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Connected car: A catch 22 for the car industry

Michael Vakulenko · June 08, 2015

More and more car makers understand that “digital” will bring profound change to the industry. Audi chairman Rupert Stadler recently said at CES Asia in Shanghai:

“We are experiencing a digital revolution that is having a faster and stronger impact than the industrial revolution. This is the new normal. It will not stop.”

connected-car

The challenge, though, is that the industry often sees connected cars as a linear extension of its legacy business model. This reminds me of how Nokia in 2007 saw the iPhone as competition for better phones. The trends – and history – point in a very different direction. The connected car will be a completely different ball game with new competitors and business models.

Connectivity opens the car to Internet companies, which create, deliver and capture value in completely new ways. Software already disrupted many industries. Today there are clear signs of how the encounter with the Internet can become a catch 22 for the car industry as well.

A smartphone accessory on wheels

Car makers are busy adding connectivity to their cars. Software companies take a very different approach – they instead focus on people, “the connected driver”.

For software companies it’s not about connecting the driver to the car. It’s about keeping drivers connected to their digital lives through their smartphones. Google’s Android Auto, Apple’s CarPay and numerous startups like Automatic, Carvoyant, Navdy, Vinli, Dash, WayRay, Zubie and many others work to turn the car into a smartphone accessory on wheels.

Google’s Fabian Tamp says in the video introducing Android Auto to developers:

“Your car is by far the most complicated accessory we’ve ever attached to an Android phone.”

On that rare occasion Apple agrees with Google:

“The accessory ‘Toyota’ uses an app you do not have installed”

“The accessory ‘Toyota’ uses an app you do not have installed”

The strategy seems to be working pretty well for Google and Apple. Joanna Stern writes in the Wall Street Journal:

“After a week cruising around with Android Auto, I’m convinced this is the future of in-dash technology. Taking the software design out of the hands of car makers and putting it in the hands of phone makers should have happened long ago.”

Developers: From podcasts to disrupting after-sale services

Apple, Google and startups like Automatic and Carvoyant bring proven app paradigms together with legions of developers to the service of the drivers. [tweetable]The goal is to turn the car into a platform allowing startups to experiment with new use cases[/tweetable] and business models.

VisionMobile surveyed 4,000+ Internet of Things developers for our IoT Developer and Platform Landscape 2015 report. It turns out that 61% of connected car developers make apps for Google’s Android Auto or plan to do so, versus 50% for Apple’s CarPlay. Compare that with 22% of developers pinning their hopes on the car-maker-friendly MirrorLink platform.

[tweetable]These are still the early days of the connected car developer ecosystem[/tweetable]. Developers are still experimenting with a wide range of car-specific use cases: From listening to podcasts, expense reporting and teen driving to trying to disrupt the most lucrative part of the car business – after-sale services.

[tweetable]Dealing with repair shops and dealerships is the most annoying part of car ownership experience[/tweetable]. A growing number of startups try to change that with the model of on-demand services, which works so well for Uber.

For example, YourMechanic in the US connects car owners with independent certified mechanics in their local neighborhood. The service helps you find the right mechanic at a fair price, pay for parts and services, and get your car fixed conveniently at your home or office. YourMechanic created an app for the Automatic app store that allows the service to collect real-time diagnostic information from your car, making the service much more useful.

The writing is on the wall

The writing is on the wall for the automotive industry. [tweetable]The connected car, as it turns out, is much more than adding connectivity to cars[/tweetable]. To compete in this new market car makers will need to learn how to think and act as a software company, leaving behind the comfort of their traditional business model.

Android Auto, CarPlay, Automatic, Carvoyant and other ecosystems are leading us to the future where the key purchase criterion for the car is not “what the car can do”, but “what you can do while in the car”. This is much like smartphones evolved from “what the phone can do” in the Nokia era to “what you can do with the phone” in the iPhone/Android era. It will be rather unfortunate, but predictable if car makers repeat Nokia’s mistakes.