OEMs aim to boost consumer loyalty, service business through connected cars, Frost & Sullivan says

Expect automotive OEMs to continue to target telematics and other connected car services as a way to extend customer communications and loyalty, as they invest heavily in mobility and other technology.

In Frost & Sullivan’s recent briefing, “2016 Global Connected Car Outlook,” the analyst firm outlined its predictions for both connected and autonomous vehicles.

According to Praveen Chandrasekar, consulting director for the company’s North American automotive and transportation practice, OEMs will continue to target customers with value-added connectivity services in a bid to boost their aftersales business.  “Is it immediately useful or does it increase customer loyalty?” Chandrasekar says. “In the long run the North American market has seen free telematics programs becoming the norm. That along with services like prognostics will give OEMs the ability to maintain longer relationships and bring drivers back to the dealerships for spending service money.”

While most OEM offerings have been proprietary, there are standards emerging for connected vehicle technology. There have been implementations of Apple CarPlay and Android Audio, and Toyota has agreed to support Ford’s SDL app platform. “Some OEMs are not in favor of those standards, but want to do this on their own,” Chandrasekar says.

Frost & Sullivan also noted that at the recent 2016 Consumer Electronics Show (CES) OEMs were positioning themselves as mobility integrators. “Uber and others have show us that the way to look at the opportunity is in billions of miles driven, and then converting that into a dollar value per mile,” Chandrasekar says. “Mobility integration opens up that opportunity for new business.”

Ford has set up a new venture, Ford Smart Mobility, which is targeting autonomous driving, car sharing, electric bikes, and other connected vehicle applications. The company is actively working with tech start-ups to help accelerate technology development in the space.

GM, meanwhile, is testing out new connected vehicle services in the 2016 Cruze that includes infotainment, navigation/roadside assistance, and a smartphone app that allow users to remotely lock and unlock their doors.

All of this activity is expected to create a nearly $47 billion market for connected cars by 2020, according to Research and Markets.

Autonomous driving

Autonomous vehicles continue to generate a lot of buzz, even though we are still several years away from fully autonomous operation. OEMs will likely use a combination of LIDAR and map-based autonomous driving solutions, even though most pilot projects right now are using one or the other. “It’s going to be both of them together,” Chandrasekar says. “Maps are much more useful from one perspective, but some suppliers are taking a more cost effective approach using lane and road geometry.”

Autonomous driving will also require more driver status monitoring, because the system will need to know if the driver can take control of the vehicle. Some of these solutions are motion based, and some may even be use pupil scans.

In separate research on the autonomous driving market, the research firm predicts that one in seven vehicles will feature “highly automated features” by 2030.

“Meanwhile, the market is enthusiastically adopting and investing in revolutionary technologies such as Artificial Intelligence (AI) and deep learning,” says Frost & Sullivan intelligent mobility research analyst Arunprasad Nandakumar. “In fact, a strong AI and deep learning wing is considered vital for designing a sustainable business model for autonomous driving.”

The industry is faced with several technological challenges. Companies are striving to offer vision capabilities in multiple driving conditions at a reasonable price, but the current software and validation capabilities are not sufficient. The industry also lacks a regulatory framework.

According to Frost & Sullivan, there should be a unified approach to devising regulatory frameworks. New regulations should assist the growth of the global autonomous driving market rather than just the regional markets.

“Overall, the participants that will enjoy success are not likely to be singular entities, but those with the strongest partnerships and ecosystems,” says Nandakumar. “These companies are expected to boast a robust product and service portfolio that best address the needs of next-generation drivers.”

Predictions for 2016

In the year to come, the firm expects that OEMs will continue to subsidize telematics offerings. “It’s not viewed as a revenue generator, but for the first time OEMs can communicate with customers, and improve that communication beyond the warranty period,” Chandrasekar says. The dealership is removed from the middle of the transaction, and OEMs can focus on creating new potential revenue streams, and providing new features to the vehicle via over-the-air updates.

There also will be more aftermarket telematics services like Zubie and VOYO; some of these focused on dealerships as well as independent aftermarket providers.

Expect more interest in predictive services using machine learning and artificial intelligence to analyze the data generated by connected cars. AI in vehicles could potentially reduce traffic delays and pollution, according to Frost & Sullivan. “How do you handle predictive analytics?” Chandrasekar says. “You will see the development of something like a virtual assistant that can understand your habits and routes, even without you looking for that assistant. This will continue developing.”

There will be more infotainment advancements like the Sensus Connect system on the Volvo XC90, which takes a tablet-style approach to the user interface. (Tesla uses similar technology.)

OEMs also will experiment with delivering different types of services to drivers beyond location/navigation and diagnostics. BMW, for example, has partnered with SAP to create a prototype that uses SAP’s HANA database platform to send personalized services and offers to drivers. The navigation system could recommend a nearby gas station and provide an offer for free coffee, for instance, as well as give drivers advice on finding a parking spot. BMW’s ConnectedDrive system securely matches the offers to the driver’s preferences.

The Toyota Connected initiative (in partnership with Microsoft) is even targeting health tracking for divers, integrated directly into the car. The vehicle could monitor heart rate via the steering wheel, for example. Multiple OEMs are also linking smart watches and other wrist-worn devices (like the Microsoft Band) to their vehicles to provide some degree of remote control.

In-car payments are another area that will advance as the technology matures. The migration to embedded LTE wireless networks is also happening fast, with a 25.2 percent growth rate. That can enable more robust connected vehicle services.

“While still in very early stages, most OEMs are trying to find the right use case for LTE,” says Krishna Jayaraman, lead analyst in the passenger vehicle infotainment and telematics team at Frost & Sullivan. “Concepts like firmware and software updates over the air will help decrease recalls and increase customer relationships.”

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