Data to become new profit centre for car makers

New cars have become far more than just a means of getting from A to B thanks to the connectivity that is being built into them.

With more and more of these connected cars having embedded sensors and communication capabilities, it is allowing car makers to design new services built around the ability of the car to interact with other vehicles and the surrounding infrastructure.

But this connectivity and the related services are starting to pit traditional car makers against non-traditional industry players, including many who create in-car services (such as Apple’s CarPlay which features Siri voice control), as they seek to gain ownership of the data that is being created.

Cars already produce more data than any other piece of consumer equipment and will produce even more of it in the future. Data could include anything from in-car phone usage, to all the locations you navigate to, or choice of petrol stations.

Car-specific datapoints could be fuel or oil levels and type, through to parts performance and potential failures.

Auto companies are beginning to see some of their technology partners showing an interest in making the car a natural extension of their ‘connected life’ strategies.

Everyone from Apple to Google and Uber has thrown their hat in with cars. And what they all want is the data.

Building block for new revenue streams

The vast amounts of data that the connected car produces is only increasing and by generating analytic-driven insights, new revenue streams can and will emerge.

There are already embryonic moves in this direction, particularly from some of the luxury car brands. However, the ability to turn data from car users into revenue is still in its infancy.

An even bigger hurdle at the moment is that this year only 35 per cent of new cars will come with inbuilt connectivity. But that’s changing rapidly.

Research conducted by Accenture estimates that connectivity will rise to 98 per cent by 2020 and five years after that all new cars will be connected.

There are three dimensions to data: variety of the source of data, such as video input or feeds from sensors; volume, which will increase rapidly in line with connectivity; and lastly, velocity of processing, where data flows range from real-time to periodic.

Connectivity is turning data into a pot of gold for car makers. Accenture calculates that connectivity and the associated data access could be worth nearly £4,000 in extra revenues for car makers over a vehicle’s lifespan.

The three main sources of revenue from connectivity are likely to be up-selling to vehicles with additional services at 22 percent, cross-selling new, connectivity enabled services at 21 percent and 19 percent from data monetisation.

Getting to know the driver

The most valuable source of insights for car makers is data about how their products are used. Car companies will be able to identify trends by aggregating location and usage data from many users, as well as individual drivers.

Such data could complement, and in some cases, replace traditional market research, ultimately leading to better designed cars, but it’s important that car manufacturers implement ‘privacy by design’, ensuring that any data stored in or collected from the vehicle is protected.

But there’s more.

This data will be of great interest to third parties, who will pay car makers a fee to access it. This can range from selling insurance products priced around a user’s driving behaviours (if they agree, possibly in exchange for an incentive) through to generating insights for retailers over the best locations for new stores.

Given that cars are all about mobility, location-based data and services are particularly sought after. For example, a group of German car makers, including Audi, BMW and Daimler, recently acquired Nokia-owned Here, a mapping services company, to give them independent capability in the area of driverless cars.

This could be used to help drivers to be guided to nearby restaurants, parking places, hotels or other locations of their choice.

Car makers will increasingly link up with other brands to build an ecosystem that enables personalised deals or context-relevant offers to be shared with drivers as a service, presented seamlessly through the vehicle on behalf of ecosystem partners.

One growth area is expected to be concierge-type services, and already cars can be used instead of cards to make payments.

Obviously, this is an exciting opportunity for car makers. The danger, however, is that they could be overtaken by non-traditional players, such as tech giants.

These companies already run their businesses based on data insights and produce rapid prototyping and product releases. Car companies will not be able to duplicate this capability alone.

But, rather, they will need to work with ecosystem partners, such as tech companies, network providers, and others with the expertise necessary to satisfy consumer demand and their evolving expectations and privacy and security needs.

They also will need to pursue the ownership of key connected vehicle data to create new third-party, fee-based services that will help them retain leadership in the coveted connected-vehicle market and increase profitability.

Andreas Gissler is the Managing Director of Automotive Strategy at Accenture