Will phone-based digital car keys unlock sales – or pose a new challenge for dealers?

By Paul Smith, Director, Traka Automotive

Like just about everything else automotive, car keys are getting smarter and they are getting ‘softer’. Computer code is replacing the physical indentations and notches that used to actuate door locks and engine ignition. Transponder fobs, using short-range wireless links, have superseded the need for physical connection to unlock and start most new autos. The various forms of smart keys to date haven’t proved a significant sales driver, but the next technology leap to completely digital keys could have a much bigger impact on buyers’ decision-making.

Some automotive manufacturers are abandoning the traditional concept of physical keys and moving key and other control functions into new mobile-ready apps. Jaguar Land Rover is porting the latest versions of its remote functions app onto smart wearables including Android Wear and the Apple Watch. The new app’s connected features including the ability for drivers to remotely start the engine, activate climate control settings, check vehicle fuel level, confirm location (if in a large car park, for example), and unlock doors to let friends and family into the car.

Volvo’s ‘digital key’ app already places key functionality onto a device most drivers will already own: an Android or iOS smartphone. Using Bluetooth, the Volvo app will let a driver open the door and start the car without necessarily touching the phone. The digital key also means that, in theory, key codes can be exchanged between phones so cars can be more easily shared.

To most car buyers today, these developments might seem more gizmo than must-have. But thinking ahead, dealerships know OEMs like Volvo don’t invest megabucks in R&D without expecting reasonably quick return on their investment in terms of increased sales. Volvo also knows that making car key functionality available via smartphone apps is not just about appealing to motorists who have an unhealthy attachment to their handsets. It’s also about ironing out a range of car key-related issues simultaneously, and offering a more rapid, cost effective method of upgrading security around car access in the future.

Replacing lost car keys, for instance, is now an increasing bugbear for dealerships as well as for owners hunting for keys around their own home. The escalating cost and aggravation involved in replacing conventional car keys has become, as former PM John Major used to say, “not inconsiderable”. Insurer Keycare calculated that since 2013 the cost of replacing car keys has risen, on average, by nearly 30 per cent. So that replacement of prestige car keys today routinely exceeds £250 and can cost as much as £700!

Prestige-end dealerships have nearly all added key replacement insurance as part of the F&I shopping list they offer new car buyers. But would a move from physical to digital keys kill that relatively new income stream off? A reduction in the number of physical keys being lost might also bring about a reduction in additional revenue some dealerships make when supplying replacement keys to customers.

Even if car buyers aren’t smitten by this new phone-based key, and just want something to do the basic tasks of opening and starting a vehicle, there is the potential to have your mobile-based key as a back-up just in case. After all it is already clear that many of us take more care of our smartphones than we do of our car keys.

Less positively for the new soft keys, if your mobile phone is stolen or hacked by cyber-criminals, they are likely to target access to car control apps because they are the juiciest prospects for ransomware attacks.

There is no doubt that dealers today have real problems keeping track of large volumes of physical keys. We do not hear about it much in the trade, but it’s there as a quiet (or even silent) loss to the business. I know because I speak to DPs right across the country week in week out who are wrestling with it and often select our key management system to tackle it head on. It is likely that in the future our systems will have to secure digital as well as physical keys.

The other issue for dealerships of a transition towards digital keys is that it offers car manufacturers a new way to establish direct relationships with the owners of their products. It represents a threat of further disintermediation of dealers, especially if dealerships don’t gear up to securely host, serve and maintain digital keys. In a worst case scenario, digital keys might be downloaded directly onto car buyers’ handsets from an OEM’s dedicated web portal.

So whilst the accusation that Volvo is ‘killing off’ traditional car keys with its digital alternative sounds over-emotive, the company’s initiative could be the first stage in the eventual demise of the hallowed ritual of the physical ‘key handover’ by dealer staff at the conclusion of a sale or service.

So the only remaining question is: how long will it take us to get used to knowing we have our car (back) in our control when we hear the familiar ping on our smartphone as our key software download completes? It may sound like magic today, but if autonomous cars are likely to be on our roads in volume in less than 10 years (Uber is piloting self-driving taxis in the Pittsburgh already), it seems highly unlikely that smart/mobile-based access to cars will not be an option for most new vehicle owners within 2-3 years. Are you ready to take advantage of this eventuality?