There is growing enthusiasm about the outlook for connected vehicles. A recent forecast from Navigant Research projects market revenue growth for connected vehicle systems from under $100 million in 2016 to over $36 billion by 2025, a near 100% compound average growth rate. Other forecasts are even far more exuberant.
There’s no question that cars can be loaded up with tons of technology – sensors of every type, communications links, components for V2V (vehicle to vehicle), V2I (vehicle to infrastructure), infotainment apps, even technology to monitor the driver’s (and why not the passengers?) health, and so on.
However, what we are most interested in is hearing from a leader in the field about the issues in getting to connected cars that are not only heavily loaded technologically, but are viable financially and operationally.
We recently spoke with Scott Frank, VP of Marketing of one of the pioneer companies in the connected vehicle field, Airbiquity. Airbiquity offers a cloud-based platform, Choreo, as a service, primarily to vehicle manufacturers.
It is a quintessential mobile cloud company – as Frank explained, they made “a big bet on the cloud back in 2005-06,” when they started building their platform. Today the company serves over 5 million connected vehicles on the road, with major auto makers, led by its high visibility relationship with Nissan. Its platform is in use in 51 countries in 23 vehicle models, and being used in 32 languages.
The connected car is not a hard concept to grasp. However, there are at least three different takes on what is going to drive the expected phenomenal growth.
These are: 1) Smartphone App Addiction, also called Infotainment – or, as a Nissan exec put it, “Consumer expectations regarding smartphones, apps, services and cloud content being part of their driving experience…” 2) Safety – with the U.S. DOT (Department Of Transportation) claiming that connected car systems could help prevent 70 to 80 percent of vehicle crashes; and 3) Navigational Assistance – helping the driver, initially with access to maps, traffic, road conditions and weather, etc. and eventually to other information.
We were very interested in discussing with Frank how this all stacks up against solving the issues involved in getting connected cars to be viable from a technological, financial, and operational point of view.
He emphasizes the need to deal with the automotive ecosystem. Providing a cloud-based platform, he emphasizes, “requires a lot of engineering and integrating into other units” from a technology point of view. Their platform allows for linking with the capabilities of the other aspects of the ecosystem, whether they are part of the car, (e.g., displays), personal devices, (e.g, smartphones), or outside factors, (such as wireless networks, sensors on roadside infrastructure or other cars), and the like.
He states that this requires working with “multiple clouds” that must work “fluidly, in Internet time.”
Frank states that each OEM customer has different objectives. He cites four criteria for a successful connected car program: a) Flexibility or Configurability – can a technology partner do the integration; b) Scalability – can a program be scaled across the world and cover multiple vehicle models and devices; c) Manageability – does the automaker have the back end management tools; d) Reliability – not only the robustness of the system, but also its security features and privacy protection. (Frank points out that security and privacy of data are areas in which the auto industry has been “incredibly accountable.” Airbiquity maintains all customer instances as unique, on dedicated facilities – they don’t mix server racks, and they use the best quality data centers.)
Frank states that he believes the market is “on the cusp of big adoption within the next 12-to-24 months.” He says that while the market is still in the early adopter phase, an increasing percentage of consumers are oriented towards a digital lifestyle. He points to a J.D. Power study indicating drivers expect to pay more for in-car technology, in the $200-2000 range depending on feature sets.
He points out, however, some of the issues still to be addressed if the market is going to take off. For one thing, automakers and providers are working through the issue of the economics of getting high bandwidth data off the car. Early applications, such as GM’s OnStar involved small packet bursts. With low bandwidth data. it was economical for the automaker to pay for transmission. Now with newer applications relying on high bandwidth transmission up to the cloud and back, who pays?
If the costs can’t be fully loaded into the original selling price of the car, then a subscription relationship is needed with the owners. But since cars can last 10 or more years, there may be several owners.
Thus there is a feeling that this may all come back to the issue of not just how much extra will a buyer pay up front for zappy new technology, but will a subscription relationship hold up over time. There isn’t a lot of precedent for the industry to rely on. But as with services, such as SiriusXM radio, the question is: while the capabilities may be loaded into the car, how many users will activate them. In the case of SiriusXM, experience to date seems to indicate that that number is about 50%. However, connected car functionality still presents unknowns, because satellite radio was simply replacing an existing functionality in the car, while connectivity features are mostly new and present risks, such as that the driver may actually find them to be distractive, offsetting some of their benefits.
Frank points out that there is potential attractiveness to the automakers to be included in the customer relationship over the vehicle life cycle, because traditionally this is solely the province of the dealers. One solution for the OEMs, he suggests, might be that an intermediary company such as Airbiquity deals with the customer on behalf of the auto maker.
Airbiquity has been cautious on one area of the market, namely fleet management. It does have one large deployment with Shell in Europe – the FuelSave program that Shell markets to fleet managers runs on the Choreo platform. However, the company does not have plans to expand in that market segment.
As for next steps, Frank identifies a key area of interest for Airbiquity as “the intelligent vehicle.” Frank has blogged a description of this: “Intelligent car is about a vehicle—and the connected car platform it’s connected to—leveraging multiple data streams with driver preferences, habits, and physical locations to dynamically and proactively serve up real-time, highly relevant communications and promotional offers from local businesses and service providers.”
He told us that the idea is to bring together multi-channel sources of information that can “contribute to the individual’s journey through the day.” This can include information about the vehicle itself, but also about tasks the driver needs to fulfill, across a wide range of possible interests that are focused and immediate.
He emphasizes that this extension of capabilities is “perfect for the cloud” since it relies heavily on info storage and analytics. He, in turn, appears quite confident about the long-term role for Airbiquity and its platform. As use cases develop and more and more information and processing regarding vehicles and their users is sought, he emphasizes that what is required is “broadband and a platform to orchestrate the distribution of the data and provide security.”
The outlook for the connected car market has been further complicated by the entrance of the two elephants in the room – Google and Apple. While early on these two were considered mainly in regard to their potential interest in the infotainment area, things have progressed far beyond that point and there is open discussion of every possibility including one or both entering the auto business.
After all, if we look down the road far enough, to the era of self-driving vehicles, is the auto at that point anything more than a very large communicating mobile cloud device?
Visit Company Website: www.airbiquity.com