Connected Car Revenues to Grow Five-Fold by 2025

United States and Europe account for majority of global demand; China growing faster

Safety regulations and customer experience driving exponential growth globally

 Seoul, Hong Kong, New Delhi, Beijing, London, Buenos Aires, San Diego

March 12th, 2019

Revenues from connected cars are projected to grow five-fold, reaching over US$35 billion by 2025, the latest research by Counterpoint’s Smart Automotive Service shows.

For the purpose of this study, a connected car is defined as a passenger car, having an embedded SIM card for internet connection, with proprietary Telematics Control Unit (TCU) hardware, managing data exchanges. The study further categorizes potential OEM revenues by services offered and hardware equipment installed. Connected services include advanced navigation, infotainment (music, social media, news, etc) subscribed by the driver, as well as emergency assistance and diagnostics alerts as valued added, and in some cases, mandated services.

Commenting on the analysis, Aman Madhok, Senior Analyst for Smart Automotive at Counterpoint Research said, “Deep technology applications, specifically, smartphones and diagnostics notepads, in daily life has created expectations for seamless ‘on-the-go’ technology accessibility in cars, especially among emerging millennial car buyers. Connected cars are gaining preference with the rising awareness of their enhanced overall comfort, safety and convenience while driving.”

The study reveals that more than 274 million connected passenger cars will be added globally during 2019-2025 period. While the United States and Europe together accounted for most connected car shipments in 2018, during the forecast period, China is expected to develop into a key market, growing to almost one-fourth of global shipments by 2025.  Aman adds, “The United States is considered to be the pioneer in connected cars, thanks to GM which has been offering Onstar in the market since the mid-1990s. The European Union Parliament’s eCall mandate has been the primary driver for the European market. Cost sensitiveness of car buyers in China, coupled with a lower share of premium cars, had initially stunted connected car penetration in the country.  However, with more and more connected features being offered now by OEMs in mainstream car models, significant growth is projected.”

OEMs find connected services to be lucrative channels, generating additional revenues and profit margins. In partnership with telecom operators, OEMs offer car owners optional connectivity plans ranging from daily, monthly to annual subscriptions. For example, in the US, AT&T offers monthly plans between $10 to $20 on its network for backhaul. The Average Revenue Per User (ARPU), is the highest for developed countries, where data plans are amongst the most expensive in the world, e.g. $180 annually in the US in 2018. For emerging economies like China, the ARPU is considerably lower.

Aman adds, “Despite the fast growth in connected car shipments, China’s connected car market will see slower revenue growth, due to lower ARPU from its drivers, when compared to the United States.”

Exhibit 1: Global Connected Car Shipments (%)

 Vinay Piparsania, Consulting Director for Smart Automotive at Counterpoint Research, added, “With more and more countries adopting their own versions of Europe’s eCall, automotive OEMs are taking the opportunity to install original and proprietary embedded telematics systems, opening up significant revenue opportunities to offer connected and subscription-based services globally. By incorporating innovative smart connected features, OEMs are looking to differentiate their models.”

Cautioning on the challenges for automakers, Vinay added “Digital features in cars today are expensive and complex. OEMs need to up their game to provide in-car experiences which are as seamless and intuitive, as smartphones. This explains why OEMs are looking to collaborate, and even invest, in software companies. While OEMs continue to prefer embedded onboard infotainment to diversify their revenues, it is clear that the smartphone’s dominance on personal connectivity is overwhelming. There continues to be considerable debate over how connectivity will develop within the vehicle, i.e. the choice between built-in connectivity or brought-in mobile systems. OEMs failing to innovate, and bring costs down through scale, will lose the race, leaving behind significant revenue on the table.”

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Analyst Contacts:

Aman Madhok
+91 9560384548
[email protected]

Vinay Piparsania

+91 9971005882

[email protected]