Telematics Wire recently got chance to interact with BearingPoint’s Sarah-Jayne Williams to discuss connected cars market in EU. Sarah-Jayne Williams is an Automotive Partner at BearingPoint UK and leads the Digital and Customer Management practice. She has worked with both OEMs and Automotive Leasing Providers to design and deliver digital strategies and Connected Car services.
BearingPoint recently sponsored a study with PAC “Connected Car in Europe: Strategies and technologies for connected driving” which is referenced in the responses below.
Connected cars have been in discussion for quite a few years. What is the “next wave maturity” that everyone is talking about?
The first launches of connected car services have focused on overcoming the technical challenges of embedded core connectivity which include differing standards, evolving legislation, security and establishing a viable ecosystem.The next wave of maturity will focus on two key areas:
- Enhancing the technology
Vehicle-to-Vehicle and Vehicle-to-x communication technologies are already hitting the market and will be a major part of the “next wave maturity”, following the current focus on vehicle-to-driver and in-car connectivity. Other major technology developments will concern driving assistance and security services, which will replace today’s focus on information services (environmental information, entertainment/news and navigation).
- Creating a seamless user experience
The user experience must be streamlined to include a single authentication process for all connected services with multi-factor authentication. The purchase experience must be simplified to enable customers to buy “package” offerings which bundle multiple connected car services from different providers through a single online market place. A connected car commerce platform such as BearingPoint’s Infonova R6 solution is an example of a platform able to support such a market place and enable services to be bundled, sold and provisioned onto vehicles seamlessly.
Innovation will primarily rely on and be pushed by collaboration between providers, universities & R&D centres, and governments. Notably, 69% of companies surveyed demand joint product development with external service providers (mostly in software development, security, testing, and systems integration).
Do you feel that the entry of tech-giants (Google, Apple) will disrupt (or even threaten) the traditional connected vehicle business model?
With trials of the Google car and rumours of the Apple Car, tech giants may soon be challenging the OEMs in the market for their core products, however, currently the threats are focusing on apps and the share of space on the infotainment system. There are two main types of apps currently being used in vehicles: embedded apps that are built and delivered to the vehicle either remotely or through an OEM branded store and multi-platform apps working on both smart devices operating systems and cars operating systems, available through an app store.
Many car manufacturers have developed or bought their own proprietary platforms to deliver apps and content to the car.However, with the launch of Android Auto and Apple CarPlay and consumers’ desire to use these familiar interfaces combined with a rich set of customer data, Apple or Google have a strategic advantage in securing the platform.OEMs do have a strong base as they currently have the monopoly on vehicle data and they will need to decide how to collaborate and which data to make accessible through APIs and which to retain to build their own differentiated brand experiences. Tech giants like Google and Apple are necessary partners with 73% of companies surveyed seeking collaboration partnerships with electronic device manufacturers. Collaboration will be key as a mutually beneficial symbiotic partnership will support the creation of a viable ecosystem.
How do you think a future EU consumer will pay for connected car services?
- One-off payment at time of car purchase
- Basic services at no cost with the purchase of additional functionality (Freemium model)
The luxury and premium car buyers will be ready to pay up front with the vehicle, making their whole user experience more enjoyable. But price-driven consumers in the volume segments will be more open to different payment models such as pay-as-you-go, on demand and subscriptions. Freemium models have been used successfully by some OEMs, but the key for all segments is to ensure that payment models are simple, easy to understand and consistent across different types of services. The other critical design principles are making the services easy to sign up for, purchase, cancel and renew where appropriate. Although this sounds straightforward, it is challenging for OEMs to deliver with multiple providers, service contract agreements and different sets of terms and conditions and privacy considerations, however, this is seen as critical by most market players, with 70% of companies surveyed considering billing a major challenge for connected car services.
There has been growing concerns around remote hacking of connected cars. How serious it is? Who do you think is best positioned to create an impenetrable car, automotive OEMs or 3rd party service providers?
As with any connected ecosystems such as smart homes or even our smartphones, there is a hacking risk and connected cars are no different. The key concern for vehicles is that some could hack into the car and remotely control aspects of it. After recent headlines about researchers being able to imitate BMW Connected Drive servers and send remote unlocking instructions to vehicles, there is a clear market focus on security, which will help secure a safer ecosystem, along with the current market entry of security service providers from legacy IT markets. Indeed, around 70% of companies surveyed that are discussing or planning investments are considering investment in security technologies.
Most current vehicles are built on platforms that were never intended to be connected and have evolved to rely on “security by obscurity”. New vehicle platforms will have to be re-engineered to ensure security from the ground up for connected vehicles. The reality is that no car will ever be impenetrable and unfortunately, the only way to make a car digitally impenetrable is to disconnect it completely.However, with good risk mitigation strategy, frequent penetration testing and collaborating with hackers will allow manufacturers to better mitigate risks.
Third -party security service providers have experience in hacking risks and are therefore best positioned to mitigate them, but collaboration (included collaborative testing) between all market players will be key in protecting the complete connected car environment. Accordingly, a vast majority of companies surveyed prefer joint product development with external service providers (for software development, security and testing).
How do you see the “standardization” of connected car technologies shaping up in days to come? Is it a conundrum for a few?
Impending legislation is already driving basic standards for emergency call and trials are underway to crowd-source data across manufacturers which require minimum data standards. By 2020, at least 80% of new vehicles will be connected, making increased standardisation a likely trend to ensure that more players can connect to and benefit from the connected car ecosystem. The OEMs are still more focused on driving differentiation by creating and protecting their patents than standardisation.This does create the risk that different technological, data and security standards could slow down innovation and impact potential revenues. It also has the potential to impact other companies in the ecosystem that are forced to bespoke solutions by OEM rather than creating standardised services. The insurance industry is well placed to drive standards around the data requirements for usage-based insurance, while governments and industry bodies are already looking to the role of standards required for autonomous driving and integration with smart cities.
On one hand 98% of CXO respondents agree that connected car will become mandatory customer requirement, still only 17% of companies are investing in it. Why do you think vision and actions do not match in this case? (Refer to PAC 2015 Slide 36 & 44)
The number only seems low because the question focuses on plans for new future investments. Connected Car Technologies have been around for over a decade – 17% of companies are not investing now but are planning to. Most other companies have either already invested or are implementing: 29% are already implementing because they have passed the investment stage and 26% are discussing what projects to invest in. A further 28% don’t consider this investment as it is already part of BAU (Business As Usual). Many companies have already massively invested in connected car technologies and are already at implementation stage extending services across vehicle lines and markets. The first investment cycle is coming to an end, giving the impression of a general slowdown while companies await the tangible benefits, but the second wave is forming. Accordingly, 95% of vehicle manufacturers surveyed regard connected car services as a long-term strategic topic and it will not disappear from the companies’ portfolios. As with any new industry, the first R&D investments were on infrastructure, embedded technologies and connectivity, which are always the biggest spending. Second-wave investments focus more on software and services, which drives down costs.
Nevertheless, there is common consensus among companies surveyed that connected car offerings will be the major business drivers in the future, and that it will not be a substitute for the current business. This means most market players consider connected car services as a complimentary business, hence opening new revenue streams. Accordingly, their current hesitant investment will probably shortly be replaced by new R&D expenditures. It must be noted that only 2% of companies surveyed are not working on connected car solutions at the moment, with 43% having already released something.
At present we only hear connected car offerings in the North American & European market. How do you see its future in other emerging markets (MENA, ANZ, APAC, LATAM)?
Connected car technologies rely on mobile network infrastructure, smart device penetration, minimum sales volumes and the ability for OEMs to share some of the costs of the hardware and ongoing services with the vehicle owner. OEMs have first focused on launching services in markets where the business case stacks up and the implementation challenges do not outweigh the benefits. However, once established in these more straightforward markets, connected services are emerging globally.
The regulatory environment will strongly affect the pace with which some markets will embrace connected car solutions. Expected positive regulatory action in some of the BRIC countries (Brazil, Russia, India and China) such as Emergency call legislation in Russia and stolen vehicle tracking systems in Brazil will support local growth. Consumer awareness and desire for connected services in China is typically stronger than European markets and penetration of services is already high. There is also growing demand from MENA and a willingness to pay for services which means that despite the infrastructure challenges outside of major cities and conurbations, connected services are gradually being launched in those markets.
To successfully establish profitable services in all markets, OEMs may be forced to implement localized versions of their services with different cost models to ensure the sustainability of services globally.