By Pavan Mathew, Global Head of Connected Car, Telefónica Digital
The automotive industry is currently undertaking its biggest transformation in over a century as it evolves into another touch point for digital services. Mass-market penetration of the Connected Car in the next few years is predicted to bring the number of vehicles with built-in connectivity up from ten per cent to 90 per cent by 2020. The question is what will this future actually look like?
Earlier this week I attended Connected Cars 2013, an industry conference in Amsterdam co-located at the LTE World Summit. I sat in on a closed, invite-only roundtable that we organised with automotive OEMs and tier one automotive suppliers. Whilst there was no simple conclusion as to how this industry will play out, there were some key takeaways from my perspective.
The Connected Car is inevitable
The Connected Car is no longer an option for automotive OEMs, it is a necessity. Consumers are keen to have vehicle connectivity and it is fast becoming an important aspect in car showrooms. My friends at Kia tell me that the level of connectivity offered in cars is considered as important as the type of engine in the car to many consumers. These same consumers are driving a trend in business models within the industry. Buyers are demanding the latest upgrades and it won’t be long until upgradable and switchable head units are provided in car units. Owners will be able to update their vehicle screens, apps and digital services within the car unit on a regular basis.
Payment flexibility is critical to support the emerging business models
These evolving business models will necessitate a review of payment structures. One suggestion is that mobile operators could recognise vehicles as a second device on a customer’s data plan for a low monthly fee. App packages could be bundled into these monthly subscriptions meaning that customers do not have to commit for a lengthy term. They can upgrade or buy access whenever necessary, based on flexible payment structures. This new way of selling will give automotive OEMs additional contact opportunities with their customers, offering them the chance to develop relationships beyond the point of sale.
Automotive OEMs don’t want to become App companies
Despite the predictions of some analysts, automotive OEMs do not need to have the wide ranging app stores boasted by tech giants Apple and Google. The car will never be a smartphone and it doesn’t need to be. Unlike app stores where amateur developers are free to build their own apps, applications built for cars must be built professionally and with safety in mind in order to minimise driver distraction. Users do not need hundreds of apps in their cars – they need a few dozen core features that will enhance the driving experience.
There is certainly much to be finalised around the future of the Connected Car industry. It’s an exciting period, but also one where many important strategic decisions must be made. One thing is certain; if automotive OEMs and mobile phone operators work together then this industry will absolutely reach its exciting potential.
If you’re interested in reading further, take a look at my SlideShare ‘The Connected Car comes of age’ from a keynote I delivered in Las Vegas in May this year.
