Viewpoint: Will smart mobile devices change OEM hardware?

Product innovation in automotive manufacturing tends to follow a tried and true path: Introduce services in premium and luxury vehicle lines where demographics favor value-purchasing and unit profitability. The adoption of connectedness among all demographic segments is challenging this notion. Meeting market demand might require faster integration of consumer electronics with the vehicle; perhaps even near capitulation in entry and value product segments.

The vehicle is following the trajectory of many other technology products: It is gaining connectivity. Despite the fits and starts, the developmental cul-de-sacs and crashed schedules, the industry is inexorably moving toward connected products. As vehicles become connected, the product use cases are subject to business model innovation that alters market fundamentals. (For more on connected vehicles, see Industry insight: The connected car.)

Transportation economics

Backup devices for personal computers are quite sensible, but purchase choices now includes service vendors with business models more advantageous than purchasing a physical device. The realized cost is lower to subscribe to a service than to purchase the physical product. Transportation will have similar economics for some market segments, and total cost is an understandably important consideration with such an expensive product.

Transportation-as-a-service is far from market parity with its product sibling. For the near term, vehicle selection for purchase will be much greater than available for subscription, for example, providing greater choice to buyers. Car-sharing services, however, demonstrate satisfaction through a connected utility, a utility derived from capabilities similar to those found on a smart mobile device. (For more on car sharing, see Viewpoint: Telematics and the ‘car as a service’ model.)

Finding, scheduling and paying for private town car service in many markets is markedly easier with Uber, for example. Dense, expensive markets, such asthe Netherlands, have many car-sharing services to choose from. One way or another, the connected demographic is gaining comfort with multiple private or semi-private transportation options. This is changing the fundamentals of the market conversation for meeting transportation needs among significant demographic segments.

The connected vehicle investment underway and under consideration from the automotive ecosystem is huge by any measure. As typical with the automotive industry, it is easier to justify this development if incorporated into a ‘value purchase,’where premium and luxury vehicle buyers consider more than cost. It is primarily this reason that explains the introduction of many vehicle features and capabilities that, later, become standard across the vehicle lines.

Connected capabilities

While Ford and GM have democratized many basic connected capabilities, return on investment for most entry-level and mid-tier vehicles remains a challenge. Adding personal apps, incorporating connected infotainment services, or extending social media into the driving experience each require persistent development and product lifecycle innovation. One might reasonably posit that more, perhaps much more, remains to do than has been done. The investment express rolls on.

This ‘trickle down’ theory of product development creates significant challenge for automakers. Demand from connected drivers has little correlation to luxury vehicle brands. Indeed, hyper-connected drivers are more likely found in entry- and mid-level vehicles than premium or luxury models.

Consumer electronics

The Pareto distribution of manufactured vehicles would demonstrate the numerically smaller premium and luxury vehicles delivering the majority of profitability. Entry and mid-tier vehicles constitute vast numerical superiority of production, but lower profitability. The business case to invest significant human and financial resources into a fickle smart mobile device integration, with its apps and cloud services homologated to vehicle systems, is anything but straightforward for these vehicles. (For more on apps, see Industry insight: Telematics and apps.)

It might be simpler and less taxing on finite financial and human resources to incorporate vehicle interaction for services like cabin temperature control, sound output to vehicle speakers, and vehicle performance alerts and messages into an OEM app downloaded onto a brought-in tablet than to drive vehicle hardware to become a duplicate consumer electronics component.

Maybe it’s time to bring consumer electronics into the vehicle with great enthusiasm. Focusing development on integrating a handful of vehicle functions into a smart mobile device might be the smarter and least costly path toward both safer roads and happier customers.

Leo McCloskey is VP, Marketing for Airbiquity Inc.

For more from Leo McCloskey, see Airbiquity: “Connectivity is quickly becoming standard”, Airbiquity: “Consumers expect services tailored to them from their selected information sources” and Viewpoint: Telematics, cognitive dissonance and distracted driving.

For all the latest telematics trends, check out V2X for Auto Safety and Mobility Europe 2013 on February 20-21 in Frankfurt, Telematics for Fleet Management Europe 2013 on March 19-20 in Amsterdam, Telematics India and South Asia 2013 on April 16-17 in India, Insurance Telematics Europe 2013 on May 8-9 in London, Telematics Russia 2013 on May 14-15 in Moscow, Telematics Detroit 2013 on June 5-6 and Content & Apps for Automotive Europe 2013 on June 17-21.

For exclusive telematics business analysis and insight, check out TU’s reports: In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.

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