Commentary by Colin Pawsey, an Automotive IQ and Wind Energy IQ writing consultant who follows trends and technologies in the automotive and wind energy sector. This is one in a series of periodic guest columns by industry thought leaders.
Every new generation of vehicle that drives off the factory floor represents a step forward in the inevitable convergence of big data and auto manufacturing.
That’s because vast amounts of data are being collected as vehicles become connected and as autonomous driving technology develops. The auto industry is examining the best methods of collecting, sharing and processing these valuable insights.
How to monetize the data is the million-dollar question, and it's likely to become a huge business in the next decade.
Vehicles are equipped with an array of sensors and cameras that generate data about how they are used, where they are, their surrounding environments and the health of a variety of operational systems and components. This data is most commonly used to train the neural networks of autonomous cars and to map roads for navigation to develop more advanced systems.
Vehicles can also access large amounts of personal data about the driver. It’s everything from simple choices about the seat and headrest positions to favorite radio stations to personal browsing habits, app usage and favorite destinations.
Drawing all of this together is the challenge for the automotive industry. Many players have stakes in the data. Car companies, telecommunication firms, restaurant reservations systems and many other ventures are looking for ways to monetize the data and develop new business models. This is a battle where auto manufacturers are at a disadvantage.
The big tech companies of Silicon Valley are well ahead in developing new features and services. Dealing with data is integral to large tech firms, and in that respect, they have a distinct advantage over traditional automakers. Manufacturers have been quick to invest and forge partnerships with technology companies and startups in a bid to claim a piece of what will become a giant industry over the next decade.
The Connected Ecosystem
The overall revenue pool from car data monetization globally could add up to between $450 billion and $750 billion by 2030, according to a report from business consulting firm McKinsey and Co.
Four global macro trends are driving the growth in data availability and its money potential. These include powertrain electrification, shared mobility, vehicle connectivity and autonomous vehicles. They all have disruptive characteristics and are changing mobility on a grand scale.
Each trend also is contributing to an explosion of available vehicle data, according to the report.
Who wins depends on each player’s ability to conquer two areas.
Organizations must quickly build and test vehicle data-driven products and services that attract consumers. They must also develop new business models built on technological innovation, advanced capabilities and partnerships that push the current boundaries of the automotive industry.
Automakers are used to a five- to seven-year development cycle that’s easily being outpaced by startups and tech firms. That creates a conundrum. Should automakers develop their own data management capabilities, should they enter partnerships with technology companies or should they mix and match?
Silicon Valley clearly leads the auto industry when it comes to the Internet of Things and global connectivity. That is a challenge for traditional automakers accustomed to guarding proprietary technology. But the auto industry is changing
, as it works to embrace connected products and services.
BMW has provided a recent example of this convergence by collaborating with IBM to develop its CarData platform.
BMW’s CarData service, launched in Germany in May 2017, uses data to collect information on vehicle condition, mileage, usage, fuel consumption and events such as an automated service call.
A BMW with a built-in SIM-card is necessary to use CarData, and some 8.5 million BMW’s currently have this feature. Some of the information collected is transmitted as ‘telematics data’ to secure servers. From there, service providers can access the encrypted data to provide products and services to the customer. This method prevents third-party access to the vehicle to avert hacking, and no data is shared without the customer’s explicit consent.
Service providers such as garages, insurance companies and fleet managers can register with BMW to obtain the data. If drivers wish to use a specific service they can actively consent to the release of data, and the relevant company will receive it in encrypted form via BMW’s back end.
The benefits to customers include money saving through individualized insurance services based on actual mileage. They also can get faster service performance because of pre-planned maintenance that includes ordering needed parts in advance.
The system will pave the way for new services such as personalized infotainment, according to the company.
BMW’s offering demonstrates a proprietary method of collecting and monetizing data. Future developments such as ride-sharing, however, may establish a market for a shared, secure platform that gives access to stakeholders so they can integrate data more efficiently to provide services
Otonomo Vehicle Data Exchange and Marketplace Platform
Auto parts supplier Delphi invested $25 million into Otonomo — a startup founded in 2015 with the aim of creating the first data exchange platform and marketplace for the automotive industry. Instead of complex technical integrations and long business negotiation between manufacturers and service providers, Otonomo provides a cloud-based platform where the ecosystem can simply connect and exchange data.
The platform is based on industry security standards and provides a multi-layered approach to protect data. The marketplace packages vehicle-generated data parameters into data bundles. Service providers can subscribe to these bundles in order to receive aggregated anonymized data.
Further plans include the normalization of data, which means Otonomo will translate data from each of the different manufacturers into a ‘standard language’ so that everyone is able to access and read the data.
An owner’s consent app will enable the customer to maintain full control over which service providers can access their data and offer a comprehensive auditing and billing function within the platform based on agreed prices between the various parties.
The money that can be derived from connected vehicles is huge. The total business value of connected car services could reach $100 billion by 2020 and $500 billion by 2025, according to a report by consulting firm Accenture.
How this sorts out will be critical to the health of the traditional automakers and an important source of future profits for the tech industry. The auto industry and tech companies need to work together to optimize the monetization of this data and connectivity revolution.
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