How vehicle manufacturers can successfully engage in the data business
A guide for car makers on how to engage with relevant service ecosystems and avoid pitfalls
As the world’s economies contract under the weight of the COVID-19 pandemic, it could seem like a strange moment for vehicle manufacturers to throw their weight behind the promise of car data and the business potential this data facilitates. However, since transformative forces in the automotive industry continue to accelerate, sharpening the focus on potential drivers of growth has become a key priority.
Over the last five to ten years, alongside the expansion of connected vehicle fleets and digital service ecosystems, data has received increasing attention in the automotive domain, moving to the top of the strategic agendas of numerous vehicle manufacturers. In addition, more global players — data providers as well as data consumers — are seeing exciting opportunities to engage in new data-driven business models.
Recent estimations see the market potential of car data monetisation to be worth between 5bn and 10bn USD by 2030, indicating the high potential value for vehicle manufactures if they choose to engage in the field.
As interest in the car data market grows, so too does the number of other players and car data legislators which in turn increases the pressure on manufacturers to provide access to vehicle data. The industry needs to prepare for and reflect this trend in their business models to ensure that standards are considered from the beginning, guaranteeing interoperability and the sustainability of data businesses as well as reaping the benefits of data monetisation.
Recent estimations see the market potential of car data monetisation to be worth between 5bn and 10bn USD by 2030.
While major car makers are already in the game, fueling a new wave of thinking about the vehicle as a platform and transforming the customer experience, there is still a significant number of manufacturers who are not yet fully engaged.
In this article — the first of a series aimed at raising awareness of the value of data monetisation for vehicle manufacturers — we hope to offer those manufacturers who have not yet embarked on the data business journey an accessible way to engage, learn and ultimately benefit from car data, all while avoiding the most common pitfalls.
We’ll be starting with the role of standards in the car data market, before taking a deep dive into car data marketplaces and the Neutral Server model. Finally, we’ll be outlining the business challenges facing newcomers to car data monetisation and, crucially, how to overcome them.
The role of standards to facilitate data exchange
A successful car data market needs a reliable framework for both carmakers and third parties to rely on. Crucially, standards for the exchange of vehicle information are needed to avoid having multiple data and transmission formats.
For newcomers to the space, these standards and framework are even more important. To address the issue of standardisation, industry groups created the Extended Vehicle ISO standard, published in early 2019. The standard covers all aspects of how telematics data is made available to third parties and how customer consent should be obtained.
With market participants actively working on both standards and a framework for the exchange of vehicle information — for example, the Secure Vehicle Interface (SVI) or the Extended Vehicle — car manufacturers who are newer to the car data field have a defined structure within to work and are able to avoid the common pitfalls of earlier adopters. However, car makers need not feel constricted by these frameworks as it is within these defined structures that data sharing can still be managed in a multitude of different ways.
The Extended Vehicle
One of the most important standards in the car data space is the Extended Vehicle standard. This standard is applicable to personalised, anonymised, or aggregated vehicle data, and covers all aspects of how telematics data is made available to third parties as well as how customer consent should be obtained. With an interface specification based on common web technologies, car makers can be reassured in knowing that obstacles related to technical incompatibility are unlikely to occur.
The extended vehicle standard is a framework for sharing vehicle telematics data with independent service providers without allowing direct access to the customer’s vehicle physically.
Although the Extended Vehicle standard has numerous benefits for both existing car makers and newcomers, there are a handful of aspects that the standard does not cover, such as a definition of a business framework or a standardised data format.
In the next section, we’re going to see how the car data marketplace has emerged to address these issues and bring about additional benefits for both carmakers and third parties.
How intermediaries facilitate data sharing between car manufacturers and third parties as data consumers
The car data marketplace
The role of a data marketplace is to facilitate data sharing between the car maker and the third party. Put simply, third party applications and services can get verified to work with all types of car data and car makers can sell their car data for a specific price.
How does it work?
Typically, a car data marketplace provides a unified data API for third parties and translates the different data formats of car makers into this unified API. This reduces complexity for third parties as it enables their smooth integration with the various data interfaces from car makers.
One API integration = access to data from multiple car makers
Car data marketplaces also facilitate the business side, often by providing a business and legal framework. This framework means third parties can avoid individual contracting between themselves and the car makers. In addition to this framework, third party service can easily get an overview of which car makers provide which specific data sets within the marketplace.
The Neutral Server model
A similar concept to the car data marketplace is the so-called Neutral Server model. The Neutral Server is an independent intermediary that is engaged by carmakers to enable data access to third parties. These servers are “neutral” because they are not subsidiaries of the vehicle manufacturers, they are in fact wholly independent of them both financially and operationally.
Already adopted by many major carmakers in Europe, the Neutral Server model is an additional layer on top of the Extended Vehicle standard that utilises intermediaries to provide more options for third parties. A third party that is accessing data through a neutral server may choose to remain anonymous to carmakers.
What’s the difference between a car data marketplace and a Neutral Server model?
Car data marketplaces and neutral servers both follow similar objectives, but there are some key differences. The main difference between the two is that in the marketplace scenario third parties do not remain anonymous to the carmaker. This is a fact that may be seen as advantageous in the case of, for example, advanced data use cases.
Data marketplaces are able to function in situations which are not covered by the Neutral Server framework, such as data sharing for commercial vehicles where there is no individual owner of the vehicle. The opposite is also true, with neutral servers frequently operating data marketplaces where carmakers can offer features that are outside the scope of the Neutral Server or even the Extended Vehicle models.
Independent, standardised data platforms are multipliers to carmakers’ own data monetisation efforts.
Key benefits to third parties of a standardised data platform
For third party services looking to move away from aftermarket hardware, a standardised data platform offers numerous advantages:
- A lower barrier of entry for accessing vehicle data
- The opportunity to build on a scalable interface without limitations
- Data from multiple carmakers with just one integration of an API
- Reduced costs: the expense of producing, storing, transporting and maintaining hardware becomes a thing of the past
- Business models can be scaled more quickly
Challenges and how to overcome them
Vehicle manufacturers are struggling to create comprehensive and flexible business models in the car data space.
The issue comprises of three facets:
- Service consumers and data consumers alike demand clear benefits for sharing their data or paying for provided data.
- Carmakers are still bound to traditional, relatively inflexible business models.
- Successful car data business models stand or fall with its data protection framework.
Put simply, major parts of a comprehensive business model get overlooked while a lack of flexibility stands in contrast to the fast-changing dynamics of the data business market.
In this context, the definition and communication of a value proposition represent a specific challenge. Yet, vehicle manufacturers are often opposed to the idea of considering the needs of both the end-customers and data consumers as traditionally the driver’s needs have always come first. However, there are significant steps vehicle manufacturers can take to overcome these hurdles.
Customer Segmentation
Designing a business model to monetise data requires vehicle manufacturers to significantly rethink their traditional approach as the sale of data products differs so widely from vehicles. Manufacturers must instead consider developers, start-ups and even competitors in the aftermarket as primary partners or early adopters. In this regard selecting friendly first movers can help to facilitate the enabling of benefits to other customer segments at a later stage.
Value Proposition
Another challenge for vehicle manufacturers lies in the identification and communication of the overall value proposition, not only to service consumers but also to data consumers.
Technology companies pushing into the automotive market have incorporated this understanding into their DNA. To keep up, manufacturers must find similar ways to create sought-after service products.
Value-creating use cases can be generally broken down into four broad categories:
- Safety-related benefits
- Convenience-related benefits
- Time-saving benefits
- Cost-saving benefits
Successful Solution Design
In order not to fall behind their competitors, vehicle manufacturers need to focus on identifying relevant solutions. Multiple dimensions in the design of data products play a part in this. As use cases focus on delivering value to the end-customer it is just as important to recognise that they provide equal value for data consumers who use vehicle data to create their own use cases in the first place.
While use cases and related ideas might already exist in the backlog of many developers and external partners, car makers struggle to provide useful and relevant data points. However, data points and data products provided by manufacturers to third parties are as valuable and unique as the cars and other means of transportation they produce. For these reasons it is important that manufacturers take advantage of this data treasure when interacting with the market and, during this process, established data platforms can act as brokers between vehicle manufacturers (i.e. data providers) and data consumers.
Finally, data providers can create their own marketplaces or find additional ways to distribute data products. Consequently, data consumers such as insurance companies are able to access data points via technical solutions such as APIs.
Revenue Streams & Costs
Setting a price for a data product and designing the revenue model is the final stage of most business models. Common options are transaction models, volume-based models or subscription models. Additionally, any partnership with data marketplaces or data consumers can lead to new options.
Although details on data product pricing may differ from manufacturers’ traditional methods of pricing vehicles or associated features, by working with a data marketplace, decisions on pricing can be simplified thanks to the advantages a partnership brings along. Equally, costs can be reduced as multiple required functions are generally available within the data marketplace platform.
Data protection
One crucial step when embarking on the data business journey is understanding the legal requirements for sharing vehicle data with third parties. The continuous involvement of legal and data protection experts from the start is therefore highly recommended.
The most essential part of the legal setup is that the vehicle owner agrees to the data sharing. An agreement between the carmaker and the third party is usually the starting point combined with consent from the vehicle owner.
Once an agreement is in place, the consent flow needs to be secure, fully transparent and compliant (e.g. in Europe GDPR compliant). Should a vehicle owner no longer wish to share his data, he or she must be able to revoke permission at any time, either in the third party application, at the intermediary data platform or in the carmaker’s owner touchpoint.
Though customers are accustomed to sharing all kinds of data from their smartphones, authorising access to vehicle data is a new and sensitive topic. Hence, understanding the sensitivity of the issue will be crucial for building trust with customers.
What’s next?
Many vehicle manufacturers have already engaged in data business initiatives responding to market dynamics and rising regulatory pressures. We believe that it is time for those still unsure about their route into car data to get on board.
Watch this space for more insights on the vehicle data business, from how to develop your first data products to setting up your first technical MVP. In the meantime, if you’d like to learn more about us and what we do, simply get in touch.
About HIGH MOBILITY:
HIGH MOBILITY is a car data company with a mission to build the best environment for innovative companies to discuss, test and launch data-driven mobility services. Acting as a data marketplace and neutral server, pioneering third party insurance, EV charging and fleet management services use HIGH MOBILITY’s Auto API to access vehicle data from BMW, MINI, Ford and Mercedes-Benz cars through a single API.
About Ginkgo:
Ginkgo Management Consulting is all about Getting Digital Done for their clients. Founded in 2006 in Hamburg, the international strategy consulting company partners with CEOs, CFOs, CIOs and CDOs and offers a selected range of services to help achieve business and technology transformation targets. Ginkgo’s global clients include well-known Fortune 500, DAX listed, and mid-sized companies as well as hidden champions. Together they take digital and data-driven businesses to the next level.
