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Connected Car Consumer

Services

Eden Zoller Principal Analyst

Key Trends and Enablers

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Although connected car services are expanding, the reality is that many are still at an early stage of development The development trajectory for consumer connected car services is summarized at a high level in Figure 1.

Although more vehicles are coming to market with embedded connectivity and sophisticated infotainment systems and related applications, smartphone-mirroring solutions will continue to be an important enabler for both connectivity and digital services. In the short to medium term, the two approaches will coexist. One reason why external connectivity solutions via smartphones will continue to play a role is due to lengthy vehicle replacement cycles, which are typically between five and seven years. Because smartphone-mirroring solutions remain popular with consumers, content providers and applications developers must take a pragmatic approach, supporting integration with smartphone-mirroring services and forming partnerships with auto OEMs to integrate their services into a vehicle’s native infotainment platform.

As Figure 1 shows, many connected car consumer services are still at an early stage of development. Most consumers today are drawn to connected cars for access to security services and safety features such as adaptive parking, cruise control, and collision-warning (i.e. ADAS features). In-car digital mapping and navigation services have become ubiquitous, whether built in or via dedicated devices or smartphone apps.

The majority of video and games-related entertainment consumed in cars is the same as that available on other connected platforms. However, these dynamics will change, propelled by the growth of shared-vehicle services and, in the longer term, the more widespread availability of fully autonomous vehicles. For example, TV programming for shared-vehicle scenarios will be structured and produced differently from content designed primarily for consumption in the home.

Autonomous driving will have a profound impact on in-vehicle content services, particularly rich media. Self-driving cars will give passengers more free time and a safe environment in which to engage with rich-media content. For many consumers, video-based infotainment will be the preferred way to pass the time during a journey, with sync options for home entertainment systems. Driverless cars will increase the demand for video services, supporting more immersive content in the form of AR and VR.

Connected cars are evolving into software platforms capable of supporting a growing range of consumer digital services and commerce, driven by complex, rapidly advancing technology enablers both inside and outside of vehicles. Connected cars can facilitate consumer services spanning entertainment, digital payments, mapping and navigation, communications, productivity applications, verticals from health to finance, and the rapidly growing wave of mobility services.

But although the opportunities this presents are creating excitement, the reality is that many services are still at an early stage and some will not reach their full potential until vehicles are fully automated.

Many service opportunities are a longer-term prospect

Mirroring solutions will continue to play a role in the short to medium term

Figure 1: Evolution of consumer services in connected cars

Source: Ovum Service functionality & features

Leve

l of c

onne

cted

car

aut

onom

y

Digital radio (music, news)

Productivity apps

V2X communications VR applications

AR applicationsADAS

Health

Immersive TV & video media

Basic safety and security services

Embedded payments / multiple commerce scenarios

Integrated mobility services (MaaS)

Insurance

Smartphone-based content and apps

Rear-seat display streamed content (e.g. TV, video)

Zero Autonomy Full autonomy

Basic

Advanced

Simple point-to-point mapping & navigation

Smartphone payments for specific use cases (e.g. fuel, parking)

Smartphone digital assistants

Standalone mobility services

While connected vehicles will provide plenty of opportunities, they will also make digital service delivery and management even more complex than it already is.

Connected cars introduce a new integration and interoperability challenges. This will become more demanding as sharing vehicles becomes increasingly common because digital services will need to work across a wide range of vehicle types and models.

The provision of digital content to connected cars raises complex media rights and regulatory issues. For instance: Who will control access to media and entertainment in the car? And how will audio and audio-visual content be licensed, stored, and delivered? These issues are magnified in the context of car-sharing and pooling services as well as fully autonomous vehicles.

Identity management is a critical component of connected car security but also for digital service delivery and management. In the digital service context, identity management platforms need to be able to recognize and authenticate one or more identities in the relevant context. For example, this means denying children access to any vehicle control functions and payment platforms, but providing conditional access to TV and video. Identity management takes on a new dimension in shared vehicles, where multiple occupants need to be recognized and authenticated, for security purposes but also to ensure they are delivered the right services.

The rise of car-sharing has far-reaching implications for service personalization. In the shared-vehicle economy, drivers and passengers will use different vehicles all the time, which will make personalization highly challenging. Solutions will be needed that enable users to take their driver/passenger profiles with them, so that they can access all the relevant data they need to meettheir travel needs.

The in-car conciergeThe migration of digital assistants to connected cars is already underway. Digital assistants in connected cars will play a central role in orchestrating voice-activated, personalized digital services and facilitating commerce, just as they are starting to do on smartphones today. Today’s digital assistants do not understand cars or driving, but with advances in AI, particularly in the form of AI-infused driverless cars, digital assistants will start to play a central, integrated role.

Auto makers are starting to experiment with in-vehicle digital assistants that create a personalized driving experience associated with their own auto brand rather than that of a third party such as Apple or Google. This could be a point of differentiation for auto OEMs, giving them greater control over the services offered and how closely these are integrated into vehicle capabilities.

Digital paymentsDigital payments in the auto domain are gaining modest traction thanks to smartphone applications rather than embedded in-vehicle payment solutions, which are still at a largely experimental stage. Auto-related payment apps on smartphones typically facilitate fuel, parking, and toll payments as well as, to a lesser extent, payments in forecourt convenience stores and fast-food restaurants – scenarios where consumers value safety and convenience the most.

Embedded payments must add more value than smartphone apps to take off

Embedded payment solutions today are still mainly focused on supporting the same scenarios enabled by smartphone payment applications. This raises the question of how embedded payments can add more value than smartphone apps. To be effective and widely

used, embedded payments must offer consumers something that is noticeably different and better.

Driverless cars will usher in a new era for in-vehicle payments

The arrival of fully automated driverless cars will substantially increase the opportunities for payments, just as it will for other digital services. Payments and other interactive applications that require user inputs have clear limitations in driven vehicles for obvious safety reasons. Driverless vehicles free users to focus their attention on shopping, for both digital content and physical goods and services. Driverless vehicles will also become prime real estate for targeted advertising, particularly on longer journeys when passengers are in effect a captive audience.

Smart mobility servicesSmart mobility services are a fast growing category that enable the more effective and efficient transportation of vehicles and people, in both driven and driverless scenarios. Core smart mobility services cover car, taxi and bike sharing/pooling, rentals, ride-hailing services, journey planning, fare information, and ticketing. These smart mobility applications increasingly need to work in an integrated fashion so that together they can support a customer’s end-to-end needs during journeys and across different modes of transport. Mobility services will inevitably become more joined up: A person could use several types of mobility transport service during a single journey plus associated applications relating to ticketing and infotainment while in transit.

The rise of MaaS

The evolution of mobility services from standalone solutions to integrated solutions is leading to thedevelopment of Mobility as a Service (MaaS) propositions. MaaS platforms should be able to provide personalized,

Challenges ahead Assessment of selected consumer services

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real-time, and integrated mobility services and support a wide range of mobility scenarios in a joined-up fashion. This can include B2C and B2B models. Core services include journey planning across multiple modes of transport, including tailored recommendations based on a user’s needs and preferences (e.g. type of transport, journey time, and cost). This must be underpinned by intelligent analytics. MaaS platforms should also be able to support digital payments of various kinds (e.g. from a smartphone or wearable app or via mobile banking, prepaid smart cards, debit/credit cards, and embedded systems), across multiple modes of transport. As mobility services become more integrated, business models will have to adapt to include flexible billing or flexible mobility service packages covering several applications, and possibly based on a subscription model. MaaS service providers will have to work with transport authorities and local government. Taken all together, this is a demanding proposition.

Connected car and smart home integration servicesVehicle and home integration services are based on the premise that digital services and applicationswill be able to follow users and add value in both domains. This brings to mind the liquid mobility concept that has long been championed by telcos, with the notion of interoperable, integrated services that are able to follow users across any connected platforms that they use.

Initiatives in this area are already being driven by consumer tech firms, whose digital assistants act as an interface and bridge between the smart home and connected cars. Ford and Amazon are positioning the latter’s Alexa digital assistant in this way. The premise is that users could ask the Amazon Echo (i.e. Alexa) to remotely start their Ford car in order to warm it up or cool it down prior to a journey, for example.

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Connected car digital services are being facilitated by a wide range of technology enablers and infrastructure, both inside vehicles and externally (as summarized in Figure 3). Many of these technologies already work together and will only become more enmeshed. The technologies are complex and developing rapidly, which makes it important to gain an understanding of the dynamics at play.

AI is transforming the driving experienceThe combination of AI technologies, machine learning, and advanced analytics is transforming the driving experience, fueled by a growing range of data created from within and outside of vehicles. Players across the connected car ecosystem are investing heavily in AI. For example, in 2015, Toyota announced that it will invest more than $1bn in AI over a period of five years. AI is at the heart of autonomous driving but it has near-term applications in the form of advanced analytics and predictive modeling. For example, AI-powered predictive models drawing on contextual data are being used to radically improve ADAS and safety features.

Enabling advanced personalization

AI can also enable advanced personalization for connected car functions and services. AI systems will be able to recognize the driver, adjusting vehicle settings and services – such as journey route, seat position, in-cabin temperature, calendar updates, and infotainment options – according to the driver’s preferences. This level of AI-powered personalization will be particularly important for fully autonomous taxi fleets and shared car pools, where vehicles will need to recognize and adjust to a wide variety of different passengers.

Impact of selected enablers and technology developments

Figure 3: In-vehicle and external digital service enablers

In-vehicle External

Connected car digital services

& commerce

Source: Ovum

Embedded SIMsIn-car sensorsSmartphonesCamerasComputing and data storageHuman-machine interface

ConnectivityLocation/navigation softwareIn-vehicle dataArtificial intelligenceSecurity

Cellular networksWi-Fi

BLE beaconsSensor networks

Satelite linksGPS

Camera networks

Smart road infrastrucure (e.g. smart

signs, road markings)Cloud computing and

data storageExternal Data

Artificial intelligenceSecurity

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Consumers are living in an increasingly connected world, where on-demand digital services are available across multiple platforms, both in the home and on the go. Connectivity brings vehicles into this domain, making connected cars an important part of consumers’ digital lifestyle. Smartphone applications already work with connected cars thanks to mirroring solutions, and services that integrate connected cars and smart homes are set to grow in number. Digital assistants will assume increasing importance in connected cars. They will play a central role in orchestrating voice-activated, personalized digital services and facilitating commerce from connected vehicles, just as they are starting to do on smartphones. Digital assistants today do not understand the car itself or the nature of driving, but this will change with advances in AI.

The potential for Augmented Reality (AR) in connected vehicles is attracting a lot of interest, with a focal point being the use of AR-powered head-up displays (HUDs) that can project holographic information at the base of the driver’s front windscreen. But wider, more immersive applications are a longer term play due to safety issues, and will not completely realized until the arrival of fully autonomous, driverless vehicles.

Service providers must prepare for complex personalization challenges. In the shared-vehicle economy, different drivers and passengers will use different vehicles, which will make personalization challenging. Solutions will be needed that enable users to take their driver/passenger profiles with them, so that they have access to all the relevant data they need to meet their travel needs.

Service providers must likewise approach the autonomous-driving opportunity with a level head. Driverless vehicles will open the door to richer, more interactive digital services, but the reality is that fully autonomous vehicles will not be widespread commercial propositions in the next 10 years, although shared autonomous vehicles may appear sooner. The development of autonomous driving will take time and evolve through a number of linked, and often overlapping, stages.

To read the full report, contact us here: marketingdepartment@ovum.com

In summary

The road to fully autonomous vehicles The journey has started, but the end point is years away.

Still, the investment activity and R&D effort in autonomous driving is intensifying. All the major auto OEMs are investing in self-driving vehicles, not to mention bullish new entrant Tesla. In 2016, Audi announced that it was setting up a self-driving subsidiary. GM and Volvo have tested autonomous vehicles, while Ford is aiming to release a fully self-driving car in 2021. Auto makers are not the only ones eyeing the autonomous vehicle market: OTT players and consumer tech firms are also focused on this space (including Baidu). But the reality is that fully autonomous driverless vehicles are still years away and will not be widespread in the next 10 years. Fully autonomous shared vehicles such as shuttle buses or taxis may appear sooner, but privately owned driverless cars will be confined to very high-end premium models that only a few will be able to afford.

There are still multiple issues that need to be addressed concerning autonomous driving, including: • creating regulatory frameworks • resolving safety and security issues • provisioning smart road infrastructure • provisioning deep cellular network infrastructure • setting industry standards • deciding on commercial pricing • encouraging consumer understanding and acceptance

Connected vehicle security is complex and challengingConnected cars are vulnerable to cybersecurity breaches because they are complex and composed of many computer-based systems and digital services which are often brought together by a range of disconnected players.Cyber-attacks on connected vehicles can range from engaging the car horn to more ominous scenarios such as remotely unlocking vehicles or interfering with brake functions and power steering. In fully autonomous vehicles, cyber-attacks could potentially take full control of the vehicle. In a worst-case scenario, cyber-attacks could endanger drivers and passengers on the road. Alongside cyber-attacks that could lead to physical theft or endangering drivers, is the threat of data breaches such as fraud and identity theft – and potential data privacy infringement.

Connected vehicle security needs to be part of vehicle design - an integral part of the vehicle lifecycle that is regularly updated. Security solutions will need to draw on a mix of technologies and systems, including back-end firewalls, data encryption, and biometrics to help physically authenticate vehicle users.

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