Connected Cars – the next digital battleground

2014 was a landmark year for the motor industry as we reached one billion cars on the roads globally.  When you think as well that many of those drivers will be using smart devices, you start to understand how the “Internet of things” has the potential to transform the automotive industry, just as the internet has disrupted and reshaped so many other industries – from retail, to finance and entertainment.

That’s why, today, billions are being invested in what is seen as the next digital battleground – the car.

Connectivity provides endless opportunity

The usage areas of connectivity are vast and the possibilities seem endless. In the US, the industry is currently looking at how cars should communicate with each other, vehicle to vehicle. This means cars would be able to brake to avoid crashes, give warnings ahead on the road and relate the vehicle to the surrounding infrastructure.

Another area where connectivity could potentially transform the market is the creation of autonomous cars. Google are currently doing trials in San Francisco, where one of the test drivers is a blind man!

Connectivity could not only drive cars, but also make driving itself easier and more enjoyable. Tesla has developed software that enables the driver to program the car to park itself via a smartphone or even pick up the driver from his front door. And Audi have shown videos of cars that can drop their drivers off at a car park before they find a space.

Another example of ingenious ways of using connectivity is Volvo in Sweden, who is currently trialing a service where the delivery of parcels is connected to your car. So parcels are delivered to where your car is, a smart phone application allows the owner to open and close the boot remotely, so the delivery driver can drop the package off.

Regulation drives connectivity too. For example, cars in the EU will have to be “e-call” compliant from 2018 onwards. One of the implications of this is that manufacturers will need to include technology that enables cars to call emergency services automatically in the event of a crash.

Similarly, connectivity can provide practical solutions to existing issues.  A number of car manufacturers have introduced remote vehicle diagnostics.  They can identify potential issues with their cars at an early stage, allowing them to avoid expensive and damaging large scale recalls. They use this information to proactively communicate with customers as soon as they see that some intervention is required on the car.

‘’After Market” connected’ cars – another area of growth

It is however important to remember that all cars won’t become connected at once. In five years’ time, despite the increased prevalence of connected cars, the majority of cars on the road will still be ‘’normal cars’’. There are, however, services which are growing in demand that require connectivity. When connectivity  isn’t built into the car itself, there are “After Market” devices that can be retrofitted to provide it.

Examples of such services are usage based insurance, stolen vehicle recovery and vehicle tracking services.  The market for these products is expected to peak in 2018/2019 with more than 65 million cars likely to be connected with these types of devices. Governments in various parts of the world are also drivers of this kind of connectivity – Brazil for example is putting regulation in place to help combat car theft.

Soon – connectivity will be expected

Together, the market for after-market connected cars and connected cars make up a big opportunity across the industry as a whole. When looking at recent reports, it is estimated that the by end of 2015, more than half of all new cars built will have connectivity embedded. And by 2016/17 we’ll have reached a critical tipping point – by which time, car manufacturers who don’t offer connected technology will be negatively differentiated from the competition.