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Connected Vehicles

Data Monetization and the Evolution of Connected Car Technologies

August 10, 2023

Software-Defined Vehicles (SDVs) are redefining the automotive industry and establishing once more that “Data is king.” Each new development in connected car technology creates additional data points, opening additional windows for more value-add services to consumers and data monetization opportunities to automotive manufacturers.

Data monetization, which was once merely a buzz word in the automotive industry has has slowly spread in the automotive industry over the last decade to provide several new features:

  • Usage-Based Insurance Policies
  • Targeted Advertising
  • Fleet Management & Maintenance
  • New Business Models for Vehicle Maintenance and Repair 

The impact of these examples underscores data monetization’s further potential in the SDV. With increasing data insights, ‌OEMs can offer drivers customizable software packages and services based on actual vehicle usage. They will also be able to adapt the revenue model, and value offers in real-time. With vehicle’s constant connectivity to the OEM’s cloud, manufacturers can use huge data sets to understand how people use their vehicles en masse and offer the pricing-per-service that best fits each use case and driver. 

New Products and Services: The Next Wave of Automotive Innovation

The trend of greater connectivity has brought automakers and tech companies closer together, collaborating to enhance the driving experience. We have seen outstanding innovations that have completely changed how we drive on the road today.

This collaboration, together with the vast amounts of data collected from connected vehicles, has led to transformative products and services, including:

  • Traffic Analysis: Intelligent route suggestions and traffic warnings
  • Remote Access for OEMs: To diagnose and‌ rectify vehicle issues remotely
  • Autonomy: Level 3 and 4 pilots are on the road
  • Improved Driver Safety: Driving alerts and preventive actions, reducing accidents

Naturally, these innovations also lead to new business opportunities in the industry.

New Business Models

The data collected from connected car technologies provides more than just improved driving experiences. It enables the launch of new business models across the automotive industry.

McKinsey breaks down the data generated from vehicle usage into 5 categories:

  • External Road and Environmental Conditions
  • Technical Status of the Vehicle
  • Vehicle Usage 
  • Personal Data and Preferences 
  • Direct communications from the vehicle

This data creates the opportunity not only for continued improvement of vehicle testing and design optimization, but also for data-driven business models, including:

  • Subscription-Based Services: Where drivers can subscribe to specific software features or apps, introducing a consistent revenue source for OEMs
  • Pay-Per-Use Features: Drivers would pay for luxury features only when they choose to use them, being more affordable than a subscription 
  • Data Brokerage: Companies can serve as the bridge between data providers and seekers, ensuring transactions occur with proper security and privacy
  • Collaborative Ventures: By automotive and tech companies targeting areas from shared mobility to in-car entertainment systems

But naturally, not all business models are well received, and OEMs will need to ensure that these models are not only technically possible and profitable but also provide meaningful value to consumers. We have seen recent automakers’ subscription services (i.e., locking seat warming behind additional payments) met with mixed reactions.

Data Privacy and Cybersecurity

All data collection comes with the responsibility of data protection and security. As the automotive industry is on the verge of managing even more massive amounts of data and analyzing it for further use, there is an expectation that the privacy of vehicle owners and drivers will be protected and used responsibly. The average cost of a single data breach in 2023 is $4.5M, but this does not include reputation damage and consumer trust. No OEM wants to become known as the first that allowed hackers to track drivers' trips and personal data. 

But data privacy is not the only concern. The Over-the-Air (OTA) connection enabling data collection from the vehicle opens a new attack surface for malicious actors. And as SDVs are defined by their software, the possibility of an attack ‘jumping’ from a low-safety application or domain to a high-safety one is quite real. 

To this end, vehicles must be built secure by design, utilizing methodologies such as Communication LockdownTM to act as defenses against present and future attacks. This is why we see new cybersecurity measures for OEMs like UNECE R155.

The Road Ahead

Automotive data analytics will continue to evolve, especially with ‌advances being made worldwide in machine learning and AI. This will lead to a deeper understanding of driving habits and vehicle performance as well as new opportunities for data monetization.

But the upside doesn’t stop at just new revenue streams. OEMs will also be able to reduce costs, especially with testing. Today, OEMs cannot afford billion-mile testing on the road. A good portion of testing is done in the lab. Still, with the power of data and digital twinning, these billion miles can be run seamlessly and almost entirely in a lab, reducing costs significantly.

OEMs will also be able to quickly test new algorithms by generating data from live sensors in vehicles on the road, updating the algorithm in the digital twin, and then only releasing the safest and highest-performing changes to the vehicles.

We are standing at the edge of an exciting era in automotive technology, and the potential for OEMs to reshape their business models is tantalizingly close. More data spells more opportunities for the automotive industry.

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