Over the next five years, number of cars equipped with embedded connectivity will rise by 300%. The technology will transform the way we commute, communicate and interact with products and services while we travel and will create a multi-billion-dollar opportunity for ecosystem players by 2022.

The changing market dynamics will transform the business model of automotive OEMs and create a turf war across the evolving eco-system involving OEMs, network operators, in-car service providers, telematics firms, telecom operators, hardware manufacturers as well as technology firms such as Google, Apple and Amazon.

Automotive OEM Opportunities

Predictive Maintenance and Inventory Management: Connectivity enables the tracking of component wear-and-tear and a vehicle’s health. The data generated can push information to the cloud continuously, flagging alerts to the OEM, service centers, service advisor and vehicle owner.

• Over-The-Air Updates: Vehicle recall is a major cost overhead as well as a logistical and branding nightmare for automotive OEMs. OTA (over-the-air) updates could help eliminate some recalls.
• Infotainment Services: Connectivity will open a new revenue stream for automotive OEMs. Infotainment service packages will be provided based on a consumer’s usage pattern and interest. For example, Mercedes-Benz launched its own voice assistant at CES 2018 Las Vegas, which enables users to control car temperature. The system also analyses driver needs based on routine and behavior, to automatically operate music and car navigation.

Product Differentiation and Customer Retention: Connectivity will enable OEMs to analyze car usage metrics and user pain points. The data will enhance vehicle ergonomics and push new car sales by encouraging users to upgrade through attractive discounts and offers pushed through the car platform.

Network Operator Opportunities

Currently, vehicle telematics are well adopted in the commercial space through aftermarket solutions such as OBD devices. Going forward, the market will shift towards embedded connectivity and we will see a larger adoption in the consumer space.

• US Network Operators leading the way. In the US, AT&T claimed to have 17.8 million connected car connections in Q4 2017, with monthly packages from US$20. In Q4 2017, Verizon Telematics’ revenue totaled US$230 million.
• Rise in Average Revenue Per Driver (ARPD): Service providers will push the concept of the ‘marketplace-on-wheels’. This will drive data usage requirements and enhance ARPD, creating a multi-billion-dollar revenue opportunity for network operators.
• New Revenue Models: In developing countries with low ARPU, telecom operators may opt for advertisement-based revenue models to counter consumer resistance to pay for in-car connectivity.

Hardware Manufacturer Opportunities

• Telematic Control Units (TCU): Connected cars will boost demand of TCU in cars. At present, each of these units cost US$100-150.
• Storage and Processing: As needs evolve, more storage and processing will be done locally within the car, creating a billion-dollar opportunity for storage firms.
• Biometrics: As connectivity brings more features to our cars, biometric authentication will be needed to protect our data for example in fuel payments and drive-through restaurants.

Service Opportunities

Service firms will leverage data analytics (DA) and machine learning (ML) to transform cars into a marketplace-on-wheels, providing for our business, leisure and road safety needs.

• Insurance Firms will be able to track driving trends and deliver a tailored insurance plan. In the UK, Vodafone is already providing data on driving patterns to insurance firms.
• Mobility-as-a-Service: Connectivity has already enabled new business models such as ‘taxi-on-demand’ services offered by Uber, Lyft, DiDi, Ola, etc.. As cities across the globe seek economic efficiency, decongestion and low carbon footprint – shared mobility services can be touted as future of mobility in smart cities.
• Safety and Security: In Europe, the EU has already mandated the eCall regulation, intended to bring rapid assistance to motorists involved in a collision anywhere in the Europe. A similar eCall mandate is also expected in Russia and Brazil in coming years.
• Advertising: Location-based advertising will target people arriving at parking lots attracting customers to nearby restaurants, shopping malls and gas stations. In the US, Telenav, a location-based service provider is providing an advertising platform that enables automotive OEMs to push advertisements to vehicle display screens, based on vehicle location, frequent routes and time of the day.

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Connected Cars - Global - 2013-22