01/05/2020
The Connected Car Revolution: More Than Just Mobility
The automotive landscape is undergoing a seismic shift. No longer are cars simply a means of getting from A to B; they are rapidly transforming into sophisticated, interconnected hubs that are integral to our daily lives. This evolution, driven by advancements in mobile connectivity and a growing demand for seamless digital experiences, is opening up vast new revenue streams for manufacturers and creating a compelling vision of 'connected living'. From managing your schedule to monitoring your health, the car of the future promises to be an indispensable component of a truly integrated ecosystem.
Projected Revenue Growth: A Lucrative Future
The financial implications of this transformation are substantial. Research indicates a dramatic surge in revenue generated by connected cars. Projections show a five-fold increase, with global revenues expected to surpass US$24 billion by 2025. This is a testament to the increasing integration of digital services and features within vehicles. Looking further ahead, the market is poised for even more explosive growth. A groundbreaking study forecasts the 'connected living' ecosystem, with cars at its core, to reach an astonishing $568 billion by 2035. This signifies a potential revenue stream of approximately $1,600 per vehicle per year for manufacturers, a significant leap from the current average of $120.
From Transport to a Connected Living Hub
The traditional perception of a car as a mere mode of transport is becoming obsolete. Vehicles are evolving into central elements of a comprehensive connected living ecosystem. Imagine a car that not only drives you autonomously but also proactively manages your daily schedule, orders groceries, seamlessly integrates with your smart home and office devices, and even functions as a personal health kiosk. This multifaceted role positions cars as 'golden geese' for automakers, capable of generating continuous revenue throughout their lifespan. Gone are the days when connected car data was solely for fleet management and safety compliance; today, these vehicles perform a myriad of functions previously exclusive to smartphones, unlocking new realms of connectivity with a simple touch.
Features Driving Revenue: Beyond Basic Connectivity
The potential for revenue generation within the connected car space is immense, driven by an ever-expanding array of features. MarketsandMarkets (MnM) research has identified over 300 potential features that Vehicle Manufacturers (VMs) can integrate into future software-defined vehicles. These features are designed to create a seamless customer experience while simultaneously generating vital revenue streams. This spectrum includes:
- Pre-buying and Digital Retailing: Influenced by social media trends, these features streamline the purchasing process and offer personalised experiences.
- Seamless In-Car Experiences: This encompasses a wide range of entertainment options, from advanced infotainment systems to immersive gaming.
- Operational Use Cases: Features such as predictive maintenance, remote diagnostics, and over-the-air software updates contribute to both customer satisfaction and manufacturer revenue.
- Integration into the Metaverse: As virtual worlds become more prevalent, cars could offer unique experiences and connectivity within these digital spaces.
- Autonomous Driving Packages: The development and rollout of advanced driver-assistance systems (ADAS) and fully autonomous driving capabilities represent a significant revenue opportunity.
- Flexible Vehicle Ownership Models: Subscription-based services and on-demand access to features are creating recurring revenue streams for Original Equipment Manufacturers (OEMs).
- Personalised Digital Insurance: Connected car data can enable dynamic insurance policies, offering lower premiums for safe driving habits.
- Energy Management: For electric vehicles, features that manage charging, optimise energy consumption, and integrate with smart grids will become increasingly valuable.
- Health Monitoring: In-car sensors and systems can monitor driver and passenger vital signs, providing valuable health insights and alerts.
OEM Initiatives and Industry Trends
Automotive manufacturers are actively embracing this paradigm shift, positioning themselves not just as car makers but as key players in the broader connected living ecosystem. Major players like Stellantis, General Motors (GM), Ford, Tesla, and Hyundai are investing heavily in expanding their connected car services. Their strategies extend beyond enhancing connectivity to include sustainable solutions such as renewable energy generation, energy storage, and Vehicle-to-Grid (V2G) technology. This strategic pivot leverages connected vehicle data to pioneer new services, including innovative connected insurance models, as exemplified by Tesla.
Looking ahead, the revenue potential is clearly articulated by industry leaders:
| Manufacturer | Projected Revenue from Connected Vehicles (by 2030) | Primary Revenue Streams |
|---|---|---|
| Stellantis | EUR 20 billion | Subscriptions, Features on Demand, Data Monetisation |
| General Motors (GM) | ~$20 billion | Subscriptions, Features on Demand, Data Monetisation |
| Ford | ~$20 billion | Subscriptions, Features on Demand, Data Monetisation |
These revenue streams are primarily derived from:
- Subscriptions for Connected Living Services: Offering ongoing access to premium features and services.
- Features on Demand: Allowing users to purchase or subscribe to specific functionalities as needed.
- Data as a Service: Monetising anonymised vehicle data for various applications, including traffic analysis, urban planning, and product development.
Specialised Services and Future Integrations
The innovation in the connected car space extends to specialised services. Hyundai and Renault are making significant advancements in health monitoring with their BeyonCa solution, an in-car health monitoring system. Simultaneously, Tesla, GM, and Ford are leading the charge in the connected energy sector, focusing on systems that support renewable energy generation and integrate with V2G technology, thereby enhancing the energy efficiency of electric vehicles. The integration of vehicle operating systems with popular video conferencing platforms like Zoom, now compatible with Apple CarPlay and Android Auto, further underscores the concept of the 'office on wheels'. This trend suggests that future in-car experiences will increasingly mirror the functionality of our smart devices.
Nissan's Arc Strategy highlights the critical importance of cross-industry partnerships, the development of new revenue streams, and the introduction of innovative products to maintain a competitive edge in the rapidly evolving automotive market. In this context, Xiaomi, a leading Chinese smartphone maker, has made a notable entry into the electric car market with an in-vehicle operating system that seamlessly integrates with smartphones and home appliances, offering comprehensive control of one's home environment while driving. This contrasts with Apple's decision to cancel its car programme, underscoring the varied strategic approaches within the industry.
Conclusion: An Unforgettable Journey
The connected car is no longer a futuristic concept; it is a present reality rapidly shaping the automotive industry and our daily lives. With projected revenues soaring and manufacturers investing heavily in innovation, the car is set to become an even more integral part of our connected world. This evolution promises not only enhanced convenience and functionality but also a wealth of new opportunities. As the technology continues to advance, every drive is poised to become a truly unforgettable journey, deeply interwoven with the fabric of our connected existence.
Frequently Asked Questions (FAQs)
Q1: What is the projected global revenue for connected cars in 2025?
A1: Global revenues from connected cars are projected to reach over US$24 billion by 2025.
Q2: What is the long-term market forecast for the connected car ecosystem?
A2: The 'connected living' ecosystem, with cars at its core, is forecast to reach $568 billion by 2035.
Q3: What are the main revenue streams for connected cars?
A3: Key revenue streams include subscriptions for connected services, features on demand, and monetisation of vehicle data.
Q4: Which car manufacturers are leading in connected car initiatives?
A4: Major manufacturers like Stellantis, General Motors, Ford, Tesla, and Hyundai are actively investing in and expanding their connected car services.
Q5: How are connected cars integrating with other aspects of our lives?
A5: Connected cars are integrating with smart homes, personal schedules, health monitoring, entertainment, and even the metaverse, becoming central to a 'connected living' experience.
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