Digital lifestyle to become more relevant than a car’s engine

TU-Editor

6th May 2016

Connectivity of cars as an element of the IoT is an inevitability as their function shiftspast a focus on performance and reliability and into the realm of software and connected services, according to John Rakowski, director of technology strategy at AppDynamics.

He argues that performance and reliability have been the cornerstones of brands such as BMW, which is known for premium construction quality, and Volvo, which focuses on attracting customers based on the safety features it puts into its cars. Furthermore, while many car manufacturers, including Renault and Nissan, are focused on making most of their new cars driverless over the next few years by getting rid of the steering wheel in each model, Volvo has decided to differentiate itself by keeping it in its own models because its customers wants to drive.

Adding value

Juniper Research also says that only 10% of consumer vehicles will be adopting in-vehicle connected applications in 2016. The analyst firm also told TU-Automotive: “Consumers see added value in connected car services and they place a higher importance on in-car services than on performance.” The automotive manufacturers have realised this and so Juniper Research says they are able to add more value to their services without any need for making a large investment.

Yet the systems need to meet customers’ expectations and they are closely aligned with the smartphone ecosystem. In other words they need to be updated at “the same rate as a smartphone, otherwise they becoming outdated very quickly…” Rakowski adds that cars have been connected since about 2010 but, as the technology starts to evolve, he thinks the number of connected services that will increase. He therefore predicts that “by 2020, 75% of cars shipped globally will have an increasing number of connected services to be alerted about traffic and for automated parking.”

His colleague, Prathap Dendi, general manager of emerging technologies, adds: “There are two ways to look at the connection part of the connected car: The driver’s smartphone and the car itself, which has a connection to the internet.” He also reveals that, according toIHS Automotive, 20% of vehicles in 2015 had in-built internet connectivity. Forbes, too, foresees that 180M cars will have connectivity in 2016. The mobile providers’ organisation GSMA forecasts that the global connected market will be worth €39Bn in 2018. So it represents a sizeable opportunity.

Connectivity increasing

Dendi thinks the connectivity rate is likely to increase in 2016 when large scale manufacturers such as Ford, Volkswagen and General Motors will announce plans to make connectivity a standard feature in most of their new cars in additional to the connectivity offered by drivers’ and passengers’ own smartphones. “This is where Apple CarPlay and Android Auto are playing a big role: Android Auto is expected to be supported by 200 car models in 2016, and 21 car brands already support Apple CarPlay today in 100 car models,” he says. Car manufacturers are as a result already evolving to become data technology providers for their consumers.

Rakowski says that software is becoming part of the value that the car offers its users: “The connected car services are integral to the car – and this includes features such as self-parking and, if it’s not working, it affects the driver’s perception of that car because a great driving experience now goes beyond the engine; it’s about how the car is personalised through connected services.” Dendi adds that cars are doing more than just getting people from A-to-B; they are increasingly, in his view, about becoming an e-commerce hub for services that are linked to the car, “such as infotainment services, and usage-based insurance services that track your driving habits.”

Predictive services

Connected cars also permit manufacturers to offer predictive maintenance, allowing them to gain “a line of sight to what can be proactively fixed,” explains Dendi. In essence these are the vehicle manufacturers’ new revenue streams, which means that they need to offer a superior user experience in order to inspire customer and brand loyalty. After all the car manufacturers need their customers to trust them to provide more and more information services in order to create a better automotive experience. This requires an increasing element of personalisation with regards to the software-based features within each car. As they use the mobile internet, they need to perform well and be reliable.

“These features include entertainment connected to the home, the ability to let the home know when to put on things such as lighting, heating or home security when you are out or before you arrive home,” he explains. Juniper Research adds that audience knowledge will be the biggest factor behind any brands’ success, especially in the aftermarket sector – and as Apple and Android are well known brands, brand loyalty is likely to affect the consumer choice” in terms of which system and car to use and purchase.

Digital disruption

“The impact of this market is about digital disruption: An established market that is being disrupted by new players whom are looking for partnerships,” argues Rakowski. He says Google and Apple have been investing in connected cars. The new entrants also include firms such as Nvidia, which was historically involved with producing chips for smartphones and graphics cards for computers. “They see the connected car market as being a big opportunity because the car is now seen as a smartphone on wheels,” says Rakowski.

The true shift in the market is being created by the new entrants and they will come from business verticals – including insurance, media, and telecommunications companies. Dendi concludes that they “will increasingly view automotive and transportation as a growth area as connected cars become mass market ready”. As a result performance and reliability are now about software – not just about engines and smart vehicle interiors. Like everything cars are ever becoming digitalised.