Connected vehicles will create the Internet of Cars, transform the automotive industry, enable Big Data infomediaries, and spawn new businesses.
Andreas Mai is Director, Smart Connected Vehicles at Cisco, where he applies his industry expertise in business and technology architectures for connected vehicles for automotive and insurance companies, service providers, and governments. Mai spoke to Automotive World about how OEMs can use the connected car as a platform to transform their businesses, as well as create enhanced value propositions and technological developments.
‘The Lakes’ vs ‘The Valley’
A big concern in the industry today is how OEMs will fare in the race against technology companies in the connected car space. With outside forces such as Apple and Google entering the industry with interesting value propositions, Mai explained that the next generation of connected car services will exist as a second and new development cycle for both OEMs and technology companies. “The race is more about who can design superior experiences for personal mobility and deliver them to vehicle owners and drivers first,” he said. “An example is a smart map service that meshes navigation with traffic, weather, parking and other location-based services into a seamless and easily consumable experience.” In this instance, Mai noted that the integration of a new service into the vehicle in a way that it can be consumed with minimal distraction and better experience is a core competency of OEMs. However, he explained that technology companies have a “leg up” on OEMs when it comes to designing state-of-art infotainment systems, which are a key service delivery gateway. “Therefore, I see two development cycles with two different speeds and also interest in designing such systems in a way that they can be upgraded post sales and over the lifecycle of a vehicle.”
In fact, Mai notes that the race to win the future mobility services business has begun, and explained that it is wide open on how OEMs, which he describes as ‘The Lakes’, will fare against technology companies, ‘The Valley.’ So will OEMs cross the finish line first, or will they be delayed or get stranded in their previous business propositions? “I would not entirely discard the risk that we will also see some ‘carbusters’, where OEMs get stranded in the pits of the past, tuning to technologies and business models that have been working well for them for a century but are only marginally suited to strive in a future driven by autonomous vehicles and connected transportation value chains,” noted Mai.
To avoid rewriting the past, Mai believes that OEMs will be increasingly forced to expand their value proposition beyond the confines of the car, and explained that the future mobility value chain will go far beyond connected vehicle or owner relationship management and what an OEM currently controls. “It closely integrates maintenance services, energy, usage-based insurance, Internet connectivity, location-based services, parking, traffic lights, road charging, car- and ride-sharing and also other modes of transportation in a way that future customers can conveniently consume,” he noted. “Accomplishing this will require OEMs to literally connect their value chain and systems across enterprise boundaries with non-traditional suppliers.” However, he noted that as some of the innovation leaders have ‘skin in the game’ in the connected personal mobility value chain and are of equal or larger size than OEMs, a traditional supplier-buyer relationship will likely be insufficient. “Winners will work closely with non-traditional partners, will embrace different innovation models and will explore new business models,” he stressed.
New business models
Mai noted that OEMs are facing a business model change – from building cars to selling travel time well spent, resulting in changing business models. “There was a time when we had to buy or rent videotapes or DVDs and now on-demand streaming is set to replace these consumption models,” he said. “Similarly, we are starting to see OEMs that expand their business model into delivering personal mobility services, for example Drive Now, car2go, just to name two, and we are starting to see companies like Uber that are delivering personal mobility on demand.”
Cars clock in at 12% of total household expenditures, making them the second highest household expense, averaging about US$11,000 per vehicle per year in the US. In emerging markets they often consume 30-60% of the disposable household income. “Therefore, mobility-on-demand holds the promise to significantly reduce consumers’ budget for personal mobility and make mobility affordable for billions of people in the emerging world,” he concluded.
Andreas Mai will be speaking in the connected car track at Automotive Megatrends 2015.