The report offers a unique perspective on one of the biggest transformations the automotive sector has undergone in over a century, detailing challenges and opportunities, as well as proposing a model for automakers and telecommunications operators to work together on a 10-point action plan.
The connected car sector will experience enormous growth in the coming years. By 2020, 90% of vehicles will come equipped with connectivity solutions, compared to the current 10% in the global market. As this shift occurs, the report identifies four strategic areas: the transformation of the current dealership model, the payment model for these new services and connectivity, concerns about opening this market to third parties, and the role to be played by mobile operators driving this radical change in the industry.
Redefining a Century-Old Business Model:
At a time when consumers are demanding more connectivity services in vehicles, the transformation of a business model that has remained virtually unchanged for over a century is becoming even more crucial, the report notes. Product lifecycles, payment models, and customer service are typically measured in periods of several years. However, connected vehicle users want a new, more dynamic service, more akin to the telecommunications industry, whose cycles are measured in months rather than years.
Service packages, distribution channels, product offerings, pricing, and customer service will all be significantly impacted, and in some cases, will require entirely new business models that will have to be built from scratch as the dynamics between manufacturer, dealer, and customer evolve.
*Audi, BMW, GM, Jaguar, Land Rover, Kia, Nissan, Renault, and Volvo
1. Dynamics at the Point of Sale:
Traditionally, dealerships have taken an average of just 20 minutes to sell and deliver a car. According to the report, the complexity of optional extras and vehicle customization has increased the sales time to an average of one and a half hours, a duration that will increase as the number of available services grows. This impacts the cost per vehicle for the dealer, as well as the type of sales and technical training required to complete the sale.
However, these factors can be offset by the advantages offered by selling a connected car at a dealership. Advantages such as the ability to automatically alert customers and service and automotive dealerships about poor performance or malfunctions, facilitating proactive and preventative regular vehicle maintenance and long-term maintenance contracts.
The report also anticipates a new type of relationship between the manufacturer and the vehicle owner once the car leaves the dealership. App stores, software updates, and solutions for both the car's interior and exterior will give dealerships the opportunity to connect directly with vehicle owners, fostering closer and more lasting relationships with their customers.
2. Who foots the bill?
The report also addresses concerns about who will pay for in-vehicle connectivity services. While consumers have become accustomed to a one-time purchase, manufacturers have realized that selling cars "only" is no longer profitable.
Traditional telematics services have historically been characterized by low data consumption. However, future in-car connectivity services will cause data consumption to increase exponentially. Audi announced earlier this year that its 50,000 Audi Connect® customers had consumed more than 75 terabytes of data since its launch in April 2011—four times the size of the Library of Congress, one of the world's largest libraries.
Manufacturers, therefore, need to find attractive pricing models that provide the flexibility and value consumers demand from comparable services. General Motors, for example, advises mobile operators to consider vehicles as a second device on a customer's data plan with a low monthly fee, or for the operators themselves to introduce an advertising model to help finance part of the connectivity.
Pricing flexibility is a priority for many automakers, allowing rates to be tailored to the specific uses of in-vehicle connectivity services.
3. Collaboration is the key to success.
The report highlights that the automotive industry sees mobile operators as natural partners, not only to enable connectivity, but also to share their knowledge and experience in strengthening relationships with a hyper-connected consumer.
Closer collaboration between the automotive industry and mobile operators is essential to share knowledge and develop new and innovative business models. According to the report, these operators will not only be key enablers of the new business models needed for the connected car sector to thrive, but will also act as a catalyst for this change.
The report also highlights several issues that manufacturers would like operators to address, such as establishing agreements that guarantee global connectivity, comprehensive services (including software updates, data management, etc.), and data tariffs.
4. Caution Regarding the App Ecosystem:
Although apps are expected to be part of the ecosystem, with manufacturers like Renault launching their own app stores, manufacturers believe it is unlikely that the connected car will become an open-source app development environment due to security and reliability concerns.
Overall, automakers believe the potential market for connected vehicle apps will be much smaller than the one that has developed around smartphones.
