We have more conversations with the world’s consumers than anyone else.

 

Whether it’s self-parking, sat-nav, or just personalised music playlists, drivers and their passengers have fallen in love with connected cars. Obviously then, the technology represents a huge opportunity to differentiate and increase brand loyalty for OEMs. Features that have nothing to do with how the car performs or what it looks like, are playing a huge role in the buying process.

A new business model for new car models

The technology has the potential to open up an entirely new business model for OEMs, based on software and services that deliver driver and passenger benefits. Whether developed in-house or as part of a multi-player portfolio, connectivity has the potential to boost loyalty and sales in a highly competitive market.

Transitioning to this model is also a compellingly cost-effective route. Developing cutting edge connected car features takes much less investment than innovating new engineering solutions. Connected car tech also unlocks a completely new way for brands to increase customer preference and loyalty. Once users get familiar with a particular OEM’s apps they are predisposed to keep using them, something that’s bound to influence their decision-making when it’s time for a new model.

Get personal to build stronger relationships

Over time, connected tech becomes indispensable, creating the perfect opportunity for OEMs to build a strong relationship with devoted users. It’s an opportunity for the manufacturer to stay in touch with them regularly and importantly, for a genuine reason. Adding value becomes an on-going customer conversation, not an intensive burst of over-anxious salesmanship once every three years.

The opportunities presented by connected car developments are plain to see. But only for OEMs that act quickly.

 

The data driven threat

The biggest threat to the OEM connected car business model comes not from manufacturing rivals, but from third party data and app specialists. Google is making the most noise and seemingly the fastest progress in autonomous car development. Uber is pioneering intelligent geo-location solutions, while Apple continues to up the ante on in-car entertainment and experience. Tech companies are becoming a real threat to the investment auto OEMs have already made in connected car ingenuity.

To seize connected car opportunities and to keep control of the agenda, OEMs have to act fast.  If they don’t pioneer new technology and stay ahead of non-auto players’ ‘brought in’ app developments, they could end up looking like hardware providers whose software is inferior. The OEM features need to be as good if not better than the software specialists’ products.

 

Closing the gap by creating an ecosystem

The technology gap is a huge threat but there may be a way to keep it narrow or even close it completely. Just as with smartphones, third party developers will create apps for use on different operating systems. Savvy OEMs can capitalise on this by funnelling the sale of these apps through their own dedicated online ‘store’ - selling upgrades and new features directly to their customers, controlling their release and using the features as marketing tools. They can also partner with the best developers, ensuring that they are at the forefront of app capability and trend. And they could tap into the tech companies’ superior experience in developing and selling apps. Creating and controlling their own connected car ‘ecosystem’ is an intelligent move.

 

Partner up, speed up or pack up

There’s a clear choice for OEMs and the direction they take will depend on how confident they feel and how visionary they are. They can continue to invest vast sums in connected feature development or they can form strategic partnerships with non-traditional auto companies as GM have recently done in their self-driving car joint venture with Lyft. Of course they could also acquire the developers completely, like the recent Audi, BMW and Mercedes $3 billion purchase of the Nokia/Microsoft HERE map and navigation platform. Or smarter still, partner with each other to develop their own proprietary technology, rather than continuing to go it alone and causing further fragmentation in a market that already has too many players. One thing is for sure, once on the road to a software driven business model they need to continue investing heavily in cutting edge technology. They will only keep up with other players in this constantly changing, fast moving arena by accelerating their tech development and increasing their ambition.