Ericsson has released a connected car report highlighting a number of “significant” monetisation opportunities for car manufacturers.
The report – Connected Cars: Succeeding in the midst of economic and societal transformation – also examines some of the challenges faced by automotive OEMs as they seek to secure their place in a world that’s rapidly changing.
Statista forecasts the connected car market to reach $166 billion by 2025 while some other analysts predict it to exceed $200 billion. If even the lower figure is correct, there’s plenty of pie for players to grab a slice of.
Kyle Okamoto, General Manager of Ericsson IoT, says:
”Automakers need to strategically consider the future of their business and capitalise on an evolving ecosystem of technology companies, information and entertainment companies, suppliers, and many more players who are progressing innovation around the Internet of Things.
This interesting report outlines how automakers can adapt and succeed in the market.”
Consumers are yet to be convinced by the safety benefits of connected and driverless vehicles, despite studies indicating they could reduce annual accident fatalities by an incredible 94 percent. However, connected car manufacturers would do well to focus on enhancing and marketing their safety features as improved safety and navigation features are the most important connected car services from the customer perspective. Consumers say they would be willing to pay a premium for safety improvements.
The regulatory environment will undoubtedly be a challenge. Navigating the complexity of global regulations – as vital as most are – is a headache even for more traditional vehicles. With regulators around the world still working out how to approach semi- and fully-driverless vehicles in particular, it will be difficult to keep up and ensure compliance in each market.
A silver lining is that most governments are supportive of connected vehicles for the economic benefits, helping to achieve carbon emissions reduction targets, and lowering traffic congestion. In the European Commission’s Third Mobility Package of May 2018, the bloc set out its strategy to make Europe a leader in fully-automated and connected mobility systems to achieve a cleaner, safer, and more efficient transport system. By 2035, it’s expected that 43 percent of vehicles in the EU will be at least partly autonomous if the regulatory environment is favourable.
The amount of data generated by connected cars will be tremendous and Ericsson notes this will provide a huge opportunity for monetising that information if done so in a safe, secure, and compliant way.
One clear benefit to the consumer of sharing data from their vehicle is for predictive maintenance—helping to minimise downtime, prevent further damage, lower costs, and improve safety. Personalisation of the in-vehicle experience for the driver and each occupant is another way automakers can differentiate and build brand loyalty.
By 2025, it’s expected that 50 percent of a vehicle’s value will be software. To put that in context, the value for an average car today is 90 percent hardware and 10 percent software. Despite this growth in automotive software, terrifying research from the Ponemon Institute found that just 10 percent of automakers have an established cybersecurity team.
5G connectivity will enable many new experiences such as game streaming with low latency for passengers and support the delivery of increasingly large over-the-air updates for connected vehicles and their services.
However, the downside is that 5G comes at a cost and one that often isn’t even remotely stable from one market to the next. In India, for example, connectivity prices could be 92 times higher than in Belgium. These costs will likely be passed on to the customer and impact adoption.
“The amount of data consumed will increase exponentially. However, if all data is treated equally and billed to one subscriber, who pays? It’s a big question. Will car owners pay for general software updates driven by the OEM? Are OEMs willing to pay for entertainment-based data usage consumed by passengers?” mulled the report’s authors.
“OEMs and their partners will need to wrestle with these questions and come up with a model that the market will bear.”
There are many such questions that OEMs will need to wrestle with over the coming years, but it’s clear that the prize will be worth it.
You can find a full copy of Ericsson’s report here (registration required)
Want to find out more from executives and thought leaders in this space? Find out more about the Digital Twin World event, taking place on 8-9 September 2021, which will explore augmenting business outcomes in more depth and the industries that will benefit.