Better Connected: How Telematics are Revolutionizing Europe's Car Travel
Regulation and smartphones are among the drivers of sophisticated new infotainment systems in Europe's cars, with vehicle manufacturers queuing up to provide new services.
September 30 , 2012
When it comes to being better connected, some cars are further up the social ladder than others. No longer simply a way of getting from point A to point B, vehicles are turning into sophisticated hubs for information and entertainment systems driven by machine-to-machine (m2m) technology.
The United States is currently the biggest market for connected cars, but that is changing rapidly. By 2015, the U.S. market is expected to account for 25% of total sales of embedded telematics, down from 70% in 2010, according to SBD, a market research firm and consultancy specializing in automobile technology. New regulation outside the U.S. is helping shift the balance. In June, the European Parliament passed a resolution stipulating that by 2015 all new cars must be fitted with a GPS receiver and a GSM communications link, or eCall system. ECall will enable drivers to automatically contact the nearest emergency services in the event of an accident. Russia and Brazil are considering similar moves, and analysts say China could follow suit in the longer term.
"ECall will definitely make a big difference," says Stephen Longden, Analyst, Advanced Research Division, SBD. "Some vehicle manufacturers will piggy-back to offer extra services such as traffic information, navigation or breakdown assistance."
There are three main ways to provide connectivity within cars, which can be combined with each other or used alone. With embedded solutions, the connectivity and intelligence is built into the car; tethered solutions rely on mobile handsets to enable connectivity; and integrated solutions integrate smartphone apps into the car to provide services. Rapid growth in smartphone processing power and usage is spurring the adoption of connected car services.
"Most vehicle manufacturers are looking at ways of integrating the smartphone into the vehicle," says Anthony Cox, an associate analyst for Juniper Research. Cox expects that by 2016, "the vast majority of new cars will be sold with infotainment systems using the smartphone as a hub."
But as more content and services are hosted in the cloud by operators, the trend could shift from smartphone integration back to embedded telematics units, says SBD. For now, vehicle manufacturers are covering all their bases and enabling smartphone integration while also differentiating with their own in-house user interfaces and applications.
Longden at SBD says manufacturers currently spend between E50 and E250 to equip each car with an embedded device. "[They] are not making money out of connected cars…but they see it as a huge sales point at dealerships," he says. "People like entertainment and communications and it's a lot easier to understand, and thus sell, than a better airbag."
In-car touchscreens and voice recognition systems, for example, are becoming increasingly common in high-end vehicles from companies such as BMW and Audi, while other innovative applications are in the pipeline (see sidebar). Such developments are driving growth in the machine-to-machine (m2m) connectivity market globally. The research company Analysys Mason forecasts that by 2021, the automobile and transport sector will account for 43% of the U.S. $50.9 billion total revenues from m2m connectivity worldwide, largely due to consumer connected car usage.
Nevertheless, uncertainty remains over which connectivity and application systems will dominate as well as the role mobile operators and vehicle manufacturers will play in delivering them. Analysts point out that embedded telematics give operators a wider opportunity to provide more advanced m2m support to vehicle manufacturers, including network security, billing, customer relationship management (CRM) and device management.
"There's no convergence on the best way to go forward, and everyone is scrambling around to find the optimum solution," says Longden at SBD. "Some network operators are happy if drivers want to use the phone for data downloads; others want to set up partnerships and establish tariffs and services."
France's PSA Peugoet Citroen, for example, has set up its own app store and has formed an alliance with car manufacturers including BMW, Volvo, Toyota and General Motors to make it easier for software developers to create applications for proprietary user interfaces. BMW, meanwhile, has agreements with almost 50 partners including Google and Michelin to provide weather, navigation, search and news functions in Europe, the U.S., Canada and the United Arab Emirates. However, the company, which plans to extend services to China in the third quarter of 2012, buys only connectivity and a SIM card from operators, according to a BMW spokeswoman.
BMW offers connected car services at no cost for the first three years and bills E250 per annum thereafter, according to a BMW spokeswoman. The company provides no subscriber figures, but according to Longden, U.S. companies "have experienced big churn" once drivers have to pay directly for services.
The good news for operators is that changes in mobile billing could create new business models. Giving customers a single bill to access data via multiple devices may encourage more drivers to use in-car systems on their existing mobile data plans, according to SBD. In addition, the development of split-billing SIMs would enable vehicle manufacturers to pay for vehicle-related connectivity such as remote diagnostics and ECall and leave drivers to pick up the tab for entertainment and navigation services.
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