Revolutionary Measures

Driving you round the bend

Driver in a Mitsubishi Galant using a hand hel...

Over the years the humble car has been getting smarter. From electronic control units that monitor and automatically manage performance (and flash alarming warnings at regular intervals) to in-built sat nav devices, cars are becoming driven by technology.

And now it looks like the internet is coming to a vehicle near you. Intel, for example, claims that, for some brands, by 2014 every car they sell will offer some sort of internet connectivity and analysts IHS say that over 50% of consumers would be swayed by the presence of an internet-capable device when it comes to buying a car.

So what do they predict connecting your car to the net would enable? Obviously there’s entertainment – surfing the web, updating social media, listening to internet radio and watching streaming content. But where analysts see the biggest growth is in apps that help the driving experience – from updates on the nearest cheap petrol station to finding you a parking space in a crowded city.

All very impressive sounding, but will it actually catch on and will car manufacturers actually recoup the billions they’re investing in connected technology?

In my view, the market is going to initially be a lot smaller than people think – but it does provide a potential new revenue stream for car manufacturers if they retain control. In terms of size of market there are four ways that the car market is very different to other internet-connected devices.

Firstly, not that many people buy cars new, so even if half of new cars are smart, that will take a while to trickle down into the mainstream, by which time technology will have moved on in leaps and bounds.

Secondly, a lot of the apps being touted around can already be found on 3G smartphones. Plugging them into a voice controlled connected car should guarantee an easier experience but as anyone that’s tried speech control will tell you it doesn’t always work.

Thirdly, there’s the safety aspect. You can’t use your mobile phone in a car, and the complex apps that some people are talking about would be equally distracting to the driver. In the US a quarter of car accidents are attributed to mobile phone use. I’m sure ‘I was arguing with my car when I crashed’ would soon enter the list of insurance excuses.

And finally, the car market is in turmoil as cash-conscious consumers desert mainstream brands for cheaper alternatives – Peugeot for example lost £4.3 billion in 2012. Is it likely that such advanced technology will be in the latest generation of Kias anytime soon?

But if car manufacturers can get it right they would be able to add a completely new revenue stream to their operations. Rather than just selling a car, they’d be able to act as a gateway to the internet, taking a cut on every app installed in the vehicle and providing ongoing services (such as mapping) on a subscription basis. You may even get to the point of cars, like mobile phones, being subsidised if you sign up to certain packages.

However the big challenge to the automobile industry is adapting to this new reality when it happens. Can they avoid losing out to the likes of Apple, Samsung, Google or mobile phone networks by keeping control of the relationship with the customer? When you look at other industries transformed by the internet (such as music or retail) it isn’t the traditional players that have survived, but young upstarts. Ready for a Google car? They already have one on test…………

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February 13, 2013 - Posted by | Uncategorized

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