Connected Vehicle Services: From Great Hopes to Great Despair

In our 2020 Connected Vehicle Payments Global Study, we were predicting that in-vehicle payment solutions would generate a whopping €537 billion in transactions by 2030.

As we are almost mid-way, does PTOLEMUS’ vehicle commerce market prediction still holds true?

Casualties of OEM inaction

10 years ago, we could all expect successes such as OnStar and SiriusXM to generalise and become global. Unfortunately, recent developments have not been pleasant for many of key solution providers or intermediaries in the domain:

• Xevo, the inventor of the v-commerce solution category, has been “digested” by Lear Corp, which unfortunately has not converted the acquisition into a successful business;
• Otonomo, the inventor of the vehicle data market place, has been acquired by Urgently, which has also ceased its data activity;
• Despite being partly owned by General Motors and an attempt to sell the company to Google, Wejo – Otonomo’s most prominent competitor – has entered administration;
• After the recent GM privacy outrage, Verisk discontinued its telematics business.

How could have this happened in a world where virtually all new car models sold in Europe and North America are now equipped with cellular (generally 3G, 4G or 5G) connectivity?

Unfortunately, connectivity is just the first of many steps necessary to make vehicle commerce work. To a large part, automotive OEMs have been very slow to open their data to third parties. In addition, they have not developed the PII (Personally Identifiable Information) collection and renewal engines that are critical to most connected vehicle data and payment services. The class action lawsuit against GM and LexisNexis has emerged only because GM did not pro-actively design an adequate consent management system.

This has made their chief v-commerce partners Xevo, Wejo and Otonomo casualties of OEMs’ foot dragging.

And regulators on both sides of the Atlantic have generally been slow to enforce clear rules on the sharing of vehicle data with third parties.

Does that mean that this is the end of the connected vehicle data business? And consequently the hope of using connected vehicles for payments?

Will all mobility payments effectively end up being handled by Alphabet-enabled systems on our smartphones, as we were assessing in our recent Google in Mobility Report?

Too little, too late?

Well, after more than 15 years of hopes to see connected vehicle services take off – and dozens of consulting assignments in the domain – I could easily fall into despair.

Almost 25 years after the opening of the GPS’ Open Service to civil applications, how many of us are using connected vehicle services? A tiny minority. Typically 50+-year old new car purchasers of high end vehicles.

BMW (20 million connected vehicles) and Tesla (5 million connected vehicles) are the industry’s biggest successes because they have systematically and consistently pushed connectivity in their vehicles and delivered valuable services with it. GM, the forerunner, still sports 15 million connected vehicles but to deliver what services?

While the number of connected vehicles is increasing fast, notably thanks to the EU’s eCall mandate, the number of actual vehicles with an active embedded connected service is on a slow growth trajectory. This is because almost all OEMs charge for connectivity after the initial period (12-36 months) and… never communicate about the uptake rate of these services afterwards because they are typically between 0 and 10%.

Even BMW has admitted defeat by giving free access to its Remote Services (remote unlock and diagnostics, etc.), … which is another way to obtain the continuous consent of their customers to collect data and keep precious maintenance information.

In fact, much of the connected vehicle services markets we have been dreaming of have not yet materialised. And if they have, it is largely despite OEMs rather than thanks to them.

To find innovation, look at… the aftermarket

Much of the innovation has come through the aftermarket world, first with TomTom in PNDs then with Uber, Waze and EasyPark in smartphones and Lytx, Octo and Webfleet in telematics devices. Uber now has 150 million users, EasyPark 45 million, PaybyPhone 43 million; Waze 130 million, Geotab’s 6 million vehicles equipped.

What is the single largest connected vehicle payment business today?

Electronic tolling, another aftermarket success. Toll Collect, the German nationwide truck toll operator, is expected to collect over €10 billion in tolls this year, using aftermarket GNSS-enabled connected devices. In our Electronic Tolling Europe Study, we estimated that satellite-enabled tolling, now present in 8 countries, will bring more than €21 billion in revenues to European governments in 2024.

So is the (embedded) connected vehicle vehicle services market lost by OEMs?

This seems to be the recent conclusion of Ferrari, which will remove the connected infotainment system from its upcoming vehicles, relying instead on smartphone mirroring with CarPlay and Android Auto.

According to Jim Farley, Ford’s CEO:

“We lost that battle 10 years ago. So like get real with it, because you’re not going to make a ton of money on content inside the vehicle.”

So yes, the screen size will keep widening but it will be populated with smartphone content.

Will the next connected vehicle victims be the Inrix, Parkopedia and HERE who are also almost entirely dependent on car makers? And who are now disrupted by the transition to EVs?

Obviously, connected vehicle payments are not equivalent to connected vehicle services.

Whereas many services are based on a subscription business model, connected vehicle payment providers will mostly generate revenues from transaction fees. However, all payment executives know that a model based on transaction fees requires scale to be profitable. This means that it is critical for the industry to not only convince a few privileged users but to promote a real ecosystem with a large number of suppliers and a very large number of users.

Does that mean that our connected vehicle payments market forecasts were far too optimistic? We give our answer in a second blog here.

To understand how to leverage existing vehicle connectivity to enable your services, contact Frederic Bruneteau.