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The connected vehicle race: you’ve got to be in it to win it

Connectivity adds value – for the customer, the fleet, and the OEM; it creates exciting business opportunities; and it transforms the driving experience. Martin Kahl talks to OEMs and suppliers about the ways in which connectivity is shaping the auto industry

From Internet blackspot to Wi-Fi hotspot, developments in vehicle connectivity in recent years have ensured that this is arguably the most exciting and disruptive technology to hit the industry since disconnecting the horse.

Indeed, the prominence of the automotive industry at CES and Mobile World Congress – where OEMs not only attend, but use those events instead of the traditional auto shows to launch products – highlights just how far connectivity has penetrated the industry. Connectivity has ushered in new business opportunities and new industry players, and given a whole new meaning to the word ‘mobility’.

Conceived initially as a means of delivering communication, and then infotainment, the ability to remain connected is now a basic consumer expectation, and it is for the vehicle manufacturers, suppliers and other interested parties to develop business models that incorporate the technology in a way that is affordable, future-proof and commercially viable.

Beyond infotainment, however, the multitudinous benefits of connected vehicle technology are still being discovered and explored. Many of the benefits are related to convenience and the associated business opportunities that such connected services can offer to incumbent and new industry players. Others relate to safety, with vehicle to vehicle (V2V) and vehicle to everything (V2X) connectivity clearly offering the opportunity to reduce collisions and cut the consistently high number of road fatalities and serious injuries that blight every country, developed or emerging.

For connectivity to work at its best, all vehicles need to be connected – to each other and to surrounding infrastructure. Passenger vehicles are usually front of mind in connected vehicle discussions, but the benefits to operators and drivers of medium and heavy duty truck fleets cannot be overstated. Whilst infotainment may be low on the list of requirements for a freight company’s procurement division, fleet management – even in its most basic form – can significantly improve the efficiency and bottom line of a truck fleet.
The ultimate connected vehicle is, of course, the autonomous vehicle. Various launch dates exist for various promised levels of autonomy, but nothing is guaranteed, least of all the legislation required to enable public use of autonomous vehicles.

Meanwhile, connected vehicle technology advances, with an ever-wider field of topics specific to improving the lot of private car owners, companies with fleets of cars and trucks, and new mobility services providers.

Here, Megatrends presents the views of car and truck manufacturers, technology suppliers and the telecoms sector on a range of subjects including the emergence of new connected services, infotainment, cyber security, connected trucks and the tricky business of making money from the connected car.

Hot on the heels of cell phone connectivity came navigation and in-car Internet for infotainment. The days of the six-CD changer are gone; so too are DVD-based sat-nav systems, replaced by streaming, connected navigation and in-car Wi-Fi hotspots. Where next for connected infotainment?.

“People want to take their digital lifestyle wherever and whenever they go without being disconnected. And that includes when they get into their cars to drive to their next destination,” says Arwed Niestroj, Chief Executive and President of Mercedes-Benz Research & Development North America.

“Our customers expect in-car infotainment that supports such a seamless integration, be it for entertainment or for business reasons.” Mercedes-Benz is focusing its efforts on enhancing lives by connecting the car to the Internet of Things (IoT), says Niestroj. He cites as an example a recent collaboration with Google. Announced in December 2016, the collaboration sees Mercedes-Benz integrate Google Assistant on Google Home, enabling customers to interact with their vehicle from home, via the voice-activated personal assistant. Amongst other things, this gives users the ability, before they leave their house or apartment, to send destination information to their car, set and activate the vehicle interior temperature, identify vehicle status and lock or unlock the vehicle’s doors.

“This is part of our long-term goal of creating an intelligent mobility ecosystem around cars to make everyday life more convenient for our customers. And machine learning provides an even more personalised user experience by learning from our customers’ actions and their environment.”

Ultimately, Mercedes-Benz wants to ensure seamless and intelligent interaction between its customers’ IoT and wearable devices and the Mercedes on their driveway. “Our vehicle is a digital companion more than ever,” says Niestroj.

‘APPLYING CONNECTED VEHICLE TECHNOLOGY TO ANTIQUATED SERVICES’

For technology companies, much of the growth rate lies not in device manufacturing but in the services which those devices enable. For Ford Motor Company, explains Mike Tinskey, Director of Connected Vehicle – Emerging Services at Ford Motor Company, that device (in this case a vehicle) averages at around US$34,000; once that device (the car) leaves the dealer’s forecourt, Ford estimates that vehicle owners then spend, annually, around US$6,000-US$8,000 on currently untapped services such as road tolls, fuel, parking, insurance and even drive-through restaurants. In the current state, where things are just starting to become connected, the OEMs do not participate in these annual revenues.

Parking, for example, relies on drivers seeking parking bays without any availability information and paying with cash or credit card; the insurance model is based on claims history, credit reports and zip codes; refuelling a vehicle requires a driver to stand in often poor weather at an often time-consuming credit card payment machine. “Vehicle connectivity options can make these consumer experiences much more pleasant and efficient”, notes Tinskey. The race is on for the OEMs to secure a hold in these services, facilitated by technology developments. “We’re applying connected vehicle technology to antiquated services.”

Vehicle connectivity options can make consumer experiences much more pleasant and efficient – Mike Tinskey, Ford

However, for this to work, there has to be industry co-operation at a platform level, upon which individual brands can build. “These need to be industry plays, bigger than any one OEM,” believes Tinskey. Mobile payment for a toll road or a quick service meal, for example, can be facilitated by the OEM, but this requires a wider infrastructure. “We want our competitors to use a common framework. We want to leverage technology that will soon be in all of our vehicles, such as DSRC radios, and then it becomes a question of ensuring infrastructure compatibility. In all of our scenarios, we believe the automaker would still own the touchpoint for the vehicle and provide the best customer experience.”

As traditional businesses such as car rental and vehicle servicing mature, OEMs are ramping up their enthusiasm for downstream business – and they are doing this because they now can, not because they previously didn’t want to, says Tinskey. “You need a certain level of capability in communication to have any type of shared economy. For example, a parking space that is known to be vacant can be communicated to all vehicles in the area, and this type of communication can lead to a more efficient use of assets in a shared economy.”

INFOTAINMENT – THE CAR AS A DIGITAL COMPANION

From Internet blackspot to Wi-Fi hotspot, developments in vehicle connectivity in recent years have ensured that this is arguably the most exciting and disruptive technology to hit the industry since disconnecting the horse.

Indeed, the prominence of the automotive industry at CES and Mobile World Congress – where OEMs not only attend, but use those events instead of the traditional auto shows to launch products – highlights just how far connectivity has penetrated the industry. Connectivity has ushered in new business opportunities and new industry players, and given a whole new meaning to the word ‘mobility’.

Conceived initially as a means of delivering communication, and then infotainment, the ability to remain connected is now a basic consumer expectation, and it is for the vehicle manufacturers, suppliers and other interested parties to develop business models that incorporate the technology in a way that is affordable, future-proof and commercially viable.

Beyond infotainment, however, the multitudinous benefits of connected vehicle technology are still being discovered and explored. Many of the benefits are related to convenience and the associated business opportunities that such connected services can offer to incumbent and new industry players. Others relate to safety, with vehicle to vehicle (V2V) and vehicle to everything (V2X) connectivity clearly offering the opportunity to reduce collisions and cut the consistently high number of road fatalities and serious injuries that blight every country, developed or emerging.

For connectivity to work at its best, all vehicles need to be connected – to each other and to surrounding infrastructure. Passenger vehicles are usually front of mind in connected vehicle discussions, but the benefits to operators and drivers of medium and heavy duty truck fleets cannot be overstated. Whilst infotainment may be low on the list of requirements for a freight company’s procurement division, fleet management – even in its most basic form – can significantly improve the efficiency and bottom line of a truck fleet.
The ultimate connected vehicle is, of course, the autonomous vehicle. Various launch dates exist for various promised levels of autonomy, but nothing is guaranteed, least of all the legislation required to enable public use of autonomous vehicles.

Meanwhile, connected vehicle technology advances, with an ever-wider field of topics specific to improving the lot of private car owners, companies with fleets of cars and trucks, and new mobility services providers.

Here, Megatrends presents the views of car and truck manufacturers, technology suppliers and the telecoms sector on a range of subjects including the emergence of new connected services, infotainment, cyber security, connected trucks and the tricky business of making money from the connected car.

Hot on the heels of cell phone connectivity came navigation and in-car Internet for infotainment. The days of the six-CD changer are gone; so too are DVD-based sat-nav systems, replaced by streaming, connected navigation and in-car Wi-Fi hotspots. Where next for connected infotainment?.

“People want to take their digital lifestyle wherever and whenever they go without being disconnected. And that includes when they get into their cars to drive to their next destination,” says Arwed Niestroj, Chief Executive and President of Mercedes-Benz Research & Development North America.

“Our customers expect in-car infotainment that supports such a seamless integration, be it for entertainment or for business reasons.”

Mercedes-Benz is focusing its efforts on enhancing lives by connecting the car to the Internet of Things (IoT), says Niestroj. He cites as an example a recent collaboration with Google. Announced in December 2016, the collaboration sees Mercedes-Benz integrate Google Assistant on Google Home, enabling customers to interact with their vehicle from home, via the voice-activated personal assistant. Amongst other things, this gives users the ability, before they leave their house or apartment, to send destination information to their car, set and activate the vehicle interior temperature, identify vehicle status and lock or unlock the vehicle’s doors.

“This is part of our long-term goal of creating an intelligent mobility ecosystem around cars to make everyday life more convenient for our customers. And machine learning provides an even more personalised user experience by learning from our customers’ actions and their environment.”

Ultimately, Mercedes-Benz wants to ensure seamless and intelligent interaction between its customers’ IoT and wearable devices and the Mercedes on their driveway. “Our vehicle is a digital companion more than ever,” says Niestroj.

CYBER SECURITY – KEEPING CARS SAFE AND CONNECTED

The connected car at the heart of the IoT is the future – this much we know. Yet we also know that a device connected to the Internet is a device that cannot be secure. Automotive cyber security remains very much the enormous elephant in the room.

“One of the biggest efforts on cyber security from an industry perspective is the Auto-ISAC,” says Henry Bzeih, Managing Director, Connected & Mobility at Kia Motors America. The Automotive Information Sharing and Analysis Center (Auto-ISAC) was created in July 2015 as a central hub for the analysis and prevention of potential cyber vulnerabilities in vehicle electronics.

“It’s really become the forum for information exchange. We, and many others, have benefited from this pool of brainpower from automakers, the automotive supply base, researchers and academia discussing vulnerabilities and working on best practice,” says Bzeih, who sits on the Auto-ISAC board.

For an industry traditionally reluctant to share information even with its commercial partners, let alone competitors, the level of collaboration within the Auto-ISAC has been greater than expected, says Bzeih. “There are many ways that the industry comes together, but this specific area has brought people closer. Misery loves company, and nobody wants their brand subjected to negative headlines.”

Whether owned or shared, driven or autonomous, it’s clear that the car is and will remain a key part of the IoT. However, there is concern about letting the car mingle with other non-automotive devices within the IoT. If anything connected to the Internet is vulnerable, then the wider the funnel, the greater the opportunity for an attack, testing automotive security protocols to their very limits.

“The IoT is intrinsic to the convergence of the vehicle with connectivity beyond the vehicle,” says Bzeih. “We don’t want to do things for the sake of doing things. In the past it was a race to launch technology, but cyber security has changed the way we as an industry think when we bring technology to market. We test cyber security, privacy and safety before technology is signed off. If we see there’s a risk or a potential threat, we won’t proceed with it. We want to continue to innovate, but we have to do it differently from before.”

CONVOY! THE TECHNOLOGY CONNECTING TRUCKS

Most discussions around connected vehicle technology centre on convenience and infotainment in the connected car, but it is in medium and heavy duty trucking that the greatest value will be added. “Today, the idea of a connected truck mostly means a telematics service with a limited amount of data flowing from the truck to the Cloud, and small amounts of data flowing back down to the fleet operator or the driver,” notes Josh Switkes, founder and Chief Executive of Peloton Technology. “We see considerable power in those services, and in expanding those services, but also in direct truck-to-truck and truck-to-infrastructure communication.

“Telematics can give you feedback on a daily, weekly or monthly basis about the truck, the driver and your operation. It can give you semi-real time communication with the driver, but when you add truck-to-truck or truck-to-infrastructure, you can get immediate features like platooning, alerts and driver warnings, and other actions.”

Switkes notes a significant change in the business of trucking: “To date, OEMs and Tier 1s have focused on selling physical products. We’re finding that companies are starting to see the power of services, which can serve their customers better than just components. Every OEM now has a telematics service, either in-house or with a partner. And they’re starting to see the benefit of offering automation services like platooning as a service to end customers, because it’s a very low risk, flexible financial arrangement, with no major upfront investment.”

We see considerable power in direct truck-to-truck and truck-to-infrastructure communication – Josh Switkes, Peloton Technology

 

THINGS MOVE FASTER BY CONNECTED TRUCK

When Salt Lake City-headquartered Nikola Motors burst onto the scene with a promise to revolutionise trucking, the focus was on the company’s zero emissions Class 8 truck – and there the focus has remained. According to founder and Chief Executive Trevor Milton, however, the company has developed its truck from the ground up – including its connectivity.

“One of the main philosophies of the Nikola One truck was connectivity,” says Milton. “Our truck is so well connected that an operator back at base could take control of the truck and operate it remotely, and we believe this will be a prominent feature in the future. Our trucks run off Wi-Fi and 4G LTE, and we’ve done this for a reason. On any truck now you have several major components – the engine, the transmission, the emissions equipment – all transmitting on different software platforms through a telematics system. In the past, truck OEMs focused on the equipment, not on the experience. For our truck, it’s about being completely connected.”

As mentioned elsewhere in this article, connectivity offers significant benefits to fleets. “It is our belief that fleet operators need to be able to monitor their drivers’ driving habits, how safely they drive, how much attention they pay to the road rather than their phone. We can analyse all of this, which is not possible, or is limited, with basic telematics.”

Our truck is so well connected that an operator back at base could take control of the truck and operate it remotely – Trevor Milton, Nikola Motor

Drivers, too, can benefit from being fully connected. “We have a 21-inch display in the truck which allows the driver to see every available load within a city. Consider a driver in LA who wants to go to New York, and has seven days to get there. Our system would automatically calculate for that driver the most lucrative route with the most lucrative loads, and with the appropriate hydrogen stations for our trucks. This could increase the driver’s pay by maybe 35-40% over what he’s currently making for that route.”

We have a 21-inch display in the truck which allows the driver to see every available load within a city. Our system would automatically calculate the most lucrative route, and could increase the driver’s pay by 35-40% over what he’s currently making for that route – Trevor Milton, Nikola Motor

It’s impossible to exaggerate the importance of connectivity to trucking, concludes Milton. “The connected truck is going to be the future of trucking, replacing many of the services that trucking companies have right now, much like Uber has replaced taxi services. That’s why we have to integrate connectivity into our truck.”

CONNECTIVITY BOOSTS PRODUCTIVITY – BUT WHAT DOES THAT MEAN?

One of the great benefits of connectivity is the ability to use car time productively. The Rinspeed Etos, unveiled at CES in 2016, was a collaborative effort between Swiss concept car creator Rinspeed, Harman and other partners to conceive a vehicle with in-car solutions for the business professional, by integrating key elements of Microsoft Office 365 productivity suite capabilities, including Microsoft-owned Skype. The Rinspeed Oasis concept shown at CES in 2017 took the office-on-wheels concept further, with ZF adapting its collapsible steering wheel into one that folds flat and turns into a keyboard or work surface.

Rinspeed concepts of late have begun to explore how vehicle occupants will use their time in the cars of tomorrow when autonomous driving means no-one needs to spend time behind the steering wheel. Megatrends asked Frank Rinderknecht, Rinspeed founder and Chief Executive, how vehicle connectivity can help to maximise and productively use time spent in the vehicle.

“We need to first define what maximising and productivity mean,” says Rinderknecht. “Is it work, efficiency and output? Or time to reflect and relax? Technically, with 3G and 4G, and with 5G coming, connectivity is more than sufficient for any kind of work one might want to perform in a moving vehicle. That should also be plenty for watching Netflix and keeping in touch with friends. Maybe we should look more closely at the time gained by not concentrating on driving.”

In the autonomous car of the future, what people choose to do in their vehicles would be wide and varied, says Rinderknecht. “For me, it would depend on the time of day, my current mood, my trip distance, my workload, and so on – and it would be the same whether riding in a car, taking a train or a flight. Maximising in that sense is thus defined by quality of life, not necessarily by productivity.”

FROM 4G TO 5G – AND BEYOND

The automotive technology developments that have been enabled by first 3G and then 4G LTE have already resulted in new business models and a rethink of the role of the car in our lives now and in the future. But what can be expected as the industry moves from 4G to 5G and beyond?

“I see the journey to 5G as an evolution of what we already have with 4G,” says Gion Baker, Head of Automotive at Vodafone. “Rather than a sudden switch over, we will experience incremental improvements in speed, latency and overall network performance. 5G will fundamentally transform the way mobile networks are used, improving a range of applications, from responsive high-definition video streams to augmented reality and tactile Internet applications. Innovation is likely to drive applications that we have not yet even considered.”

Baker notes the automotive industry’s focus on, amongst other things, vehicle-to-everything (V2X) applications based on cellular technology. “This is considered essential to changing transportation and enabling safety applications, cooperative driving and eventually autonomous driving.”

The growth of in-car connectivity and connected services has created a need for speed, and the automotive industry is firmly behind the move to 5G. Indeed, the 5G Automotive Association, which promotes the adoption of in-car 5G, was initiated by the automotive industry, together with technology providers, network operators and Tier 1s.

As to where 5G will initially be rolled out, Baker has a perhaps surprising opinion: “I think we will see 5G first with the commercial operators, where the obvious attraction of automated trucks travelling in connected platoons will soon become a common sight on our motorways and Autobahns.”

Longer term, Baker envisages cars communicating with their owners’ smart homes, and journeys being insured in real-time based on real-time driving condition and traffic load data. “We can start to imagine cities that proactively manage traffic flows and where searching for a parking space is a thing of the past, and cities where no-one owns a car but urban populations share vehicles through on-demand providers.”

In the move to a data-driven automotive ecosystem, there will be ever more opportunities for non-automotive players to disrupt the landscape, concludes Baker. “The industry needs to recognise that innovation will come from outside the traditional market, and it needs to respond to that challenge. However, we can expect major automotive players to be well prepared.”

MONETISING THE CONNECTED CAR

Monetising the connected car, says Ford’s Mike Tinskey, is about more than making instant profit. “There are numerous models being developed for OEMs to monetise the connected car. We have to add value, and just inserting the Ford Motor Company name into a value stream is probably not the right approach. We will continue to build on trust with our customers and we will have the first touchpoint with that customer, with the dealer and purchasing experience. We want to help them have the best experience going forward. We want them to find that parking spot, or to have the lowest insurance rate.”

The disruption that’s coming from connectivity, and the value that the customer will see in their everyday lives will be much greater than anybody ever imagined – Mike Tinskey, Ford

Customers are so accustomed to doing things in a non-connected world, says Tinskey, “that they don’t realise the inefficiency, and that there’s something we can help them with. If we can help customers find services that are quicker, faster, more efficient, then they will enjoy the product more.

“The disruption that’s coming from connectivity, and the value that the customer will see in their everyday lives will be much greater than anybody ever imagined. We’re really excited about what’s coming over the next couple of years.”

Kia’s Henry Bzeih concurs. “Monetising the connected car is not about simply making money directly from an activity. It’s about what connectivity does to the overall brand, and to make it more attractive to the customer. It’s an enabler to a brand, an enabler to potential repeat customers, and an enabler to more convenience and happiness. Indirectly, connectivity does make money for the company, planting seeds for the brand. There’s plenty of focus on whether a business model makes money. I look at it differently: what does it do for the company, what does it do for the brand?”

Rather than the old way of doing things – just buy a truck and forget about it – connectivity enables an ongoing relationship with the end-customer’ – Josh Switkes, Peloton

Connectivity is an investment that goes beyond direct profit-loss from a business perspective, continues Bzeih. “That’s not to say you can’t make money, but in the grand scheme of things, the benefit for the company as a whole is much bigger than the direct revenue.”

For the OEMs, the importance of connectivity lies not in making money, but in preventing financial losses due to poor technology: “The key is to help the vehicle manufacturers not lose money,” believes Nikola Motor’s Trevor Milton. “Right now, vast sums are being lost by not being completely connected. Connected services are not an expense, but a saving. If you do it right, you’ll not only keep your drivers, but you’ll keep your customers, and you’ll keep everyone safe.”

The benefits of connectivity are partly directly financial, and partly indirect, agrees Peloton’s Josh Switkes. “Connectivity helps sell vehicles, because these services are a big part of lowering total cost of ownership. For the OEMs, there is value to being directly financially involved in these services, through factory integration or through partnerships, but they can also use it as a big sales driver.

“Connected vehicle technology and services, when taken holistically, can make a huge impact to the OEMs. Rather than the old way of doing things – just buy a truck and forget about it – connectivity enables an ongoing relationship with the end-customer.”

These connected services cannot be provided by the OEM, but they can be by other interesting companies with hundreds of millions of customers’ – Frank Rinderknecht, Rinspeed

Speaking from outside the vehicle manufacturer community, concept car designer Frank Rinderknecht says the current automotive industry set-up offers the OEMs little in the way of profit from connected services.

“Technically, the traditional automotive industry is certainly ready to implement connectivity. But is it ready to create a sustainable business model out of it? No. And here’s why. The future of most urban mobility needs is – in my opinion – clearly focused on service and experience. The hardware is just an important commodity, and we assume that it is there. Look at your smartphone – could any of us state the type of processor, the battery capacity or the screen resolution? Probably not. These connected services cannot be provided by the OEM, but they can be by other interesting companies with hundreds of millions of customers. And furthermore, these services companies are the ones that are right at home in logistics: Amazon and AliBaba, for example. That’s my bet for who will profit from the connected car.”

EXCITING AND DISRUPTIVE

Connectivity is improving constantly; CD became 3G, and 4G will soon become 5G. The services that rely on that connectivity – or benefit from it – are also improving, offering exciting possibilities for new entrants and a renewed interest in downstream services from the traditional OEMs.

Connectivity has also brought key players closer together, on software and payment standards, for example, and in unity against the common menace that is the cyber attack.

Consumers have seen the connected car; that the vehicle manufacturers should make it standard is now assumed. Somewhere along the line, however, someone has to pay for it. Clearly, opportunities for the OEMs to monetise the connected car exist, but it’s a two-speed affair. There is instant money to be made from life in the fast lane, with revenue from parking, road tolls and so on; the slow lane is all about making and nurturing the investment, for potentially greater returns. It’s for the OEMs to decide what happens to their cash cow. Whatever does happen, there’s no denying the enormity of this technology’s impact. Exciting and disruptive? You bet.


This article appeared in the Q1 2017 issue of Automotive Megatrends Magazine. Follow this link to download the full issue.