Supply Chain Integration

Connected Cars World: Auto makers still adapting to a changing market

Despite the fact the cost of the average car is increasing and car sales are hitting record numbers, car makers are in a bind. Most of the money the auto industry makes is made after the initial sale from the likes of repairs, services, and financing. But with the likes of Apple, Tesla, and Google all setting their sights on the car, things are changing.

People now demand an intelligent and connected car, offering services for free. Where once people paid for maps, they now expect them gratis. At this year’s Connected Cars World conference in London, the talk is all about connected cars can benefit the OEMs rather than the technology companies looking for the latest object they can monetise.

“Consumers expect much more from car makers”, said Honda’s Remith Ravi. Where once they expected to simply go from A to B, they now want a “comfortable and joyful experience”.

Services are where all the money is, says Caterpillar’s Borja Cedron. “You have to face that reality and adapt to it.” If you don’t competitors will.

The need to change is urgent, because the technology companies are there, ready to strike. Richard Robinson, a Director at Strategy Analytics, warns that Tesla – a business he describes as a “technology company that makes cars” – is “so far ahead it is almost a joke”.

“They threaten the future of what we have if we don’t change.” Some companies are starting to change. Ford recently launched a separate company to focus on “Smart Mobility”. Part of the problem is the OEMs themselves. Where the likes of Google and Tesla put the person at the centre of the universe, car makers still put the car in the centre and just put a person in it. They are ignoring the shift from cars being a brand object into something very functional.

Change, but how?

The theme that OEMs need to change is constant. The only other constant is that no one really has the answer to what that change should be.

Is the concept of the “smartphone on wheels” the right one? There’s been more than a few “app stores for cars” launched in recent years, but none have yet taken off in significant numbers. But few of the speakers at the event are in favour.

“The App Store in a vehicle approach has failed,” says Eugene Tsyrkleveich, CEO of Parkopedia. “Downloading an app in your vehicle is kind of alien”. Tsyrkleveich is firmly against each OEM taking an independent approach; currently his parking app works with 10 SDKs, and he warns that the little commonality these systems have is creating problems. “Everyone is doing their own thing, it’s killing us.” He says. “We’ve all been trained to expect high quality for free, and it’s difficult to make money.”

OEMs are not content providers, suggests Massimo Cavazzini, Head of Connected Services at Fiat Chrysler. And while they cannot directly sell services such as Spotify or Deezer, there’s an opportunity to monetise the data car generates through APIs, and even the integration between car and phone, perhaps even embracing the freemium model the mobile world works from.

Jonas Rönnkvist, a Director at Volvo, suggests a “Human-centric, not technology” approach is key to services, and while there is an “opportunity to find new service models, unique services are more important”. He cites Volvo’s delivery direct to your car boot as an example of this, and although this new era of services requires OEMs to “mix and match new competences”, collaborating with the right partners makes that transition easier.

“It’s very difficult to compete with Apple on an App Store,” says Robert Diab, Project Manager at Rolls Royce. But when it comes to the sensors in the car and the data they generate, “the Apples and Googles have no knowledge of these.”

He warns however, that too much technology could damage the brand proposition of car makers, especially as they are not prepared to handle 24/7 services in the same way as technology companies.

Even questions over how to get the data out of the car remain unanswered: should it be the driver paying through normal data plans, should it be the OEMs picking up the data bill (and should they become MVNOs themselves?), or should services who want to beam into cars – for example Spotify or Netflix – be made to pay for the privilege of accessing a driver?

Lifecycles, dealers, confusion

Part of the problem is the timeline cars work to. Where an iPhone can and often is replaced within a couple of years by a new, shinier model, cars have a much slower lifecycle. It can take up to three years for technology to make its way onto a car, and then that model will remain unchanged for around five years, with the cars on the road for anything up to 10 years. Gautier Falconnet, VP at Citroen,

For years, the car model has been the same: people come to dealers, dealers sell them cars and services. But that’s changing. Tesla don’t use dealers. You can order services through your phone.

“Traditionally the dealer is the only window for OEMs,” says Honda’s Remith Ravi, but now the car and the phone can be used to directly interact with the customer. Research from TNS & Bearing Point suggests nearly a third of dealers are failing to explain or demonstrate connected features or services, cutting off an easy way for both dealers and OEMs to make money and improve the experience for the drivers.

But given the opportunities offered by a moving internet connection, it’s the dealership which has more to lose than the manufacturer-come-service providers. “The dealer gets his chance and if he does good he gets a reward,” says Daimler’s Ingo Bloink. “If he is not taking the call we will do it, and the OEMs will get the reward.”

Fiat Chrysler’s Cavazzini says that eventually you “may only go to the dealer to pick up the car in the future”. While this complete shift in the salesforce will take years, he warns there was a definite need to change the way the dealer works.

Amidst all the confusion, new research from TNS & Bearing Point suggests that the very notion of a connected car is being lost on the public. According to a survey of 3700 people driving connected cars in Europe, 25% incorrectly believe their cars are not actually connected, while another 15% were unsure.

Debbie Shuttlewood, Director at TNS, said there is “clearly still an awful lot of work still to do” in getting the message of what a connected car actually is across to the public. Of those who understand that they are driving a connected car, 30% feel that those features – chiefly navigation, road safety warnings, fuel consumption and in-car entertainment – are important to them.

Still opportunities

“There are less and services carmakers can monetise” because of Google et al, according to Frederic Bruneteau, MD at Ptolemus Consulting. He feels OEMs should be “pragmatic”, and start simple with the likes of fleet management, remote diagnostics, electronic tolling and fuelling – the kinds of in-car services that other technology companies are yet to muscle in on.

Where once the car was a closed box – it was built, sold, and forgotten about – connected cars offer an opportunity for regular feedback from the customer. And the data is the key. Richard Robinson, a Director at Strategy Analytics, says many OEMs are stuck in an old model, falsely seeing the connected car as a way to make $15 a month from consumers – something that won’t happen when they can get the same value from their phones.

“The value of the data collected [by cars] will be far more than $10 a month,” he says. Instead, they should be looking at telematics as a way to save money: real-time diagnostics can predict problems and save the driver money, while at the same time help avoid costly recalls.

Currently the customer has no idea what kind of data their cars are generating, while the car industry doesn’t understand the value of that data per car. But once they are ready to collect, integrate and offer data in the right way, new possibilities will open up.  Fiat Chrysler’s Cavazzini says that once OEMs get a grip on the data, they will be able to “understand the life of the customer and offer new & better services.”

Andrew Weil, a Senior VP at Nuance, sees the car a whole new way to interact with people. Rather than merely repeat the smartphone experience, he sees the connected car as an opportunity to manage the whole journey from door to door. Rather than a variety of apps and interfaces, he – perhaps unsurprisingly given Nuance’s background – wants an integrated voice controlled UI where the automotive assistant directs you to your destination via the best route to a convenient parking space, while at the same time acting as a tour guide, manager of diagnostics to your car and reporting issues, and still helping you play songs, dictate messages and generally do the usual digital assistant tasks.

So what’s the answer? Moving app stores? Tightly integrated automotive assistants? OEMs as MNVOs? Is there one?

Also read:

London Tech Week: Driverless cars will change everything


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Dan Swinhoe

Dan is a journalist at CSO Online. Previously he was Senior Staff Writer at IDG Connect.

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