8 Ways the Connected Car is Changing the Auto Industry
This post is archived from December 29, 2014.
The rise of the connected car and the consumer’s expectation for a connected lifestyle is changing the way the auto industry must do business; from design to partnerships to software support. Here are the ways that the connected car is changing the auto industry.
Infotainment is challenging customer loyalty
For now, in-vehicle infotainment is the main focus of a car’s connectivity to the internet. It offers news, navigation, and streaming music. However, it’s creating irritation among new car buyers for it’s lack of reliability and usability. In July 2013, a federal class action lawsuit was filed against Ford over MyFord Touch problems. In October 2014, Consumer Report reported that, of the 17 areas that they ask about in the survey, the in-car electronics received the most complaints than any other category. Car makers are great at making cars but not so great at making consumer electronics.
On the other hand, Apple and Google are great at developing consumer electronics and software that works with the connected lifestyle. Carplay and Android Auto offer a solution of extending mobile phone capabilities to the car. While some challenges include a variety of physical, tactical interfaces, I expect these consumer giants to be able to match the user experience expectations of consumers.
Let’s not lose sight of other players in the infotainment space. QNX, a unix-based supplier, has been in cars for years. It has the competitive advantage of being engineered and designed for embedded systems. QNX will remain a relevant player in automotive. Tizen is a Linux-based open source OS that supports HTML5 and with which Samsung and Intel are highly-involved. The Tizen IVI, the operating system of the Automotive Grade Linux Workgroup, is PC-compatible and will be optimized for a broad set of automotive applications such as the Instrumentation Cluster to IVI. While news in the past year about Tizen has been quieter than Google and Apple, we may see a lot of activity around Tizen. Tizen is engaging with the developer community and are working to get installed into Toyota and Jaguar Land Rover.
Yet Another Data Plan in the Connected Lifestyle
While many auto manufacturers have bet that the consumer will pay (GM OnStar, Hyundai Bluelink, Mercedes Benz mbrace), it seems unlikely that the average consumer wants to spend more on yet another data plan as voiced by owners (here and here). Based on owner forums, there are many people who do not find enough value for the price.
Auto manufacturers and telecom providers will need to find value for themselves and subsidize, learn how to package with existing plans, or figure out how to offer value that is not already available on a smartphone or third-party GPS device.
Self-driving cars are coming
Self-driving cars, although not necessarily what we mean by connected cars, are always part of the conversation about the future of car technology. As recent as early 2014, auto manufacturers were saying self-driving cars were 10 years away. While not fully autonomous, many auto manufacturers have recently changed their outlook and are pushing to have shorter timelines, as in next year, to demonstrate their self-driving features. Google recently claimed to have a fully operational autonomous vehicle.
Despite these recent accomplishments, mass adoption may still be 10–25 years out. Afterall, there are a lot of things that the Google car cannot do that human drivers can, including avoiding potholes or operating in heavy rain or snow. Until then, keep in mind that humans are amazing drivers that can operate cars in a variety of conditions.
Dealership model is being challenged
For decades, dealerships have had a stranglehold on the sales channel and have put their money behind legislation to keep their status. In the 1990’s, Ford and GM tested this direct-to-consumer strategy, but retreated in the legislative backlash of dealerships.
Tesla is challenging the dealership model by selling directly to the consumer. Franchise laws vary from state to state but Tesla is still having challenges in finding sales locations.
Clearly, there is a desire by the consumers to change the dealership model. A 2012 survey of consumers by CarFinance.com found that negotiating the price was the worst part of buying a new car. Furthermore, if Tesla is able to reverse existing laws and gain support for their sales model, it may open the doors for other new car manufacturers, such as those from China, who could set up their own sales network in the US.
Now that cars are equipped with more computers and more parties want to leverage car data, carmakers and lawmakers have to figure out how to manage privacy.
California Senate Bill 994 — the Consumer Vehicle Information Choice and Control Act is intended to establish that consumers have the right to access data produced by the car and control with whom it is shared. Yes, owners should be empowered to control their personal data and opt-out of data collection, still this bill faces criticism. On one side, the bill is accused of being a data grab for insurance companies. Another side says that the bill is a just “another set of privacy notices” that most people ignore.
This topic is highly controversial. In the end, consumers will have to decide to take control of their own data and decide whether giving up some privacy for a service is valuable and worthwhile.
Sharing economy changes car ownership model
Connected cars have unlocked the opportunity for the remote management of a car. You could even imagine the ability to manage a family’s cars like a fleet. When you couple this remote management with on-demand car services like Zipcar, Getaround, and Uber, which maximize the utility of a single car, it will change the value of owning a car for some people.This is especially the case for those who live in cities where parking is scarce and expensive. In the distant future, especially with self-driving cars and on-demand services, the ownership model could transform from consumer owners to fleet operators.
Now that the insurance companies can extract more information about your driving habits (distances, speeds, frequency), they can offer more personalized services including Pay-As-You-Drive. This could even evolve into Pay-How-You-Drive. Privacy concerns are a natural reaction to this new format, but as the mobile phone, internet, and even customer loyalty card industries have demonstrated, people are willing to give up a little privacy for saving money and other valuable services.
Right now, car makers’ app stores (Ford and GM) are very IVI-focused. CarPlay and Android Auto are taking a similar approach but don’t lock the user into the experience of the auto manufacturer. The current generation of apps provide multiple ways to bring in streaming music and news. But most of these apps still don’t access the vehicle data to be truly connected to the rest of the world. Connecting a car to the home to provide information to people or services outside of the car has yet to be seen in the current app stores.
Developers may one day build apps especially for the connected car, but it will require support from the car makers in order for the apps to be in the cars or to access the car data. For now, Ford and GM have developer portals but activity is low, especially when compared to other developer communities such as for mobile phones and wearables.