Mobile and Automotive Industries: New Business Models Needed to Promote Collaboration

By July 02, 2013
Connected car

The ‘connected car’ is about to achieve mass market penetration. If they are to go on building this new market, the automotive and mobile industries will need to work in close collaboration.

There are huge opportunities for the connected car market, both in terms of revenue and ways to cement customer loyalty. By 2022, the market will comprise an estimated 700 million connected cars plus 1.1 billion aftermarket connected devices providing services such as navigation, usage-based insurance, stolen vehicle recovery and infotainment. European telecoms giant Telefónica Digital has just published a report that identifies the opportunities and challenges in stimulating collaboration between the two industries which will together build this new market.  These focus mainly on the need to harmonise the industries’ work practices and business models, not an easy task for two radically different sectors.

Overcoming the disconnect between mobile and automotive industry lifecycles

Mobile operators and automotive manufacturers must now start to draw up their business models in collaboration with each other, suggests the Telefónica report, pointing out nevertheless that today their approaches and aims vary considerably.  For instance, while Automotive Original Equipment Manufacturers typically look for local connectivity solutions,  BMW and Nissan take a global approach to the market and so need to be able to secure suitable agreements to provide global, or at least regional, coverage. Another major challenge for the connected car sector is the difference in life-cycle between the mobile and automotive industries. New features, such as operating system upgrades and new applications, are provided almost constantly for the smartphone, whereas automobile manufacturers work on five-year cycles.  According to BMW, one of the most positive developments in the growth of the connected car is that it has moved the M2M (Machine-to-Machine) debate away from pure automation to become more about the Internet of Things.

The advent of new business models

The other issues are more to do with the customer. The connected car is about to cause an upheaval in the traditional dealership model. It offers a unique opportunity for manufacturers to engage directly with their customers. Branded app stores, upgrades to software solutions over-the-air, and sharing of vehicle data all provide automotive OEMs with opportunities to maintain brand awareness among customers. However, the question of who pays for connected car services is an issue that is far from being resolved. Consumers are used to making a one-off payment when purchasing a vehicle, but embedded connection entails an additional bill to be paid for actual connectivity. This all means that new business models need to be created.  One suggestion from General Motors is that operators could for example recognise vehicles as a second device on a customer’s data plan for a low monthly fee.

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