Cars are transforming from mere machines bolstered by horsepower into sophisticated, tech-savvy mobile devices; and as automotive technology advances, vehicles are evolving into connected, software-driven machines, mirroring the rise of smartphones over the past decade.
This shift is set to disrupt the entire mobility landscape, from how cars are designed and sold to the ways in which we interact with them on the road. Holding the potential for in-vehicle apps, over-the-air updates, and data-driven services, the car of the future will be evaluated equally based on the technology inside alongside its metal shell. This revolution holds vast opportunities alongside oscillating challenges, as the auto and tech industries converge in unprecedented ways.
A Connected Car
A connected vehicle refers to a car that harnesses internet connectivity to exchange data with both internal and external devices, predominantly via mobile data networks. This connection enables real-time access to diverse services, immersing the car into the digital landscape.
The emergence of contemporary connected cars began in the early years of the current decade. Since then, the majority of vehicles on the road have provided drivers and passengers with the ability to shop online, stream music and videos, access detailed traffic information, and utilize advanced assisted driving technologies.
According to McKinsey, it is projected that by 2030, approximately 95% of newly sold vehicles worldwide will be connected, a significant increase from the current rate of around 50%. Among these connected vehicles, approximately 45% will feature intermediate and advanced connectivity, offering features such as personalized digital service profiles, integrated ecosystems and platforms, multisensory interactions for all occupants, and intelligent decision-making capabilities.
Personalization in Motion
Consider how the mobile phone's platform model has created "always-on" connectivity, supporting continuously evolving services while gathering insights on user interactions. Similarly, envision the fully connected car of the future as an open and adaptable hardware platform capable of running various software that is able to deliver a wide range of on-board and off-board services.
A hallmark of smartphones is their ability to offer personalized experiences. Cars are now mirroring this trend, featuring customizable infotainment systems, driver profiles, and intelligent assistants. These functionalities adjust to individual preferences, providing tailored navigation routes and music playlists, and personalized climate settings.
As connected cars evolve, their in-car experience is becoming as unique and personalized as using a smartphone. They can perform almost any function available on our smartphones today and more, offering comprehensive solutions for connected living at the touch of a button.
Integrating with a person's digital lifestyle is increasingly crucial for customers. Consider the seamless and portable user experience facilitated by connectivity and software technology, allowing a person's digital life to seamlessly transition from "at-home" to "in-vehicle".
For OEMs, this represents a pivotal moment, which is set to redefine the user experience. It's an opportunity to integrate the external desires of drivers and passengers with their in-car requirements, fostering strong connections and loyalty throughout their transportation journey.
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Navigating the Connected Living Ecosystem
A groundbreaking study entitled "Car as a Connected Living Ecosystem" by MarketsandMarkets (MnM) predicts that the market will soar to an astounding USD 1.5 trillion by 2035, translating into a potential revenue stream of USD 1,600 per vehicle per year for manufacturers. This expansive market encompasses cars capable of providing cost-effective digital insurance, autonomous navigation, and energy management, among other services.
The growth of the car as a connected living ecosystem market is propelled by factors such as technological advancements, increased connectivity levels among automotive OEMs, and evolving customer perceptions and service expectations.
Customers, particularly Gen Z consumers and those willing to pay a premium for advanced connectivity, anticipate a range of connected features, including enhanced safety measures, remote vehicle functionalities, security features, seamless car-home integration, and services for electric vehicles (EVs) and energy management.
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The Golden Opportunity for Automakers
In the pursuit for new avenues of revenue, automotive manufacturers are aggressively targeting the connected car market. Once primarily data generators for fleet management and safety, connected cars have now become a lucrative opportunity for automakers, promising continuous revenue streams throughout the vehicle's lifetime.
The digital connected living services market is projected to offer customers annual subscriptions totaling USD 1,600 by 2035, with in-car connectivity taking the lead. However, the critical challenge lies in striking a delicate balance between subscription costs and customer willingness to pay.
According to a McKinsey survey, over 50% of respondents expressed interest in purchasing bundled comfort and autonomous driving features. Additionally, infotainment and performance features have piqued resounding interest and, notably, are often preferred with a one-time payment method.
The automotive ecosystem is undergoing a significant expansion, with tech giants, telecom providers, and various digital service firms joining the fray. This convergence echoes the transformative impact witnessed during the smartphone revolution, showcasing a collaborative effort among diverse stakeholders to shape a dynamic and thriving ecosystem in the automotive industry.
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Automotive and ICT Converge
Cellular technology is transforming automobiles into devices that can be seamlessly integrated into the broader world, akin to the functionality of smartphones.
To integrate the connected car into our lives, collaboration between the automotive and telecommunications industries is essential. From telecommunication service providers and equipment manufacturers to car manufacturers, suppliers, map providers, and road operators, all must be involved.
Several notable developments involving telcos in the realm of connected cars exemplify this collaboration. In February 2024, Cisco and TELUS unveiled enhanced 5G features across North America, with a focus on leveraging IoT applications in various industries, notably in the realm of connected vehicles. TELUS has since set its sights on integrating more than 1.5 million standalone 5G (5G SA) cars into the Cisco IoT Control Center over the next few years, commencing in 2024.
This network infrastructure will support drive testing by a major North American automotive manufacturer's 5G connected car, laying the groundwork for enhanced customer experiences and revenue opportunities for carmakers.
The automotive industry is rapidly embracing cloud technologies to enhance the integration between cars and telecommunications. Notably, in 2022, the BMW Group collaborated with AWS to develop innovative cloud solutions that harness the data potential of future vehicle generations. Meanwhile, Huawei and GAC joined forces to create a futuristic smart SUV and an entirely electrified lineup of vehicles, aiming to implement these endeavors by 2025.
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Additionally, in 2018, Qualcomm and Ford pledged to accelerate the development of connected cars by converging Qualcomm’s expertise in communication technologies with Ford’s automotive prowess, paving the way for seamless connectivity, over-the-air updates, and enhanced safety features.
In May 2024, du introduced its innovative plug-and-play product, Smart Car, acting as a 4G Wi-Fi hotspot in vehicles and offering real-time access to vehicle data through a user-friendly app.
Likewise, in June 2023, Verizon Business introduced the Connected Car by Verizon service for specific BMW models in the US, which offers voice, data, and unlimited Wi-Fi hotspot connectivity directly within the vehicle.
Moreover, in 2021, stc collaborated with Cubic Telecom to facilitate the entry of carmakers into Saudi Arabia with in-car connected software, simplifying the delivery and management of advanced in-car services.
With driver demands and technological advancements driving the connected car market forward, both the automobile and ICT sectors are committed to creating enticing consumer experiences. At the heart of this transformation lies 5G technology, promising faster data speeds, reduced latency, and seamless connectivity, enabling advanced features such as real-time navigation, enhanced safety systems, and immersive in-car entertainment.
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Conclusion
As cars continue to integrate more advanced technologies and connectivity, they are indeed becoming the new smartphones. This transformation not only encompasses adding more gadgets and screens to vehicles but also involves fundamentally reimagining the role of the car in our daily routines. The implications are vast, promising a future where transportation is smarter, safer, more personalized, and deeply integrated into the digital fabric of our world.
The journey of connected cars morphing into a new smartphone variation is a testament to the relentless pace of innovation and the boundless potential of technology in reshaping experience.
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