It’s clear that connected vehicles will significantly disrupt the automotive industry. The market is forecasted to reach sales of $166 billion by 2025, and some sources predict it may exceed $200 billion. Automobile manufacturers/OEMs (original equipment manufacturers) are already adapting to survive in a world where connected cars are pervasive. Emerging technologies always create complexities that must be addressed and overcome. In the research for our report Connected Cars, we have identified the five top challenges that automotive OEMs face as they navigate to find their place in the new ecosystem.
Connectivity and subscription complexity
As the number of connected cars – and the immense amounts of data they generate – continue to grow, so will the cost and complexity of collecting data and managing subscriptions. This will force automobile manufacturers to pay close attention to a number of factors such as the partners they select.
Many variables can affect the cost of connectivity. These include the geographical region, the chosen communications service providers (CSP) and performance requirements. There are also the costs associated with managing CSP relationships and the different vehicle profiles accessing the cellular network. For example, a connected car utilizing infotainment features will have very different data and performance requirements than a vehicle leveraging advanced assisted driving functions. Ensuring that these two different user types are managed and have their requirements met in a scalable, secure manner all contribute to costs.
It is critical that the costs associated with connectivity and profile management remain predictable and low. With expenses often passed along via service subscriptions, consumers simply won’t use a feature if they don’t consider it worth the cost, resulting in a canceled plan and lost revenue.
To devise a sustainable business model, OEMs will need to address questions like:
- If all data is treated equally and billed to one subscriber, who will pay for it?
- Who will pay for general software updates driven by the OEM?
- Are OEMs willing to pay for entertainment-based data usage consumed by passengers?
Reliable coverage
Another significant challenge for automakers is achieving reliable connectivity. For functions like maintenance and advanced features like assisted and autonomous driving, reliable and high-bandwidth connectivity is mission critical. The smallest lapse in service can be the difference between safe navigation and an accident.
The industry is already realizing the potential of assisted and autonomous driving as companies like Einride show the world the benefits of driverless transportation. To gain the reliable, high-bandwidth coverage needed for safe operations, cellular connectivity – 5G to be specific –is the only wireless technology that can provide it.
Cybersecurity
Security also represents a major challenge for any organization using software, and, unfortunately, cybersecurity has not been a priority within the automotive industry. Research from the Ponemon Institute reveals that only 10% of automakers have an established cybersecurity team. As a car’s functionality becomes much more software-based, manufacturers will need to prioritize investment in more robust security testing and measures.
OEMs must remain focused on consumer privacy and security because software vulnerabilities could undermine the safety of connected car systems and features, putting both the user’s sensitive information and physical safety at risk. A single negative incident can destroy a brand’s reputation, making it very difficult to recover and regain the trust of consumers. With that squarely in mind, Ericsson’s platform provides secure connectivity management and isolates IoT from other cellular traffic while ensuring it’s encrypted. In addition, it utilizes other tools including anomalous activity alerts and robust identity and access management to maintain the security of the IoT network.
Varying regulatory guidelines
Regulatory guidelines will play a key role in the adoption of connected, highly automated vehicles. Currently, government and regulatory authorities, in collaboration with automakers, are taking action to improve transportation by addressing key challenges like traffic congestion, road accidents and cost. As part of these efforts, governments would like to mandate features like automatic braking and lane departure warnings which are shown to reduce accidents. While these capabilities are primarily based on in-car services, connectivity can help to extend the driver’s line-of-sight beyond the immediate range of onboard sensors. As a result of these types of emerging technologies, the advanced driver assistance systems (ADAS) segment is expected to grow to $36 billion by 2025 with a CAGR of 30.8%.
The need for borderless coverage creates another challenge for connected cars. Local data and sovereignty regulations add complexity to managing connectivity, impacting where collected data can be analyzed and stored as a vehicle crosses borders into different countries or regions. Unharmonized guidelines will have a negative impact on adoption and usage. However, if the regulatory environment in the EU proves favorable, 43% of vehicles could be partly or fully autonomous by 2035.
Customer expectations
Moving forward, brand identity alone will not be sufficient to retain the level of customer loyalty that automakers currently possess. As more connected features become available, consumers will focus more attention on capabilities and less on the logo on the hood. They now want features integrated into the vehicle that enhance the driving experience as part of their connected ride-cycle. IoT-enabled abilities such as lane-departure detection and over-the-air (OTA) software updates will influencer buyer decisions.
To retain customer loyalty, car brands must also successfully integrate the customer’s connected lifestyle through digital services. This will enable consumers to interact with their cars in the same way they use their own familiar connected deviceslike smartphones. Realizing that services and features will be the factors driving sales, rather than their brand reputation, automakers will need to ensure the in-car experience is as seamless and intuitive as using a smartphone, especially as services are expected to account for more than half (54%) of connected car revenues by 2025.
Driving forward
These are just some of the complex challenges that automakers face as they evolve their offerings to match how people are leading their connected lives and the expectations they have for their mode of transportation. It’s no longer a matter of just getting from Point A to B but rather what consumers experience along the way.
