Smartphones Friend or Foe for Automotive OEMs?
Around the world of automotive, a new wave of device-to-device connectivity is shaking up the industry. The phenomenon will have a ripple effect on most of the connected segments— technology, software, manufacturing, telecom and networking. At the heart of this change, is the Internet of Things (IoT)—along with the evolving sharing-based economy, the consumption model, changing consumer preference, declining ownership economy and the rise of social, mobile, analytics and cloud computing. The connected cars of tomorrow will become an essential node in this web of connectivity.
Today most of the industrial IoT use cases are targeted at the top end market (1–5 percent). Similarly, in the automotive industry, only seven percent of the new cars sold, primarily targeted at the high-end market, are connected and IoT-enabled while remaining 93 percent cars sold for the mid-range and low-end market are still unconnected. The auto OEMs, suppliers and technology providers need to take a disciplined dual approach to reduce this gap between the high-end and low-end markets, paving the way to a macro-economic paradigm shift in the automotive industry.
The evolution of smartphone-based automotive updates will transform the automotive business model from ‘sell, forget and pray’ to an innovative customer-centric, car-as-a-service model
While, a top down cost reduction approach will likely always be a factor to size the market, smartphone-based connectivity is the solution that allows a bottom up IoT revolution for the automotive market. Smartphones can help auto OEMs fast track the IoT adoption for remaining 93 percent of the unconnected cars sold each year. The IoT capability can be enabled in all the cars with minimum effort from the automotive OEMs by integrating a smartphone-based app with the car functionalities.
Indeed, the smartphone revolution will mark a paradigm shift in the automotive industry. The big question is: Will this game changing technology act as a friend or foe for the industry as a whole?
The advantages are obvious. The evolution of smartphone-based automotive will transform the automotive business model from ‘sell, forget and pray’ to the innovative customer-centric ‘car-as-a-service’ model, where auto OEMs can generate subscription-based revenue through aftermarket smartphone applications such as infotainment, apps and map updates over the lifecycle of the vehicle. The new business model has the potential to transform transportation into a service in which a user’s major needs are met over one interface (smartphone of the user) by the service provider. It will cater to the demands of millennials who prefer consumption-based culture over an ownership-based culture. The smartphone will become an enabler for consumers as well as OEMs to make car-sharing services as a part of the overall Transportation as a Service (TAAS) offering.
Today, the automotive market is driven more by choice and connectivity than mechanical engineering. Smartphones will allow OEMs, service providers and insurance providers to gain an in-depth insight of their customers’ behavior, thus giving them an opportunity to enhance user comfort with personalized functionalities such as personal navigation, points of interest, and other location-based services. Customers can update their car’s functionality, customize the skin of the car’s display, create their own car profiles on cloud, download their profiles by tethering their existing smartphone to the car and access their personal contacts, playlists and in-car settings preferences at the click of a button.
Customer will have the flexibility to transfer their virtual car profile to a rental car while insurance providers can use driving behavior data to move from an aftermarket dongle to a smartphone-based app as a means of enabling the usage based insurance market.
Smartphone-based connectivity is reinventing the way the cars are manufactured, sold and driven. In order to develop a sustainable and customer-centric model, the OEMs need to have a direct interaction with the owner of the car. Smartphone in-vehicle apps can capture data, which can be used by OEMs to develop a smartphone strategy for the lifecycle management of those cars with no embedded connectivity. It will also allow the OEMs to develop apps and services to make every unconnected car connected.
As IOT transforms the automotive, new set of services will bring new challenges. The integration of smartphone with in-vehicle systems poses a real challenge for the automotive OEMs. The short lifespan of smartphones enables them to quickly adopt new apps and networking advancements like 4G. Considering that the car hardware has a longer lifecycle than mobiles devices, OEMs will have to find ways to improve the lifecycle of infotainment/navigation systems through over-the-air software updates.
However, in the growing IOT-enabled, big data world; delivering world-class systems depends on the effective use of software at every stage while meeting strict data security and privacy requirements. Hence, OEMs should focus on participating in the overall ecosystem to fully realize the benefits of third-party partners while providing information without causing driver distractions. The evolving relationship between the OEMs and the software providers is a significant step toward this evolution.
With the millennials becoming more and more concerned about connectivity, the smartphone-driven automotive revolution is inevitable. The automotive OEMs who will win in this space will be those who can keep pace with their continuously evolving roles of the IoT connected world and yet are flexible enough to meet the demands of the next generation drivers. What needs to be seen is how the automotive OEMs will go beyond their current roles to where they make smartphones a core mobility offering to deliver the increasingly personalized information-centric experience to their customers. Irrespective of the role of the OEM, the IoT revolution driving smartphone-based connectivity in the automotive industry is too big an opportunity to miss.