We’ve been watching mobile technology evolve for some time, and we think one of the next big evolutionary leaps is that technology like connected cars is going to thrive. It seems that the general consensus at Telematics Detroit 2013 was that manufacturers now understand that this change is consumer driven (much like how the consumerization of eHealth is driving change in health, and the consumerization of IT is driving changes in enterprise).
This is very different from the scene we recalled from a previous Telematics Detroit conference a few years ago, where manufacturers considered connectivity changes a lower priority. Instead, it’s worked out the other way: with manufacturers like BMW and Ford leading the way with technology like ConnectedDrive, and SYNC, consumers are already seeing (and enjoying) some completely connected experiences.
We used to think that connected cars were just about mobile; Telematics Detroit presented a view that extended beyond that.
The New Connected Car
The car is becoming connected in multiple ways. In addition to having a mobile device that brings the Internet to the automobile, many manufacturers and network service providers are connecting to the cloud directly (which involves putting a SIM card into the car itself).
This presents opportunities such as car-to-car connections, telemetry technology, and cloud updates. Companies such as Sprint and Verizon were all present at Telematics and are vying for manufacturers’ attention. In fact, both companies have already started partnering up with OEMs in order to contribute to the connected car experience and opportunity.
A couple of manufacturers are slowly starting to open their software up; for example, GM and Ford are increasing their efforts to involve third-party developers (e.g., by making SDKs available). This transition from a traditionally closed industry is also due to how change is being driven by the consumer; while it may be difficult for a single company to stay on top of all these demands, third-party developers as a collective can cater quickly to these demand shifts.
Catering to Customers at the Extremes of Technology
The advancement of technology presents another challenge: traditional users (e.g., baby boomers) don’t see the connected car as a priority in their travelling experience. They don’t understand or know the capabilities of the car (nor do they really care). This type of purchaser will continue to identify with their vehicle and make judgments based on horsepower or performance.
In comparison, Gen-Y users care immensely. The general consensus is the car is merely a mode of transportation, whereas the user identifies more with their mobile phone. For them, if it comes down to two cars, it’s not going to be the one with the better engine; it’s going to be the one with a better connected experience.
Manufacturers now need to find the balance between these two different expectations.
The Riddle of Monetization
While the connected car technology is extremely exciting, there are still many questions that remain unanswered:
How will these services make money?
From what I’ve seen, it looks like there are three options:
Subscription: This is the standard recurring payment option. Services like OnStar and Blue Link use this method. However, only a small proportion of users keep the premium subscription after.
Pay-as-you-go: At Telematics Detroit, Hyundai mentioned the possibility of an iTunes-esque approach. This could involve a charge for a certain amount of usage, or a flat rate for a feature.
Packages: This could feature an option where manufacturers allow for certain feature sets to be purchased in preset packages. However, as consumerization drives more changes, it’s likely that manufacturers will be forced to customize and tailor features according to each individual purchaser’s needs.
It’s not clear which one will be the most popular amongst customers. One notable observation: BMW ConnectedDrive Services Manager Heini Schulz announced that all 2014 models will include BMW Apps and a 10-year subscription to their Teleservices, a 3-year subscription to BMW Online with My info, and a 3-year subscription to advanced real time traffic as standard.
While the changes are extremely exciting, they won’t happen overnight. There are many questions, such as balancing between user preferences and monetization challenges, that remain unanswered. Just as important are the risks associated with car safety, as they carry major costs: the issue of distracted drivers is one that isn’t taken lightly. One thing is a safe bet: there won’t be Netflix or Angry Birds-type apps that appear on your dashboard anytime soon.
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BiographyMore Content by Nicolas Morin