Year: 2014

Automotive telematics features and services are coming of age

How much have our lives changed over the last ten years? Probably not that much really, or have they? In June 2007, an event changed our lives forever, practically overnight. The launch of the first iPhone was arguably the foremost element that transformed us into a “connected society.” The rise of the smartphone introduced consumers to the benefits of immediate, real-time connection, drawing the Internet out of offices and homes and into our daily lives.

Now, only seven years later, there are more connected devices than individuals on our planet. We are constantly connected to colleagues and friends, to sales and special offers, to weather and news alerts. So, why should our cars be an exception?

Today, only 5% of our devices are connected to the “Internet of Things.” Now, consider that there are about one billion cars on our roads and that drivers are only beginning to learn and understand about the benefits provided by automotive telematics features. Our journey towards pervasive connectivity and the “Internet of Cars” has just begun.

The automotive telematics industry is ready. It has been for a few years, now. Connected cars are a reality. Connected services provide tangible benefits. Some services, such as GPS navigation, have been in existence for a number of years, while others, like emergency services and real-time traffic notifications are newer and further new services and features are constantly being introduced. So, it is only natural that automotive, insurance, OEM and telematics service industries ask themselves whether drivers are ready for a connected car.

A recent study by Ericsson and the AT&T Drive Studio indicates that nearly two-thirds of potential car buyers in the United States, Germany, Brazil, Japan and China will carefully assess automotive connectivity services when considering their next car purchase. In fact, the study also reveals that 72% of these drivers are willing to delay the purchase of a new car by a year to acquire a car with connected services. Furthermore, the study also indicates that half of these potential buyers are willing to buy a different car brand to get connected services.

Digital natives and early technology adopters are now on the road and eager to indulge in services providing navigation assistance, traffic and parking information, weather and news updates, but automotive connectivity will truly blossom as the new generation of connected natives, Generation Z, approaches driving age and car-buying potential.

Indeed, McKinsey&Company estimates that the value of the global market for connectivity devices and services will rise from the current €30 billion to €170 billion by 2020, in just six years’ time.

Connectivity is a product feature that lends itself well to the creation of new services. And services are what modern consumers desire above all else to save time, reduce hassles and improve quality of life.

At the Insurance Telematics Update 2014 Conference, Nino Tarantino, CEO, Octo North America, urged automotive insurers that the time had come to look to the future by improving and incorporating value-added services into their basic usage-based insurance packages. “In order to differentiate a telematics product and provide true value to customers, insurers must offer packages including a wider range of value-added services,” Mr. Tarantino emphasised. “A new generation of car drivers is coming of age.”

The Ericsson/AT&T study confirms that potential car buyers are a tech-savvy crowd and are well-acquainted with connected car features including roadside assistance (74%) and navigation systems and real-time traffic alerts (72%). Moreover, the survey also points out how, at present, other connectivity features, such as remote car activation (71%) and music streaming (70%), for example, are slightly less known. Whilst the idea of cars acting as a connectivity hubs that share and transmit telematics data to cloud-based databases and services is still something new for most drivers, these features are slowly becoming mainstream and will be brought to full prominence by our next generation of drivers, the connected natives.

In the meantime, connected cars are already on the road. There are drivers enjoying usage-based insurance policies, roadside and emergency assistance packages and location based anti-theft services. As more drivers learn about the advantages of usage-based insurance products, one of their main concerns will be the cost factor. Then, as the product enters the mainstream, attention will turn to value-added-services, as pointed out by Octo CEO North America Nino Tarantino.

In fact, the McKinsey & Company report indicates that 13% of buyers is no longer willing to even consider purchasing a new vehicle without Internet access and over 25% already prioritize connectivity over features such as engine power and fuel efficiency.

Yet, while drivers are eager to reap the benefits of automotive connectivity, there still are concerns about privacy, data use and hacker attacks. A second concern regards cost: only 35% of potential car buyers indicate they would be willing to spend more for smartphone-car integration and only 21% would be willing to consider subscription-based connectivity services.

These, however, are issues and fears that have gone hand in hand with the development of technology. Older generations were suspicious of telephones and television sets that were later adopted in mass. The same adoption curve will characterize telematics and the car connectivity market. Early adopters are already enjoying state-of-the-art telematics services. They will be followed by other drivers, who learn to appreciate attractively priced innovative services and a new generation that will be eager to be connected and pampered by new safety features and time and money saving options.

So are drivers interested in driving connected cars? Yes. Our prediction is that the “Internet of Cars” will precede and catalyse the “Internet of Things.” Drivers are ready. The market is in place. A new generation is reaching driving age. And everyone will soon be interested in new automotive telematics features and services as long as it’s a “good deal.”