How Do Automakers Generate Additional Revenues from Connected Vehicles?

Connected vehicles provide auto manufacturers, and adjacent industries, the opportunity to establish beneficial relationships with customers over the entire ownership cycle. The capability to efficiently deliver over-the-air (OTA) communications, fixes and upgrades, provides stakeholders with the opportunity to offer innovative services, generating new and recurring revenue streams.

100% Connected Cars Happening Sooner than Expected

The global automotive market is already seeing a significant rise in the adoption of connected vehicles.  By country, the largest markets for connected car sales in 2017 were China 32%, USA 13%, Germany 11% and UK 9%.  Research by Counterpoint’s Smart Automotive Tracker service, expects that more than 125 million cars fitted with embedded connectivity will be shipped in the next five years.  By 2025, it is expected that all cars sold in developed markets, i.e. EU, NAFTA, China, Japan and Korea, will include originally fitted embedded telematics systems.

Data-the New Fuel for Connected Cars

Embedded connectivity is fundamentally changing the relationship between automotive stakeholders and vehicle drivers.  Much like mobile phones, connected vehicles are generating and exchanging hundreds of terabytes of customer data daily, primarily through 4G LTE networks. With multiple cameras and sensors fitted as standard equipment, automotive manufacturers, suppliers, agencies and dealers, are now collecting valuable pieces of usage information.

The potential monetization of this information is substantial. At a worldwide level, Counterpoint estimates connectivity revenues will exceed 500 billion US dollars by 2030.

Currently, services available and offered through Connected Cars include:

  • Remote door unlocking/locking, engine starting, personal security alerts, vehicle theft prevention services
  • Emergency assistance alerts and breakdown notifications
  • Preventive maintenance alerts, remote diagnostic information, service reminder alerts
  • Onboard navigation, vehicle tracker, geo-fencing, traffic and speed camera alerts, parking information, weather information, fuel station or recharging point information, travel guides, satellite imagery, location sharing.
  • Infotainment, news, music, video, event feeds, mobile communications, internet access, social networking, location-based information, restaurant reviews/reservations and other concierge services

What Will it Take to Realize These Potential Revenues?

The realization of this potential revenue depends largely on stakeholders using the information collected, to develop next-generation products and services that customers actually want. By meaningful analyses of trends and patterns, insights need to be drawn to provide a better driver experience, improve vehicle quality, reliability, and result in a stronger competitive position, offering additional revenue opportunities. Much like how open platform application development facilitated smartphone adoption or, as some may say, addiction.

As automotive OEMs adopt telematics and analyse data generated by vehicles, they also have the potential to:

  • Enhance brand loyalty, through qualitative/quantitative insights and deeper understanding of relationships with their customers
  • Improve vehicle product design, to be extra competitive
  • Extend internet related services to customers, in a safe and secure manner, while they are on the road
  • Track vehicle speed, location data, continually improve the accuracy of traffic simulation and algorithms
  • Identify erratic driving behaviour, i.e. rapid acceleration, sudden braking, other forms of aggressive driving

How Do Adjacent Industries Benefit?

The entire automotive ecosystem also stands to benefit from these alternate revenue streams. The following stakeholders are already demonstrating their ability to stay ahead in the game:

Automotive Dealerships

Dealers, so far, remain the only connection customers have to their vehicle brand. While dealers are independent businesses, consumers do not distinguish between them and the original vehicle manufacturers. Connected cars offer opportunities for OEMs and dealers to work seamlessly together. For example, remote capabilities with on-board-diagnostics systems and sensors, allow for accurate assessment when a service or repair is needed. The data pattern is compared to known issues, resolutions determined, parts identified, and the nearest dealership notified. As soon as the customer or the vehicle arrives at the workshop, the technician with the right skills is already prepped, with the right tools and parts, minimizing any inconvenience to the customer, improving overall productivity and workshop throughput significantly.

Further, analytics are detecting emerging trends across the entire cars-in-service population, improving forecasting accuracy, optimizing parts inventory, minimizing carrying costs and improving fill rates. Additionally, such analysis has streamlined recall campaigns, reducing campaign cycles, all at lower costs.

OEMs and dealers now have accurate insight into where vehicles actually operate – where people stay, work, go to school, shop etc. By focusing marketing efforts specifically and efficiently to drivers within their assigned territory, dealers can offer enhanced convenience to their customers as well as identify where they may need additional servicing centers or, if required, relocate the dealership.

Automotive manufacturers, in association with dealers and finance companies, have also successfully applied automated analytics at the point of sale to generate personalized financing and leasing options. The results: significantly increased customer consideration, closure, loyalty and advocacy.

Insurance Services

On-board telematics systems are encouraging insurance companies to reinvent their business. Telematics enables insurers to track actual vehicle usage, providing a sophisticated, unobtrusive method of gathering and evaluating relevant data, i.e. driving speed, acceleration, braking patterns and airbag deployment. With this factual information, insurers can make more accurate risk assessments, streamline their claims processing and, eventually, improve their bottom lines. In addition, by offering customers incentives for responsible driving, overall safety on the road will improve.

Local Governments

Connected cars are providing local governments with invaluable data to make informed and important decisions related to law enforcement, traffic management and public transportation. Some Smart City leaders are already taking advantage of the digital and physical convergence to efficiently and effectively manage their municipal systems. Initiatives like making parking faster and easier to find, cutting down on circling and helping reduce emissions. All while keeping paths clear for public transport.

 What are the Challenges Ahead for Connected Cars?

The average lifecycle of a car is about 10 years. Automaker’s need to take technology decisions today for connected cars that will go into production two to four from now.  For the cellular connectivity strategy to remain relevant over 12 to 15 years, significant challenges and assumptions need to be collaboratively addressed by OEMs, telematics control unit suppliers and service providers, namely:

  • Automakers must manage software in the field reliably, cost-efficiently and, most importantly, securely – not just patch fixes, but also continually upgrade and enhance the functionality
  • Cellular solutions need to be agile, to be compatible with emerging network technologies over the vehicle lifetime, e.g. 5G to be the industry standard in the next few years
  • The chosen solution must deliver reliable, seamless, uninterrupted coverage in all countries and markets where the vehicles are sold and driven
  • Solution developers must offer scalable, cost-effective ways to develop upgradeable software, that can be universally deployed across technologies, hardware and chipsets

As Connected Vehicles proliferate, the auto industry will need to adapt and transform itself to the growing technological dependency. OEMs and Tier-1 manufacturers must partner with technology specialists to thrive in an era of software-defined vehicles. As connectivity requires skills and capabilities outside of the OEMs’ domain, automakers will necessarily have to be software developers. An open platform environment will go a long way to encourage external developers to design apps for vehicle connectivity platforms.


Connected cars are indeed the next big thing in an ever-expanding, perpetually connected digital world. Automakers and adjacent industries need to urgently re-evaluate their interdependency and look at further ecosystem possibilities, to be in the forefront of realizing emerging multi-billion dollar revenue opportunities.