The Future of Connected Cars

July 03, 2017

The automotive industry is currently going through some major disruptions. Cars are rapidly becoming more and more connected, autonomous and electrified. The traditional revenue distribution between manufacturers, suppliers, dealers and service providers is being challenged. At the same time the OEMs and tier ones are investing heavily in these areas and the voices of CFOs are becoming louder, questioning the return on investments.

The life cycle revenue of cars has more or less been the same since the early eighties and there are few (if any) signs that this will change. At the same time, we see a rapid growth in connected car service revenues where some predictions say it will almost double by 2020. So the question is if this will cannibalize on other revenue sources or if the status quo in life cycle spends will finally be disrupted?

At the same time the number of new cars sold is growing and we saw a new record (again) in 2016 with more than 88 million cars sold globally, up almost 5% from 2015. However, some analysts predict that the new car sales might take a hit when the mobility sector embraces the sharing economy on a larger scale in the coming years.

We firmly believe that the automotive industry has a lot to learn from mistakes made by other industries during digital disruptions. A couple of examples below:

• The Telecom sector spent billions trying to climb the value chain and provide consumer experiences without possessing the needed expertise or the organizational agility. They still ended up providing network capacity.
• The Media & Entertainment industry tried to hold on to the traditional content distribution channels for the longest time and worked fiercely to stop all online streaming services. They failed miserably, and instead, players like Spotify, Netflix and iTunes became the new leaders.

We firmly believe that organizations that are bold enough to embrace the disruptions, as well as form strong long term partnerships with IT/Technology vendors, digital experience specialists and content providers, will become tomorrow’s leaders.

The question on everybody’s mind is how to monetize connected cars? One low hanging fruit is highly targeted and relevant in-car advertisement. The good news is that this can be implemented by OEMs today, only utilizing existing and proven technology. However, great user experiences in combination with perceived relevance every time are two fundamental success factors. Another key consideration is to ensure data privacy for customers. Furthermore, OEMs sit on a golden egg in the form of data and have a unique knowledge of the context of their customers.

As a digital agency, Valtech helps organizations across various industries with their digital transformation in times of disruption, including the automotive industry, where we have helped leading OEMs transform their businesses over the last 15 years. We are uniquely positioned to help the automotive industry embrace and even drive the digital transformation towards tomorrow’s connected mobility.

The future is bright. The future is connected.