Although connectivity is nothing new to automotive, business opportunities are growing rapidly. As the automotive ecosystem is opening to powerful non-traditional players, connectivity is truly a disruptive trend. Automakers need to determine their role and identify where they can generate value from this technology and put the pedal to the metal when it comes to deploying new operating models and capabilities. If they don’t, they risk being overtaken by tech companies looking to exploit connected cars for their own growth plays.
Yet, as original equipment manufacturers (OEMs) wade more deeply into connectivity, they are facing several challenges. For starters, while consumers want their vehicles to be connected, there is some evidence they won’t necessarily be willing to pay extra. Also, they expect their smartphones, tablets, and other devices to work seamlessly within their vehicles.
To meet consumers’ heightened expectations, OEMs will have to provide much more sophisticated options to meet or exceed what handheld manufacturers offer. However, relying on in-house development resources alone, as they do now, will be impossible. Complicating matters further are fast-paced development and release cycles favored by technology companies, producing new features and services every few months rather than years. A pace that needs to be matched by automotive players.
Ultimately OEMs will struggle if they choose to “go it alone.” Rather, the future will be defined by the convergence of a powerful connected vehicle ecosystem. One in which a wide range of business partners—automakers, technology giants, telecommunications companies, start-ups and aftermarket service providers—will coexist and cooperate to deliver solutions.
To deliver superior solutions in an efficient way within this ecosystem, OEMs should focus on vehicle-related functionality bundles related to areas such as assistance, remote access or navigation. At the same time, they need to integrate non-vehicle related services hosted on handheld devices. Earning a chunk of the connected car pie requires OEMs to make significant investments. But how and where can they generate value from connectivity?
Certainly, the potential is available: Accenture believes the total business value of connected car services will reach €100 billion by 2020, and €500 billion by 2025. On a per-vehicle basis, a fully-fledged connected car, assuming heavy usage, could deliver more than €5,000 in additional value over lifetime, in our view.
Figuring out how to exploit this potential is vital for OEMs to avoid losing control to new ecosystem players. The connected car is a game-changer for the auto industry. That much is clear. What’s not clear is how effectively OEMs will be able to defend their territory against the tech giants that consider the connected car a key element in their overarching “connected life” growth strategies. To transform these opportunities into company value, auto executives need to recognize that connected car solutions go far beyond a simple vehicle option. Excelling in the connected car market requires a totally new business, which means profound changes in strategy, mindset, culture, and operations across the entire organization.