Telematics connectivity and new revenue streams

As more and more consumers build connected lifestyles, they are going to require truly connected cars. By synchronizing in-vehicle telematics with smartphones, home computers, and other consumer electronics, OEMs could increase options for connectivity, thereby building relationships with their drivers, increasing brand loyalty, and setting their vehicles apart.

“There’s so much data available,” notes Dominique Bonte, vice president and practice director at ABI Research. “Maintenance, diagnostics, over-the-air updates—[OEMs] need to have better services for customers. They need to do more with this data.”

Greater connectivity, greater revenue

Martin Rosell, managing director of Wireless Car, a telematics service provider that’s helping OEMs do more with this data, notes that making vehicle-centric services and functions available to drivers outside their cars—such as how much fuel they have left, where the car is parked, what the dashboard controls indicate, and even remotely opening or locking doors and windows—is something all their OEM clients are interested in providing.

However, the challenge to providing this greater connectivity is doing it in a way that makes business sense and can help lead to increased revenue. “These types of services [don’t bring in] revenue from an OEM program perspective,” says Rosell. “You can never pay for them with customer revenue.”

Instead, the key is to build a business case and use the data telematics systems generate in an effective way. There’s a shift in perspective needed among many OEMs, he believes, but both Bonte and Rosell say there’s great potential for benefit. (For more on data, see Telematics and UBI: The data challenges, Telematics and the value of data, Telematics: How positive customer relationships improve ROI and Telematics and probe data: The revenue opportunities.)

Consistent access

When you’re looking at connectivity in a holistic way, with the car being one of several ways to access data, one of the challenges can be having a consistent interface and consistent access to the data across touchpoints. Before any benefits can be reaped, the system itself must be user-friendly and secure.

“Our philosophy is to move the intelligence upstream in the service architecture,” says Rosell. Whether customers access their vehicle information from a smartphone, an iPad or the interior of their car, a standard HMI makes the process quick and easy, both for the end user and for the OEM using the system to provide their services.

Once the system is in place, OEMs should focus on analyzing the data it provides and delivering it to their customers in a way that offers them convenience and service. With small modifications, data about the car’s behavior, emissions, and systems can be turned into proactive services, says Rosell: “It’s like going from static to dynamic.”

Many cars have preprogrammed maintenance alerts that come on after a certain number of miles. “You may or may not actually need this maintenance, but the information is static,” says Rosell. “Today, the OEM can pull actual information from the car and let the driver know they have a problem or are about to have a problem so they can get it fixed.”

Customer loyalty

This sort of convenience creates customer loyalty, he adds: “That’s the whole aftermarket story. That’s the business model.”

The vehicle itself provides a small net profit, so the services around it present the opportunity. “The problem is we’re dealing with engineers and technical organizations,” according to Rosell. “They need to make it a service organization. You have to think bigger and make decisions at the next level.”

Once OEMs truly understand and embrace this—and build the necessary infrastructure into their cars—more and more opportunities will unfold. Advanced engineering, managing recall processes, and limiting warranty costs can offer “big savings in terms of real money and efficiency,” Rosell notes.

He estimates that typical warranty costs might be 4 percent of sales revenue, so it’s a huge benefit if 1 percent can be saved because OEMs have the right information to limit this expense.

But challenge remains in getting not only OEMs but drivers to understand the benefits of expanded access to vehicle data and better-connected communications. OEMs need to do a better job explaining, and much can be learned from smartphones.

The example of smartphones

There’s been a great deal of discussion about what makes Apple so successful, and, in Bonte’s opinion, it’s “peace of mind.” Once customers have an Apple product, “they don’t run into trouble,” he explains.

Apps and firmware are updated smoothly, unlike some other platforms. “I’m not sure how explicit this awareness is, but somehow [customers] realize what products always work.” iPhone owner loyalty is at about 80 or 90 percent, he estimates. “They want to keep that same level of service.”

And as cars grow more connected, in a way they become mobile devices, so the same principles should apply. “There’s a huge value in giving peace of mind to the driver,” Bonte says. And given a vehicle’s much greater cost, it’s probably even more important than with a phone. There’s a “whole host of opportunities now for services,” notes Bonte. “And the first ones [to act] will have a huge competitive advantage.”

Ford seems to be moving that direction with Sync’s firmware updates, but currently these updates have to happen at the dealer. “Over the air will be the next step,” Bonte says, and that’s the ideal—“a seamless and uninterrupted experience.”

Signs of success

Whatever the remaining hurdles and changes in thinking still to come, optimism should prevail because there are already signs of success. Since 2000, Volvo Cars have offered a telematics solution on some vehicles that focuses on safety and security. The “take rate” in the market was rather low for the first 10 years, but then two years ago the firm launched a suite of apps for smartphone and computer portals.

The first application, offered in Nordic countries, was a remote-start feature. Suddenly, drivers could leave work and hop into a pre-started, toasty-warm vehicle. There was “tremendous interest,” Rosell reports.

From there, Volvo added other vehicle-centric features, such as car location, remote door lock, and fuel-level checking. Market penetration has skyrocketed, particularly in Norway.

“It’s a cold country, so there was a match and a value for customers,” says Rosell. He suspects that providing sales reps with iPhones to demonstrate these remote features didn’t hurt either, nor did the burst of media coverage the new apps and their success provided for Volvo.

Everyone now understands the concept of apps for iOS and Android, Rosell notes: “This is just another segment [of the market] and another audience for it. That’s the way to do it.”

Jessica Royer Ockenis a regular contributor to TU.

For all the latest telematics trends, check out Telematics Detroit 2013 on June 5-6, Content & Apps for Automotive Europe 2013 on June 18-19 in Munich, Insurance Telematics USA 2013 on September 4-5 in Chicago, Telematics LATAM 2013 in September in Sao Paulo, Brazil, Telematics Japan 2013 on October 8-10 in Tokyo and Telematics Munich 2013 on November 11-12.


For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013The Automotive HMI Report 2013Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.

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