Telematics Munich 2013: Day One

Telematics Munich 2013: Day One

“We are moving towards a connected society,” says Martin Rosell, managing director of WirelessCar. “We are just at the beginning of what we can do.”

It is now clear more than ever that 4G LTE will be an essential part of this process. But it’s very early days, and it remains to be seen when the broadband technology can produce the benefits everyone seems to want and hope for, including high-quality video streaming and an always-on connection to the Cloud.

Rosell was speaking on the first day of Telematics Munich 2013, a two-day Telematics Update conference focused on the connected car space. Nearly 1,000 people from every sector of the field were in attendance, many of them for the first time.

With or without 4G LTE, the goal should still be 100% fitment of telematics modules, developing the off-board Cloud and finding Big Data solutions, according to Roger Lanctot, associate director, automotive multimedia & communications service, Strategy Analytics.

“Why connect all cars?” he asked rhetorically. The reasons, he said, include revenue (“you can’t monetize what you can’t measure”), customer retention, competitive breaks and software updates “to enhance the value of the vehicle post-sale.”

What this will also do is car-makers can take advantage of this opportunity through “changing the customer relationship, the global deployment of a solution and by brand redefinition,” he added.

In terms of revenue, the most promising stream looks to be that of maintenance and repairs. Lanctot said that in the United States “70% of the profit from the vehicle leaves the lot.” And that is a lot of money, considering that it concerns “60 billion dollars in deferred maintenance and 40 billion dollars in collision aftercare.”

To ensure that this potential profit does not “leave the lot,” OEMs must make sure that they bring their customers into their original workshops, Rosell said.

Pascal Pediroda, connected vehicles manager at Worldline, agreed. “It is important for the OEM to keep the car and driver in its network,” he said. “Connected strategies can increase customer loyalty by a few percent. That’s a lot of money.”

However, for that to happen, OEMs and retailers must work together to enable the consumer to exploit connectivity seamlessly and efficiently.

In his presentation, Rosell described an imaginary future scenario in which a driver receives an alert – via remote diagnostics – that a component of his car is malfunctioning. Assisted by his connected car, he finds the nearest OEM-dealer garage, makes an immediate appointment, finds a parking space, has coffee at a nearby café (which is notified of his coming and his preferred coffee) and picks up his repaired vehicle 30 minutes later.

“The system made sure the right part was there,” Rosell said. “Next year, we will see the first examples of connected diagnostics and repair. OEMs and retailers are working on it.”

To app or not to app

The first day of the conference included several lively discussions about the importance of in-vehicle apps as potential revenue sources for car-makers. Two contrasting philosophies were presented by Simon Euringer, head of ConnectedDrive, BMW, and Ian Digman, general manager of product planning at Nissan.

Euringer presented what he called “the new era” of BMW’s ConnectedDrive service, which will give the user the opportunity “to update his vehicle whenever he wants and whenever he wants” by downloading apps or services, for many of which he must pay.

“We are talking about a range of services appealing enough for the customer to want to pay for them,” he said. “Like software on a computer, there are free apps and things we like to pay for because we recognize their value.”

However, Nissan targets a different consumer pool than BMW, which has an impact on Nissan’s strategy. Also, an ability to pay does not always mean a willingness to do so, Digman pointed out.

The purchase price of the car is often such a large expense for the consumer, Digman said, that he may need a full year before he is willing to pay for anything else. So, with the recently launched NissanConnect  Apps service, “People will get apps with the price of the car,” he said. “There will be a suite of apps developed over the next 12 months, which will also be covered in the price of the car.”

Digman insisted that apps do not present real revenue opportunities. “The revenue opportunities are in the background,” he said, citing CRM benefits as an example. In addition, the technology enhances the brand. “If I can use technology to force one more car sale,” he said, “that’s how I monetize it.”

The bill, please

Identifying future revenue sources is, of course, a necessary step to eventually exploiting the opportunities presented by the connected car. How the OEM bills the consumer, given the nexus of suppliers and services involved, was also a hot topic.

Pediroda, whose company introduced the first ever in-car payment service with Renault, said that the more payment channels open to the customer, the better. “The dealer will have difficulty selling services,” he said. “You maximize take rates by using all three channels: the dealer, the web and in-car.”

In his company’s relationship with Renault, Pediroda said, it is the car maker who controls the sales “in a simple billing plan – payment per download or per subscription.”

Another possibility cited is to integrate billing in the customer’s existing wireless plan, an option Lanctot derided as “silly.” However, Pavan Mathew, global head of connected car at Telefónica, liked the idea and rejected the suggestion that the OEM will give up ownership of the car experience.

“The MNO takes ownership only of the billing experience,” he argued. “At the end of the day, it’s about selling the next vehicle.”

Matt McFerrin, vice president of global enterprise solutions strategy at Oracle, cautioned OEMs to take the issue of billing very seriously. “If OEMs say, ‘Let someone else figure this out,’ they’re giving up the future,” he said.

A number of OEMs have been taking in outside partners with substantial billing experience to help them get on top of the problem because, ultimately, as Eddie McNeil, M2M principle strategy consultant at Flexera  Software, said, “OEMs want to have leadership in what the billing mechanism is going to be.”

Optimistic but disconnected

The question of payment was one of several put before conference participants in an informal poll carried out half-way through day one of the conference. Asked how customers will pay for telematics services, 37% said in the vehicle’s purchase price and 35% said via a pay-as-you-use scheme. Data subscription was cited by only 8.5%.

The poll came up with some other interesting results. For example, nearly two thirds of attendees said that the biggest challenge facing the telematics industry in the next five years is standards. Only about 10% named driver distraction.

Somewhat surprisingly, less than one-third of conference participants who took the poll said they drive a connected car. But a large majority, nearly nine out of ten, described themselves as being optimistic about the telematics market over the next two years.

Nonetheless, not all speakers were over the moon about the near-term revenue prospects of 4G LTE connectivity. While Euringer said that the technology will open up the car to “video and everything that comes with it,” Telefónica’s Mathew was less enthusiastic.

According to research, he said, most people drive their car for only one hour per day, at least in Europe. “In the next two to five years, we don’t see the usage for LTE,” he said. “We’re not seeing the usage today. It’s got some fantastic features, but it’s not going to pay the bills.”

For his part, Nissan’s Digman described 4G LTE as “a cost with limited benefits.”

Whatever the technology’s potential value is, we still have a long way to go before it is realized. As Lanctot drily commented, “Cars are really stupid today.”

(For our coverage of last year's Telematics Munich, see Telematics Munich 2012: Day One and Telematics Munich 2012: Day Two.) 

Siegfried Mortkowitz is a regular contributor to TU.

For all the latest telematics trends, check out Telematics Munich 2013 on Nov. 11-12 in Munich, Germany, Telematics for Fleet Management USA 2013 on Nov. 20-21 in Atlanta, Georgia, Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco, Consumer Telematics Show 2014 on Jan. 6 in Las Vegas, Telematics for Fleet Management Europe 2014 on March 12-13 in Amsterdam, The Netherlands, and Content and Apps for Automotive Europe 2014 on April 8-9 in Munich, Germany.

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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