TU-Automotive Detroit 2015: Opportunities in vehicle connectivity

Utilizing the potential of connected systems to benefit companies, individuals, and society



TU-Automotive Detroit exhibition floor
TU-Automotive Detroit exhibition floor

 The 2015 TU-Automotive Detroit exhibition was held from June 3 through June 4, 2015, in Novi, Michigan, U.S. Over 3,000 people attended the two-day exhibition, which featured three main focus areas in its exhibition area and discussion sessions: telematics, mobility, and autonomous vehicles. Despite the introduction of mobility and autonomous themes for the first time in this year's exhibition, much of the exhibition floor area and sessions still emphasized telematics and connectivity, often with multiple presentations on the topic running concurrently.

 This report focuses on the opportunities and their associated considerations that the connected vehicle provides to businesses, customers, and society. Examples of such opportunities include the following:

  • Performing diagnostics and identifying vehicle failures, which can then inform drivers to return to a dealership for repairs, thus providing a revenue stream for a dealership

  • Providing information on road conditions to the cloud, which then transmits the information to other vehicles and to regional traffic authorities

  • Reducing traffic congestion by providing parking occupancy information for on-street parking

 This report is the second of three reports which focuses on the discussion sessions presented at TU-Automotive Detroit. The first report provided an overview of ideas and concepts related to autonomous vehicles. A third report will be released in the future discussing issues on improving infotainment systems and services.

Related Reports:
TU-Automotive Detroit 2015: Impact of autonomous vehicle development
Social considerations and necessity of driver involvement in automated technologies

Revenue streams in telematics technologies

Session: Monetizing the Connected Car
Company Speaker Title
Hyundai Michael Deitz Senior Group Manager, Connected Car and Owner Marketing
Group 1 Automotive Wade Hubbard Vice President, Fixed Operations
AT&T Cameron Coursey Vice President, Product Development for IoT Solutions
Strategy Analytics Roger Lanctot Associate Director, Global Automotive Practice

 In the session titled "Monetizing the Connected Car", panelists not only discussed how telematics in vehicles presented opportunities for revenue across the vehicle supply chain, but also how telematics fits within the framework of vehicle sales and services. Michael Dietz said that while telematics technologies can help sell vehicles, it should not be presented as an independent selling point. Customers need to be informed, specifically by dealers, of how telematics can cost-effectively solve their problems so they can see the technology's benefits. Additionally, the connected vehicle can serve as a way to reinforce trust with the customer by providing diagnostic information directly from the car itself in case there is a problem.

Statistics of percentage profit derived from service and aftersales
Statistics of percentage profit derived from service and aftersales Source: NADA, Strategy Analytics

 Offering a different perspective, Wade Hubbard presented the idea that telematics has more importance in the ownership lifecycle compared to its ability to appeal to a purchaser. The connected car has the capacity to help perform sophisticated diagnostics and analysis to find vehicle failures. In terms of revenue, Wade Hubbard pointed out that it is more difficult for dealerships to make money through new car sales. In 2014, 11 percent of Group 1's revenue came from parts and services, while approximately 40 percent of their profit came from parts and services. Telematics can play a role in bringing customers back to dealerships for repairs and service.

 Cameron Coursey provided a vision of the future in which telematics would be present in every vehicle, similar to how Europe has mandated that every vehicle has e-call capabilities. Thus, user appeal shifts to the capabilities of the telematics services that are provided, as opposed to the presence of such services. Differentiation between services will then play a larger role in new vehicle sales. The ability to upgrade vehicle telematics over time without the need for additional purchases can serve as one way for an OEM to differentiate itself from its competitors.

 In regards to how telematics services should be offered, the panelists concurred that customers tend not to favor subscription-based business models. Roger Lanctot suggested that a possible business model would be to include a baseline level of service on all vehicles, with the ability for customers to purchase additional features. Despite this, Wade Hubbard mentioned feedback from customers who simply want a vehicle's center stack to emulate the features already provided on their smartphone, rather than utilize any new technology.  

Car connectivity as a method to connect to customers

Session: Networked Society and the Connected Car Cloud
Company Speaker Title
Ericsson Magnus Lundgren Head of Connected Vehicle Cloud

 In the session called "Networked Society and the Connected Car Cloud", Magnus Lundgren mentioned that Ericsson's focus is about the connected customer more than the connected car. He made a point stating that a customer might not necessarily be the person who purchases the vehicle, but rather someone who just uses the vehicle, given the availability of car sharing services. Magnus Lundgren referenced an article in the Wall Street Journal which stated that service companies would have the most to gain from connected technologies. One of the reasons why Volvo's partnership with Ericsson has been successful is that the company has focused on a future featuring the connected customer.

Visualization of Ericsson Cloud deployment model
Visualization of Ericsson Cloud deployment model Source: Ericsson
Visualization of communications
Visualization of communications between vehicles and the cloud regarding road conditions and other events Source: Ericsson

 Other factors for the success that Volvo Cars and Ericsson has experienced include Volvo's design philosophy of removing the complexity of connecting the customer to the vehicle to the cloud. This allows rapid implementation and delivery of features and applications into the cloud. Another reason for the success was the decision to have a global deployment of the Connected Vehicle Cloud. The global deployment allowed for standardized solutions to work across multiple regions. Finally, the partnership allowed each company to focus on their core competencies. Ericsson has the capability to develop cloud and customer service backends, while Volvo focuses on the human machine interface.

 Magnus Lundgren presented a number of use cases which focused on a connected vehicle in a networked society. Vehicles could connect to dealerships to send and receive information on scheduled maintenance visits. While on the road, cars could send information about icy roads to the cloud, which can then inform other drivers about specific danger spots. This information, along with data about accidents and traffic patterns, could be sent to regional road authorities for additional analysis.  One example of a connected safety system features the use of a device within a bicycle helmet which interacts with a smartphone to connect to the cloud. The cloud then sends location information about the bicyclist to a connected car, and warns both parties in case of an imminent collision. Another use case is called "Roam Delivery", which has delivery services bringing goods to a customer's vehicle instead of their home. The vehicle transmits its location over the cloud, while the courier receives a one-time use digital key to access the vehicle.


How vehicle connectivity provides additional value to the customer

Session: How the Connected Customer will Change the Automotive Industry
Company Speaker Title
Volvo Klas Bendrik Senior Vice President & Group Chief Information Officer
Examples of companies
Examples of companies whose success is based on connecting customers to their services Source: Volvo

 The session titled "How the Connected Customer will Change the Automotive Industry" started with Klas Bendrik framing an interesting phenomenon surrounding specific companies. He noted that the largest "service companies", such as Uber, Facebook, Airbnb, and Alibaba, did not actively own any service-related assets such as cars, media content, real estate, or inventory. The key to those companies' operations is their ability to connect customers to services that they demand. As such, they serve as examples of companies that can fully utilize the customers' expectations of being constantly connected, both today and in the future. Klas Bendrik presented the point that if the automotive industry doesn't capitalize on the opportunity presented by connected technologies, then another industry or company will.

 Vehicle connectivity opens up new opportunities for companies to provide the customer with additional value. Klas Bendrik gave examples of connected technologies benefiting the customer such as the Volvo XC90's ability to receive over the air updates. The XC90 also features an emergency call system in case of an accident. Other connected features include the ability to remotely control the vehicle's heating and cooling features and remotely start the car's engine. Connected technologies also assist in the advancement of other systems, as Volvo is preparing a pilot program in Gothenburg in 2017 for the testing of autonomous vehicle technology, which will have cloud connectivity to access traffic information.


Using connectivity technologies to develop solutions to traffic congestion

Session: Are We There Yet? Driving Intelligence in the Connected Car
Company Speaker Title
Inrix Bryan Mistele CEO

 In describing the current state of the connected car, Bryan Mistele noted that the capability of the connected vehicle to provide navigation and traffic information has significantly improved in recent years. Byran Mistele used the session titled "Are We There Yet? Driving Intelligence in the Connected Car" to show how Inrix is looking to use connected technologies to solve the problem of traffic congestion. Approximately 30% of urban traffic congestion is caused by people looking for parking areas. Additionally, a study by Frost & Sullivan shows that drivers on average spend 55 hours a year looking for parking, which costs consumers and economies approximately USD 600 million in time and fuel.

 Bryan Mistele pointed out that the connected vehicle is only one part of the system needed solve this problem. While connected vehicles provide a solution for the individual to the traffic congestion problem in that drivers can make better decisions to avoid traffic, the problem of optimizing traffic for a city is left unsolved. In order for this to happen, cities would have to make both appropriate investment decisions and improve its standing connected infrastructure. Inrix utilizes both information provided by connected vehicles and city systems in its On-Street Parking service.

Sample screenshot of Inrix On-Street Parking service
Sample screenshot of Inrix On-Street Parking service used with BMW's iPark feature Source: Inrix

 The On-Street Parking service uses information from a range of data sources such as parking transactions, real-time traffic probes, smart meter transactions, parking sensors, and vehicle navigation data to develop a parking occupancy model. The service provides parking availability data which is updated hourly, as well as pricing and any restrictions or policies for a given area. The service also works with Inrix's off-street parking to provide parking locations if on-street parking is unavailable. Inrix formed a partnership with BMW to provide its On-Street Parking service in BMW models using ConnectedDrive.

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