10. Potential Opportunities in Automotive IoT
10.6. Growth Opportunities in Small Vehicles
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Brazil, Russia, India and China (BRIC) and the rest of the world (RoW) classified as emerging, as non-luxury cars are starting to become available to the mass market. Based on a McKinsey Report, these emerging economies accounted for 60% of worldwide automotive profits in 2012.
This growth will continue to outpace established markets in the next seven to ten years. By 2020, emerging markets will account for two-thirds of total automotive profit – The market in China will be the largest. With this in mind, the need for advanced Internet connectivity and enhanced safety and telematics features will increase at the same time.
10.6. Growth Opportunities in Small Vehicles
Currently, subcompact, micro and super-mini cars account for 30% of global sales and could reach 30 million in 2020. 60% of this market is located in emerging economies. Furthermore, sales are expected to grow up to 6% a year. This opportunity gives OEMS the chance to gain market share in deploying connectivity with smaller more economical cars. Although there will be intense competition, connectivity within a low-cost business model could potentially outnumber luxury cars very quickly as modern city dwellers are beginning to change vehicle ownership behavior in that some do not even see the importance of purchasing cars as their parents did in the generation with options like car sharing, zip car, Uber, and etc. There are also customers who would prefer to drive smaller more fuel-efficient cars.
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Figure 20 Small Cars Show Big Potential
10.7. IoT Growth Opportunities
By looking at the entire IoT ecosystem as a whole, huge growth will be experienced in cloud computing, security, data processing, network capacity, data centers and BYOD infrastructures, vertical diversification, and Smart Cities.
Based on IDC predictions, more than 90% of all IoT data will be hosted on service provider platforms in the next five years. Security will be improved in that 90% of IT networks will have IoT-based security breach polices and procedures. With so much data coming from IoT, storage, processing and analysis will be “at the edge” of the network in predicting and understanding consumer behavior and patterns. To support this overwhelming network of information, network capacity will have excess capacity to handle even more IoT-created devices in the future.
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Furthermore, “non-traditional infrastructure” such as datacenters and enterprise systems management, will be adapting to new businesses and working models that will allow employees to “bring your own device (BYOD).”
Currently, over 50% of IoT is focused on manufacturing, transportation, and consumer applications but this will diversify to other industries and result in new IoT initiatives including the development of sustainable smart cities, embedded systems that are open-sourced. This opens the door for other developers and designers to innovate such in the area of wearable devices as an increasingly popular consumer product among the “millennials” who live in the reality of a connected world.
Figure 21 IoT Across Different Industries
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solutions. This approach will be necessary as IoT covers diverse industries and sectors to stay ahead of technological developments. Connectivity needs to support the diversification of these business models.Developers should not only focus on automobiles in isolation. Instead, they should also ensure that applications be used seamlessly across devices and platforms for end-users. Investing in software development and making it seamless is important as well as making it relevant to customers is key.
Automakers, whether big or small, need to be involved in working with software developers to provide connectivity solutions. As they are more risk adverse, it is necessary to invest in some know-how and intelligence for embedded solutions as it will become the preference among customers in North America while tethering and smartphone integration will slightly decline by 2022.
The best payment for services is pay-per-use. While overall consumers prefer to pay a one-time upfront payment to the car manufacturer, others are paying on an annual basis. In reality however, most consumers would prefer to pay for services based on usage and this could be an opportunity for OEMs to take advantage of. Consumers may tend to use a particular service more often over another and this gives more options and flexibility to the customer based on their demands.
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Figure 22 Example of Different Payment Offerings by OEMS
Build a strong team that meet up for “hackathon” events or public development events to in encourage innovation. Companies can approach colleges and university from engineering students to research, design and develop the next big IoT app for cars. Additionally, stay connected and be involved with trendy networking groups like the Open Mobile Alliance and the Autotech Council.
Consider time-to-market. As product planning and development timelines are 3-5 years and vehicles have an average lifetime of 7-10 years, make decisions regarding connectivity service to be “future proof” in which supports future trends and evolving customer needs. The best time to implement hardware and software is towards the end of the production process.
Third-party businesses should position strategically based on value proposition to select the
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most appropriate business model. Do not assume that automakers own the entire process and the final customer because with big data analytics for example, multiple revenue streams can be attained as long as businesses add innovative and complex services within the value chain.
Figure 23 Strategic Positioning of Third-Party Businesses
Automakers will have to clearly define and pursue their core interests by leveraging strategic partnerships with 3rd parties for faster deployment and time to market. While this is currently being done, automakers should not try to own the whole service process because it not their core competence. Therefore, for automakers of local brands in emerging markets, key resources should be fully utilized to meet customer demand including service providers, tier-one automotive suppliers, mobile operators, telematics, insurers and content providers.
Figure 24 Questions to Consider to Deliver Value
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Invest in tech companies that have an important involvement in Automotive IoT. For example, Apple is starting to get into self-driving cars. Since driver assistance systems are becoming more and more sophisticated, autonomous driving is progressively emerging as the next big thing. Carmakers like Daimler, BMW and Volkswagen have started to reveal that cars can drive long distances without human intervention. BNP Paribas sees a $25 billion market for automated driving technology by 2020.
Last but not least, there is a lot of money to be made in software to run a self-driving car as well as services associated with it. In fact, it’s a software game out there. With connected cars and self-driving cars in the works, vehicle intelligence will be the biggest differentiating factor. Car apps including mapping, car sharing, car recharging and other unique apps will be profitable for software developers.
The following are possible applications for smartphone devices to be connected in the car or offered via in-vehicle infotainment systems:
An app that shows open and available parking in both public and private properties
allowing users to track, reserve and pay for a spot real-time. Private car park owners can rent out their personal parking space when it is not in use. Rates can depend on peak and off-peak hours, location and availability. Unused space and money can be made in this so-called “shared economy” while giving convenience and parking options to drivers in overcrowded cities.
An app that tracks gas consumption, tracks mileage, calculates costs and provides information on the nearest gas or charging stations that offer promotions and compares gas prices for the cheapest gas (regular and hybrid cars) or battery charging services
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(electric vehicles).
A language learning app that helps drivers and passengers in the car practice linguistics
through speech recognition technology for appropriate intonations. The app can be educational, interactive and entertaining for a family driving long-distance. This idea comes from how salespeople would listen to cassettes and CDs back in the day for motivation or language purposes. This is similar to streaming music and video but can communicate and give real-time feedback without distracting the driver.
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Figure 25 Value Creation and Value Capture
Figure 26 Recap of Huge Potential in Connect Car Market
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