Day Two of TU-Automotive Europe 2015

The second, and last, day of the TU-Automotive Europe 2015 conference and exhibition opened with two significant announcements, illustrating both the importance of the event as a public platform for market leaders and the way the evolving automobile technology is altering business models.

During his headline presentation, which opened the session, GM’s global director of Infotainment Strategies and Alliances, Greg Ross, said that his company had formed a partnership with Octo Telematics to provide UBI services through GM’s OnStar platform.

“Octo Telematics is our first partner in Europe,” Ross said. His purpose for the trip was part of the carmaker’s strategy of expanding its telematics service to 13 new European markets. He said GM was “very excited to be connected to Octo”, and explained that the new partnership enabled drivers with the OnStar service to connect to Octo for its UBI services.

Less than an hour later, Bryan Mistele, CEO of INRIX, announced that his company had just sealed a global partnership with Swedish carmaker Volvo to provide real-time and predictive data for its cars. “Drivers want to know what’s on the road now and in the near future,” Mistele said.

The morning session was also marked by a presentation by the social media behemoth Facebook, in the person of the company’s head of Automotive Strategy, Christoph Stadeler.

After vaunting the company’s remarkable global penetration—“People spend more time on Facebook than on any other mobile platform in the world”—he suggested that its success should be a model for the auto industry and a platform to both sell its brand and improve its digital services.

“This is the kind of scale disruptive business models are after,” Stadeler said. “This is the kind of scale you should be looking at. Disruption does not happen with thousands; disruption is happening with millions and hundreds of millions.”

His presentation took place shortly before Martin Rosell, CEO of WirelessCar, told his listeners that connected cars make up only 2.5 percent of the global auto market, and warned that the rosy figures projected for connected-car penetration—150 million connected cars on the road by 2020, in some estimations—will not be fulfilled unless carmakers alter their strategies.

“The business models today are wrong,” he argued, adding: “To have a market to go after, you need 70 percent of the market. Less than that is a start-up. Because all the visionary things we talk about require major investments. It’s not technology investments. It’s investing in new processes, investing in organizational changes, it’s investing in doing things completely differently in big corporate organizations. 2.5 percent is nothing. We need to do something about this.”

If Stadeler was in the main conference hall of Stuttgart’s ICS Messe to hear Rosell’s presentation, he would have felt vindicated. “To create a connected car marketplace, we have to think in larger scale than we do today,” he said. “The auto business is still measured in units sold rather than users.” “Users” is the term of choice used to gauge the relative success of digital services such as Facebook.

Interestingly, during an afternoon panel discussion on “Mobility Services: A New Frontier”, Hans Arby, the CEO of UbiGo, a Swedish urban multimodal mobility service, used a similar argument when discussing the effect of new mobility solutions such as his company’s on carmakers. “[Car} OEMs will have fewer owners but many more users,” he said.

This suggests that carmakers must be prepared to think very differently about their product as it changes from a primary means of transport to a part of a complex multimodal mobility system and a deliverer of personal services, as it surely will.

But to get to that point, according to Rosell and, before him, Roger Lanctot, associate director of Global Automotive Practice at Strategy Analytics, manufacturers will have to change the way they market the technology that will get them there. And this starts with connectivity. “We need to connect the vehicles,” Rosell noted. “And we don’t want to pay for it. We want to have it for free.”

For one thing, he said, connectivity presents a potentially enormous revenue stream for carmakers. “There’s $1,000 billion in the aftermarket to go after,” Rosell said. “That’s not new money. That’s money that exists. We can get to it by connecting and leveraging connectivity.”

He also pointed to the 50 million cars recalled in the U.S. in 2014, and warned that the figure may be higher this year. “Can we do something about that with connectivity? Of course.”

However, Rosell pointedly rejected the Facebook option, saying, “It’s not about an app. It’s about providing touch points to the customers.”

He said connectivity helps carmakers change from being reactive to going proactive. “When you are connected, you can monitor it, you can measure it, you can remote-control it and you can analyse the data.”

In his presentation, Lanctot was just as adamant in denouncing the failures of carmakers and demanding that car connectivity be accelerated. He pointed to the many highly publicized failures that have plagued the auto industry in recent years, such as Toyota’s acceleration issue, GM’s ignition switch recall and, more recently, VW’s “deliberate evasion of the law” regarding emission tests.

“We need to do something about this as an industry,” he said, adding: “The solution is connectivity, and it doesn’t cost much. In fact, the costs are minimal compared to not connecting our cars.”

Connectivity, Lanctot declared, was the answer to the recall issue. “We are connecting to our cars. We should be able to find these cars with life-threatening flaws.”

Like many other speakers at the conference, he warned that competitors from outside the car industry were looking to take advantage of the industry’s failures, noting that after the VW scandal erupted, “Google added air quality tests to their vehicles, setting itself apart from ‘oh, that dirty industry’.”

The tension Google and Apple have provoked in the auto industry was palpable throughout the conference, with carmakers admiring the success of the IT giants and often using their services to enhance their own product while at the same time being wary of ceding too much of their platform to them and worrying about what effect their entry into the car manufacturing sector will have on their business and business models.

In addition, Lanctot said that the marketing of flawed cars was getting governments involved in the business. “We need to keep them at bay,” he urged, “because it’s not a value-added proposition.”

Also, like Rosell, he said connectivity was a proven money-maker for car OEMs. “You need to know how systems are performing. We need to better understand how our vehicles are performing on the road and how they are relating to other vehicles on the road. There is big money in taking care of cars around the connection.”

Lanctot also pointedly rejected security concerns about connectivity, dismissing the fears of those who suggest that less connectivity would ease security concerns. “If you want to be secure, you need to be more connected,” he declared.

It’s somewhat ironic (or perhaps just human) that while the connected car still has only a tiny share of the global auto market and influential players in the space are decrying the slow pace of change and the flawed approach of many carmakers, the ecosystem is already changing in a way that anticipates not only ubiquitous connectivity but also the autonomous car.

This was evident in two afternoon presentations on mobility: the aforementioned panel discussion on mobility services and a talk by Reimund Schmald, business development manager EMEA at Nuance Communications, titled “Personalized In-Car User Experience in a World of Mobility”.

The panel discussion focused on car- and ride-sharing services that are already transforming the way people travel and the way they use the car. All the panel members agreed that car-sharing was a difficult business to succeed in because it requires 80 percent car utilisation.

“It’s a tough market,” UbiGo’s Hans Arby said. “You have to have high usage, but not too high, because then you’d have to add new cars.”

“The key is matching demand and supply,” said Dominique Bonte, vice president & practice director at ABI Research. “Uber raises prices when the demand is too high. And Easy Taxi has people bid on taxis. Smart mobility is all about making sure there is availability when demand is there.”

The panel members also agreed that members of Generation X and so-called millennials were instrumental in changing the way the car was being utilised. According to Bonte, “Younger people are not as anxious to get driving licenses when they come of age. The Generation X is already familiar with car-sharing. They don’t see car ownership as a status symbol. It’s part of their DNA to be a part of the sharing society. It’s just a matter of time before car-sharing moves to other demographics.”

Jacob Aleksander Nielsen, a partner at Rentecarlo, said, “I’m a Generation X. I use Uber. I use DriveNow. I don’t need to own a car, but I want access to a car when I need it.”

To illustrate the difference between his attitude and that of previous generations, he cited the example of an attorney he knew. “He said he’d rather rent out his wife than his car,” Nielsen recounted.

WirelessCar’s Martin Rosell touched on the issue during his presentation, saying that his three children either have driving licenses or are working on getting one. “But they don’t want to own a car,” he noted. “They only want access.”

He also said that he’d calculated that he uses his car only 2.64 percent of the time. “What if someone else could use the car the rest of the time? And what if I pay for only the 2.64 percent of the time I use it?”

Nielsen said that people were now learning “that you can make money from their cars rather than having them sit idle”.

This will eventually influence the way carmakers market their cars, once they begin thinking of business success in terms of users, rather than units sold. As Bonte put it, “[Car] OEMs are going to have to start thinking about opening their own embedded systems to car-sharing.”

Schmald’s presentation concerned the personalisation of the in-car experience through the use of artificial intelligence to provide a “personal assistant” to the driver that fulfils specific tasks based on knowledge of the driver’s schedule, needs, private life and behaviour.

In addition to knowledge, this “personal assistant” should have certain skills and behaviour to perform the tasks. In terms of behaviour, “It will not be intrusive,” Schmald said. “And its most important skill is communication.”

One example he presented was a driver request to find “good and cheap pizza” before a scheduled meeting. “At the end, it should be an intelligent task completion in finding the best pizza near where the meeting is held,” he explained.

The “personal assistant” would carry out its task while the driver is actually driving, Schmald said. In another example he gave, a driver says, “I need fuel and good coffee.” “The ‘personal assistant’ knows the fuel status and prepares a petrol station and finds a nearby place for coffee,” Schmald said. “And if the driver asks for a parking space while it is raining, it finds inside parking nearby.”

This means that the “personal assistant” must have access to real-time weather and parking availability data.

“This service is very personal and based on preferences and the current situation,” Schmald said.

It also requires a very sophisticated and personalised HMI because, as Schmald explained, “In the shared economy, several drivers may be using the same car or one driver may be using several cars.”

To perform its function, the “personal assistant” needs to fetch context from the cloud and from the car, he explained. “It also has to be connected to your job and probably to the internet.”

Like any in-car service that updates itself as more real-time data is fed into it, such as a map or navigation, its performance would improve over time as it receives more data, Schmald said.

“Expect the ‘personal assistant’ to give you an alert message that you should go to the airport [early] if there is fog in the city,” he explained. “That is machine learning: to learn about your behaviour.”

What Schmald called “the perfect outcome” of the service would be to provide “useful information and actions”.  The aim of the service is to enable OEMs “to create their own experiences”, he said, adding: “That’s the difference between us and the Googles, Apples and Facebooks.”


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