of disruption in the auto industry. Despite the hype, penetration of connected cars in the U.S. today is at only nine percent [Statista], but this doesn’t mean there isn’t potential.

Despite visible excitement, one of the main reasons behind low adoption is that the average car owner doesn’t see value in owning a connected car. This means the value that is expected and the actual perceived value that is delivered are not aligned. Cars are depreciating ‘assets’ and quickly lose value. That said, the added costs of insurance, routine maintenance and services such as connected infotainment, drive reports, remote functions and elementary diagnostics, are beneficial but do not add enough value to justify the extra spend. Independent market studies also indicate similar insights, highlighting a whopping 43 percent who reported ‘lack of need’ as the biggest barrier for adoption. It’s no surprise that there is a faster adoption in the commercial truck segment, where telematics bring distinct value to truck drivers and fleet owners.

An Opportunity to Create Value

Cars are unique in that they offer a more personal experience and typically have a longer ownership tenure as well.

Car owners are increasingly becoming more tech savvy and stay constantly connected. They also spend a considerable amount of time in the car, as the traffic condition is worsening day by day. According to the AAA foundation for Safety, Americans spend well over 300 hours a year on driving! 

This creates an opportunity to engage the driver/owner constantly throughout the ownership cycle, and offer personalized services to redefine the in-car experience. Automotive OEMs need to re-visualize ‘Connected Cars’ as a hub for service providers, insurers, ecosystem players and technology companies — to offer innovative solutions.

Auto OEMs make great cars and provide great services, but they have a limited and disconnected consumer ecosystem. Connected cars provide an incredible opportunity to disrupt this by opening up the potential for tremendous ecosystem play and creating additional revenue generation channels.

An integrated ecosystem can offer a plethora of value additions through a connected car, ranging from providing critical/emergency services (Faster emergency response can save around 2,500 lives per year in case of road accidents) to predictive component failure alerts and automated/proactive maintenance appointment bookings. All of these can be empowered with analytics-driven insights, allowing the owner to make more informed decisions based on component usage trends, closest available dealerships and vehicle health. Insights can shed light into the history of a car’s ownership with information such as prolonged wear and tear, usage/abuse trends, enabling the subsequent owners (auctioneers, scrap yards, independent dealerships, used car valuation services and used car inspection outlets) of the car to aptly analyze and monetize their asset.

Rethinking the Car Ecosystem

Smartphones allows any developer in the world to create an application and engage consumers with their content. Soon, technology will enable cars to do the same. Auto manufacturers only need to equip cars with a platform that will enable all authorized ecosystem players/service providers to come and consume its data. Whether it be insurance providers or the friendly ride-sharing services, application programming interfaces (APIs) could provide helpful insights to better services consumers. This essentially helps multiple ecosystem players move away from independent CapEx (capital expenditure) models into a co-share OpEx (operating expenditure) model — and the auto manufacturer always gets its share of the business in a sustainable fashion.

The connected car ecosystem also allows interesting innovations and new business models. For example, connected delivery or ‘roam’ delivery, where goods are delivered directly to one’s connected car instead of one’s home, can save time and reduce failed deliveries. The connected car also opens up possibilities for smart taxation and governance through programs such as ‘per mile road tax’, where road tax is charged by miles driven instead. Tomorrow, a consumer’s smart car and smart home can communicate with each other to provide utilitarian services using connected devices and software

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