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Connected Vehicle: A Disruptive Technology

Seven key sources of value that automakers can exploit for success

Overview

The proliferation of mobile connectivity is disrupting virtually every industry—even automotive, with its complex physical product and sophisticated engineering. Connectivity is not only enabling new business models for manufacturers, but also opening up the automotive ecosystem to non-traditional players. In the face of this disruptive change, automakers need to determine their role in the growing ecosystem, identify where they can generate value from connectivity, and deploy the new operating model and capabilities required to avoid being overtaken by tech companies eager to exploit connected cars for their own growth agendas.

DOWNLOAD CONNECTED VEHICLE: SUCCEEDING WITH A DISRUPTIVE TECHNOLOGY [PDF]

Key Findings

On a per-vehicle-basis, a fully-fledged connected vehicle with heavy usage of connectivity-enabled services could deliver more than €5,000 in additional value over its lifetime. Exploiting this potential is vital for OEMs to avoid losing business opportunities to ecosystem players that to date have not been active in the automotive space. This means identifying and evaluating the different potential sources of value—not only typical OEM-related revenue streams but also more indirect streams and even innovative streams in which the OEM plays a completely different role. Seven sources of connectivity value are of particular importance to OEMs:

  • Hardware

  • Service fees

  • Third-party access

  • Data monetization

  • Cross-selling

  • Vehicle up-selling

  • Over-the-air upgrades

Total business value of connected car services is expected to reach €100 billion by 2020 and €500 billion by 2025.

Recommendations

To exploit the value from connected car solutions, OEMs need to re-tune their operating models. This includes:

  • “Test-drive” fast changing market trends to determine their potential

  • Assembling a connected car business leadership team with strategic and corresponding competencies

  • Bundling cross-functional skills, complemented by an active integration of major geographies

  • Developing new skills across the organization to create new connected car offerings and to manage relationships with end consumers

  • Implementing lean, highly efficient processes and embracing a commitment to open innovation

  • Adopting an open technology architecture including standardized APIs

  • Using big data, analytics and cloud technologies to create data-driven services

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