OEMs must drive the connected car – or get left behind

The digital revolution does not stop at the car door and today’s consumers expect to be fully connected at the wheel or in the passenger seat. As the worlds of automotive and IT collide, vehicles may ultimately be judged as much on their connectivity as their looks and performance. To reap the rewards from a …

The digital revolution does not stop at the car door and today’s consumers expect to be fully connected at the wheel or in the passenger seat. As the worlds of automotive and IT collide, vehicles may ultimately be judged as much on their connectivity as their looks and performance.

To reap the rewards from a multi-billion pound market, automotive OEMs desperately want to own the customer interface, yet face a dilemma over whether to offer “open” access to the internet from their vehicles. While this gives users the widest possible range of services, it also means losing control of content and associated revenues. The preferred alternative for many is to install proprietary software solutions, yet this entails moving outside of their core competencies and may involve significant investment.

As the worlds of automotive and IT collide, vehicles may ultimately be judged as much on their connectivity as their looks and performance.

In the fast-paced information and communication industry, development cycles are measured in months or even weeks, which is in stark contrast to the three-to-five years it takes to bring out a new car. To keep up with new technology, manufacturers are therefore taking a modular approach, installing small, in-car connectivity units that can be replaced easily and cheaply (like getting a new mobile phone), combined with continuous “over the air” (OTA) software updates.

Of course, there’s much more to connectivity than work and entertainment. With “car-to-enterprise” communication, remote diagnostics enable faults to be identified and in some cases repaired without leaving the driveway. And as greater numbers of cars become connected, traffic systems can use vehicles as sensors (“car-to-infrastructure”) to quickly identify congestion and divert drivers to clearer routes, saving time and reducing emissions. “Car-to-car” technology lets drivers spontaneously network with each other to warn of road hazards or other traffic problems, and going one step beyond, “car-to-x” allows the vehicle to communicate with any internet-capable device including PCs, stereos, televisions and even central heating systems.

When it comes to the growing population of electric cars, drivers will be able to use online navigation to locate the next charging station, as well as book and pay for a slot. Energy companies could extend the ‘smart grid’ concept and establish electric cars as an integral part of an intelligent electricity grid, using them for bi-directional electricity transfer or as temporary storage.

Amidst all this change, OEMs are figuring how to maintain their market leadership while moving into unfamiliar territory where they no longer hold a natural competitive advantage.

The connected revolution also calls for fresh marketing strategies. Traditionally, any new technologies have been introduced into premium cars and then trickled down over time across all models. However, the internet generation is young and generally unable to afford top-of-the-range vehicles, and OEMs need to quickly achieve a critical mass of connected users, so have no option but to turn conventional thinking on its head and launch new solutions as standard in fashionable, smaller cars – not just in their prestige marques.

Amidst all this change, OEMs are figuring how to maintain their market leadership while moving into unfamiliar territory where they no longer hold a natural competitive advantage. By building strategic alliances with information and telecommunications companies at an early stage – such as the recently-extended partnership between Daimler and Google – they can stay in the data driving seat, controlling the flow of new technology into the automotive sector and retaining ownership of the customer, ensuring a healthy share of the revenues from connectivity.

 

The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.

John Leech, automotive partner at KPMG LLP UK

The AutomotiveWorld.com Expert Opinion column is open to automotive industry decision makers and influencers. If you would like to contribute an Expert Opinion piece, please contact editorial@automotiveworld.com

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