Here’s what automakers have to gain from connecting cars to the internet

July 28, 2014
July 28, 2014

Carmakers from Detroit to Seoul are talking up their efforts to build “connected cars”—cars with in-built mobile connectivity. But their product managers are left to worry about how they’re actually going to make any money from these smartphones on wheels.

Henry Bzeih, head of connected cars at Kia Motors, puts it simply: “Customers do not want to pay for these services, that’s the bottom line,” he said in a report on connected cars from Telefonica, a multinational telecom and broadband operator.

But even if car buyers don’t want to shell out for fancy connectivity, putting cars online may prove to be an unexpected boon to automakers’ bottom lines, says Samuel Loyson, the head of the connected car program for Orange, a large European telecommunications company that works with Renault on its connected car offerings. Today’s cars already have sophisticated computers that can gauge with precision how their cogs and sprockets are functioning. Connecting those computers to the internet would provide car companies with a huge amount of useful data.

One example is the warranty process. With diagnostics from connected cars, carmakers will be able to decide whether they really need to honor a warranty claim or whether the problem was the customer’s fault. With access to the car’s computer, it’s possible that they could even fix minor problems remotely, bypassing the dealership altogether.

Another big benefit will be customer relationship management. For example, there is generally a glut of requests for servicing in the summer, when families go on holiday and know they will be driving several hundred miles. Being directly plugged in to the car’s computer systems will give automakers the ability to manage schedules better. Already, car companies can monitor usage and remind customers a service is due. “With connected cars, you finally have a way to talk to your users,” says Loyson.

Finally, Loyson foresees another revenue stream from sharing the data that connected cars collect. Companies could sell information about driving behavior to telematics-based insurance providers (which Quartz wrote about here), allowing smaller firms to gather the vast amounts of data necessary to run such a program. Or companies could tie up with cities to create real-time parking availability databases, doing away with the need to install hardware in city streets (which Quartz covered here).

Some of these ideas are probably more distant than others. But the message is simple: The return on investment for all the research and development of connected cars will come not only from end users, but perhaps also from changes to business processes. “It would be nice to create new revenues” from customers, say Loyson. “But don’t forget to look at your own savings and how to improve your processes. When you deploy small efficiencies on a large scale, you get big benefits.”

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