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Always on, always connected: M2M comes to the auto industry

Automotive OEMs see machine to machine (M2M) technology as a way of generating revenue and differentiating themselves from their competition. Myriad business opportunities exist, from consumer infotainment to traffic management, safety and security. Megatrends talks to Vodafone, which is anticipating significant growth in its M2M business

The concept of ‘always on, always connected’ is becoming a reality. As the global ownership of mobile devices grows, so too does the number of business opportunities. Worldwide, Vodafone expects the number of people connected to grow to three billion over the next three years.

Within this, a key growth area for Vodafone is machine to machine (M2M). Vodafone’s M2M operations sit within its Enterprise division, which represents 24% of the company’s overall global revenue, and Vodafone is expecting its M2M business to continue to grow significantly. The company currently has around 400 million consumer hand-held connections globally, and 8.8 million M2M connections – it is expecting the latter to grow rapidly, driven largely by the automotive industry, domestic and industrial smart metering and health industry applications, as companies seek new ways to meet regulations, reduce costs and increase efficiency.

In terms of where in the world M2M growth can be expected, Tony Guerion, Head of Machine to Machine at Vodafone Group Services, told Megatrends that “Asia will grow quite significantly over the next three or four years due to the availability of mobile”. So too will “the Americas, including South America, where growth will be at the same pace as Europe, roughly 28-30%.

“The question is no longer, ‘what can technology do?’ Now it’s ‘how can we use that to gain a business advantage?’ The evolution of M2M is going to accelerate dramatically over the next 18-24 months, and there are a few reasons for that. The first is regulatory, and varies from region to region. The EU is aggressively driving the adoption of M2M, including smart metering in homes, and eCall, so that if a car is involved in a crash, the emergency services are alerted. We don’t know whether the regulation will be introduced in 2015 or 2016, but what is certain is that everybody in the industry is talking about it and starting to implement it.”

Automotive OEMs see M2M as a way of generating revenue and differentiating themselves from their competition, be that through infotainment, different or additional telematics services, or billing the customer slightly differently. Myriad business opportunities exist, in areas such as consumer infotainment, traffic management, safety, security and eCall. Vodafone is also working with the insurance industry on usage-based car insurance related to when drivers use their cars, and their driving pattern.

Speaking to Automotive World at Automotive Megatrends India 2012, held in Chennai in September, Hitoshi Ono, Global Business Development Manager – Automotive at Vodafone, said, “We have a very large interest in the automotive industry from a telematics perspective, and Vodafone is creating unique services, infrastructures and products to support this.”

There are two ways of delivering automotive telematics applications, explained Ono. “The first is the mobile phone unit connecting to the head unit, called tethering. And another is having embedded connectivity in the car. Vodafone M2M focuses on the latter.”

A number of opportunities exist for providers of automotive M2M technology, “for example, safety and security, and infotainment,” said Ono. “Then there are peripheral services like customer retention-focused applications, customer acquisition-focused application, and data reapplication. There are multiple streams that arise from telematics applications today that we are starting to realise. We are first trying to provide basic managed connectivity that is completely unique to OEM requirements. We have already built certain components, like an automotive-grade machine to machine-dedicated SIM, as well as the dedicated machine to machine platform.”

The forthcoming Opel Adam is an exercise in personalisation, with over a million ways for buyers to individualise their car, and connectivity will play a key role in that strategy. Opel says the Adam will be “the most connected car on the market.” At the 2013 Detroit Auto Show, Ford and GM announced plans to open up their APIs [application programming interface] to external developers; and a year earlier, at Automotive Megatrends USA 2012 in Detroit, OnStar announced its plans to open up its APIs.

Vodafone takes a similar approach, said Guerion. “We are looking to develop the number of APIs that we have, and to ensure that whatever we can provide to car manufacturers is actually relevant to the car industry, and if that means opening the APIs to developers, we will. Indeed, we already do this – we have a programme called Developer Support where we help our customers build the right applications, but also to build the right API environment. That is clearly something we need to do. Up to now, because some of the requirements were more or less the same, we have a library of APIs that meet our needs. But in the future, there will be a need to make sure that we have flexibility in opening APIs and making sure that we can offer additional streams of information or whatever it is to car manufacturers.”

At the same time, what is offered needs to be safe. What responsibility does a company like Vodafone have that ensures that what is offered meets automotive standards and regulations? “We have SLAs [service level agreements], so everything we do with, in this case, car manufacturers, is covered contractually. You can imagine that there is no way that a big OEM will take any risk around information breaches, for example.”

Providing services is one thing. Encouraging people to utilise those services is another. “If we want end-users to actually use these services,” Guerion said, “we need to work with the car manufacturers to come up with the right pricing and billing strategies. You don’t want your end-user to receive 20 different bills. We need to do things in a smart way – that’s quite a challenge and we are investing in that because the experience for the driver will be a differentiator for car manufacturers.”

The emerging markets are particularly interesting when it comes to the level of connectivity that an occupant in a vehicle can enjoy. Some OEMs offer global products, others tailor their products to specific markets, be it the vehicle itself, or the content offered within the vehicle. “Different markets have different needs, and different car manufacturers have different needs,” Guerion agreed. “One of the requirements for BMW is to make sure that whatever is delivered can be used globally, making sure that the service will work globally, and that the features of the service are available globally. For BMW, it does not make any difference whether you are in Albania, Qatar or Germany. All global OEMs are looking for global solutions, but they are also looking to fine-tune them to certain markets, to make sure that they comply local market regulations and that they meet the demands of the local population.”

BMW ConnectedDrive

In emerging markets, most vehicle occupants are likely to have a cellphone, but they will probably not be in a car with an embedded telematics or infotainment platform. Thus, the car remains a black spot for as long as the device cannot be connected to the vehicle’s existing audio system, for example. How is Vodafone as a provider able to bridge the divide between those people who have a built-in device such as ConnectedDrive in a BMW, and those who would like their brought-in device to be connected? “The major OEMs want connectivity to be embedded at the car factory. In emerging markets, we need to find a clever way to use a cellphone to deliver these services. We’ve been working on ways to use the mobile phone and understand how we can deliver services, but our focus so far has been on working with the bigger manufacturers.”

As for developing technology and services to bring in the many millions of older, ‘disconnected’ vehicles on the world’s roads, “we are still working on that,” said Guerion, and it all comes down to cost. “Whatever you provide, it needs to be cost-efficient. If you want to offer on-demand services and infotainment, you need to ensure that the solution is cost-effective and that the business case is attractive enough to go back to cars that are three, four or five years old, and we haven’t made a decision on that at this stage.”

As noted earlier, peripheral services are also a key part of automotive M2M developments, and an example of this is work with the insurance industry. “We are working with insurance companies to provide them with the right data so that they can define driver profiles and then through use of an algorithm, come up with the right insurance price for drivers,” said Guerion. “We see insurance as a big driver for M2M applications, especially in the automotive industry. This is something we have been looking at in India, where you will be paying as you drive, based on factors such as the distance, time and speed that you drive. The insurance companies have come up with a way to calculate a price on a daily or distance basis, for example. That will be huge.”

Martin Kahl is the Editor of Automotive World

This article was first published in the Q1 2013 issue of Automotive World Megatrends Magazine. Follow this link to download the full issue