What will the Connected Car revolution mean for car dealers?

By Paul Smith, Director, Traka Automotive

Recently, I was emailed an image of the Connected Car which showed a car of the future split into four parts, each controlled by different organisations. Uber, Google and Apple were the first three organisations highlighted. That left only about 25% of the value of that car in the hands of the original car manufacturer. It got me thinking what this vision of a world dominated by Connected Cars would mean for car dealerships in 2020 and beyond.

There is no doubt that the Connected Car is a trend that is worth planning for if you are running a dealership today as the vision will become a reality sooner than many imagine. Several developments have hastened its arrival.

Firstly, 2011 saw the emergence of the Open Alliance 100 Mbps BroadR-Reach (OABR) Automotive Ethernet standard supporting faster and more data intensive data communications, primarily focused on providing comms for infotainment, parking cameras and on-board diagnostics. Automotive Ethernet will see upgrade to 1Gbps over the next couple of years and will gradually replace the incumbent communications protocols and interfaces like CAN (Controller Area Network) and LIN (Local Interconnect Network).  Why is this going to happen? There are good reasons for this.

Firstly, the incumbent comms protocols and interfaces are not geared to handle increasing volume of data that they are required to handle as increasingly sophisticated electronics is being fitted into new cars. By contrast, Ethernet is geared for handling large volumes of data. By adopting Ethernet you also expose the car to the open source software (OSS) revolution which has already transformed so many markets from the telephone, to the surveillance world and even the factory floor.

Secondly, there is a very real problem of traditional in-car systems transmitting data via copper cabling which is relatively heavy and expensive compared with the single, unshielded twisted pair (UTP) cabling used for Ethernet data transmission. As more electronics is put onto modern cars so the amount of copper cabling being run around the car has increased, weighing it down. Broadcom has estimated that replacing copper wiring with UTP cabling can shave as much as 45 kilograms from a typical car’s weight, assisting manufacturers to meet increasingly stringent fuel emission standards and increasing performance.

Thirdly, the IP (Internet Protocol) revolution has already come to more markets than I would care to mention and the impact on all these markets has been massive. Innumerable efficiencies have been found by getting IP-based systems talking to each other.  Smarter, more holistic, systems are thus created which deliver greater functionality and more automation, helping to unlock previously undreamt of business benefits.

Some of these benefits are already being felt on high-end cars like new BMWs’ 360 degree parking cameras which are all linked via Ethernet. We are at the beginning of the IP journey – Ethernet’s penetration of the new car market sat at just 1% last year but according to ABI Research will rise to 40% in 2020. When both Apple and Google start sizing up the opportunity you know things are about to change.

Apple wants to control the in-car ‘infotainment’ market and has developed CarPlay platform which essentially takes all the things we do with our iPhone today and transfers them onto your car’s dashboard. So you can get directions, make calls, send and receive messages, listen to music and download apps and infotainment content, all from your CarPlay-run dashboard.

We will also see a fresh crop of new apps specifically designed to help you get from A to B in the quickest and safest manner possible. Market research house IHS expects car manufacturers to be developing and integrating apps into their vehicles at a growing pace. Most popular apps, it projects based on its consumer market research, will be ones that improve the driving experience including navigation, weather, music, news and social networking apps, according to the research house.

Google has developed its own driverless cars and sees strong growth in this area. There is now doubt that the market will see an increased number of Driver Assistance Systems (DAS) being rolled out.  Within a few years, it will also be the norm for vehicles to have their own direct connection to the internet – with all the opportunities, as well as security and safety challenges this implies.

Swarm intelligence system is one good example of a so-called ‘Car2Car’ offering which will enable you to pass on information about the traffic you are encountering to other road users behind you automatically - to help provide early intelligence of traffic build up.

Telematics could be integrated with traffic management systems, potentially providing much more accurate data for redirection of cars. Partnerships between app developers and integrators and OEMs will be rife. Half of all car infotainment systems could be run using Apple’s iOS in the car by 2018, according to ABI Research.

Then there is the Uber revolution. Already car manufacturers are putting forward their own car sharing services responding to changing habits of consumers. We know from studying Millennials’ behaviour in the US that less young people are rushing to get their driving licenses and buy their first cars. In the US, 19-year olds with a driving license sits today at 63%, down from 83% just 10 years ago. The 18-34 year olds in America have bought 30% less cars than the historical norms. Many are instead using services like Uber to share cars or renting when they need one.

If car ownership in the west has peaked, what implications could that have on car dealers that depend so heavily on those sales?  Well the answer is to begin to start building services for this new generation of connected consumers. Will dealerships be running their own vehicle sharing services in the future? Who knows? There is no doubt that IT skills of technicians in dealerships will need to evolve. Data networking skills will be more and more vital. We may even see the day when software developers are working in dealerships to customise apps for specific segments of their customer-base.

Infosecurity bug fixing and firmware upgrades could also be handled in the dealership or via a cloud-based service, paid for by monthly subscription, which dealers might be able to run. Other franchise dealers may choose to resell their manufacturers’ IT support services which customers pay for monthly alongside their car leasing policies and GAP insurance cover. Dealers could start to look more like IT integration firms than we dare to think in 10 years’ time.

Other ‘outside vehicle’ integrations, sometimes called ‘Car2X’ apps, that are already being scoped is smart home integrations so that as we drive away from our home it will possible for the navigation system to automatically send an instruction to your home’s thermostat to turn down the heating and power-down devices to save electricity.

Clearly some of this Connected Car future is a long way down the track but some of it is here already and being included on some prestige models. My experience, having worked in the IT software world for many years, is that when markets migrate to IP and begin transmitting data over faster Ethernet, this has both a transformative and disruptive effect on markets.

It makes integration between disparate systems much easier. It brings instant efficiencies and a vast well of technology innovation from the software development hotspots of the world. It is time for dealers to start thinking about how they can add value in this vast new IP connected car world which could be ubiquitous within 10 years?