Revenue in the automotive sector is shifting from the car itself towards an ecosystem of services. Beyond mobility services such as carsharing and ridesharing, the offer now spans the whole customer experience: the sale, with leasing and usage-based products, the on-board experience, and vehicle upkeep through predictive maintenance and on-demand assistance.
To understand how the industry reads that shift, we interviewed 50 players in Europe, China and Brazil: carmakers, equipment suppliers, insurers, assistance companies, auto-clubs, fleet managers, start-ups, telematics firms and technology companies.
Three simultaneous disruptions
- Connected vehicles, combining a proliferation of sensors with cloud connectivity. Around 420 million connected cars were expected worldwide by 2020. Carmakers build in connectivity while telematics firms connect vehicles through aftermarket OBD dongles.
- Electric vehicles, whose penetration stays low in the short term, around 1 % of the global fleet in 2020 and under 5 % by 2025, but whose sales are climbing sharply. They act as an enabler for autonomous driving and mobility services, shift the balance between capex and opex for owners, and create new charging needs.
- Mobility as a Service, moving consumption from ownership towards usage. Carsharing was expected to grow from 6.5 million users to 26 million by 2020 worldwide. In France, leasing and long-term rental already accounted for 29 % of car sales in 2017, against 8 % in 2010.
The three reinforce each other, hence the ACES acronym for mobility that is autonomous, connected, electric and shared. We excluded autonomy from the scope, since its emergence looks a few years behind the other three.
Connectivity opens services few customers will pay for
Four value areas emerge from the interviews, with markedly uneven willingness to pay.
Safety and security is where customers pay readily: stolen vehicle recovery and remote slowdown are seen as essential, particularly in countries with high theft rates. The mandatory eCall roll-out across the EU from April 2018 is also viewed by service providers as direct customer access, each seeking to route incoming calls towards its own partner network.
Vehicle maintenance holds the largest mid-term value potential. Connected services today remain basic, remote diagnosis, service reminders, appointment booking, and mainly serve loyalty. Predictive maintenance is the genuine disruption: it cuts breakdowns and costs, and directly threatens roadside assistance companies while sharpening competition between carmakers and independent repair chains. It fits particularly well with full-service car offers, where the manufacturer carries the maintenance risk against a monthly fee.
Usage-based insurance has failed so far, with penetration below 5 % in most countries. Two reasons: customers will not pay for a device tracking their driving, and moving to usage-based payment generally lowers premiums, destroying value for the insurer. It could nonetheless grow with the rise of mobility services and by sharing connectivity costs with other features.
The driving experience, finally, is already a commodity. Traffic, weather, navigation and infotainment come through the smartphone, often preferred to embedded systems seen as less agile, which explains the rising penetration of Android Auto and Apple CarPlay. Willingness to pay here is very low.
Data access is the real battleground
Carmakers hold a natural advantage: they obtain customer consent and access real-time and historic vehicle data. Some sought to make that access exclusive, notably by closing the OBD port to third parties while the vehicle is in motion, triggering a legal battle in Brussels with independent repairers.
The European framework currently favours aftermarket players, but sharing obligations remain vague, and data access is still the main source of uncertainty for most of those interviewed. Notably, some carmakers anticipate regulatory intervention and concede that this market will have to be shared.
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