‘Connected Cars’ Are Driving Exponential New Business Opportunities

Internet apps on car dashboards are optimizing vehicle performance and providing drivers with enhanced navigational services, automatic notification of crashes, notification of speeding and safety alerts. roadside assistance, parking information, engine controls and car diagnostics.

“According to McKinsey, one in five cars will be connected to the Internet by 2020.”

But that’s not all: drivers and their passengers also are now leveraging Internet connectivity to receive a wide array of entertainment services and even shop online or receive marketing offers from nearby retailers.

According to McKinsey, one in five cars will be connected to the Internet by 2020, increasing as much as 30% each year for several years.

The explosive trend will dramatically increase the global market for connectivity components and services nearly sixfold, to roughly $10 billion by 2020, McKinsey says, and also will likely “significantly alter the competitive landscape.”

“Companies from the software and telecommunications sectors are already entering the automotive market, and…original-equipment manufacturers need to act now to secure control over critical industry sectors,” the authors wrote.

Smartphones will play a major role in helping cars connect to the Internet, according to a recent by research firm SBD on behalf of the GSM Association, a group representing major mobile operators.

Connected cars such as the Ford Applink or Toyota Entune have systems that enable drivers and passengers to view apps running on the driver’s smartphone on a screen in the car, SBD reported. In some cases, people will be able to interact with these apps via controls in the vehicle. Some connected car models such as Mercedes Command use “tethered solutions,” where their in-car computers run apps, but rely on the driver’s smartphone for Internet connectivity.

“By 2018, 32.1 million cars will support infotainment services, compared to 4.3 million in 2012.”

SBD said such technology will fuel the growth of “in-car infotainment services,” such as news, weather, social networking and music streaming. By 2018, 32.1 million cars will support such services, compared to 4.3 million in 2012. Navigational services and vehicle management applications, such as remote diagnostics and maintenance, will also increase, but not at the pace of infotainment services.

Retail marketers also are set to jump on the connected car bandwagon. At the Direct Marketing Association’s annual October conference, Francois Orhan, head of global CRM at Shell, said the company’s division that operates retail stores within gas stations is aiming to take advantage of connected cars to talk to drivers “at the moment of truth, so we can influence them with appropriate messaging.”

“The mobile phone is a key emerging channel and a car is now, in some ways, a big mobile phone on four wheels,” Orhan said. “The key question for Shell Retail is going to be about the integration of this new channel within the CRM architecture and ecosystem that we have built as well as the way we are going to engage with our customers via this new channel.”

That thought could lead to innovation across a variety of sectors. However, while opportunities abound, challenges still exist for the connected car market, according to Machina Research and Telefónica Digital. Some of the main obstacles they report include the delay in new car model launches compared to new smartphone upgrades and applications; jibing new vehicle operational features with governmental safety laws and regulations coming down the pike; coordinating the differing objectives of automakers and mobile operators; the training of dealership salespeople on the sophisticated new technologies and features; figuring out how drivers will pay for the Internet and app services; and determining just how many apps can be incorporated on dashboards without compromising safety and reliability.

With such fast advancing innovations in connected cars, these challenges will likely be resolved sooner rather than later.

What’s Driving the Connected Car

Connected Car Forecast: Global Connected Car Market to Grow Threefold Within Five Years

Connecticut Car Industry Report 2014

Katie Kuehner-Hebert :Katie Kuehner-Hebert has more than two decades of experience writing about corporate, financial and industry-specific issues. She is based in Running Springs, Calif.