Summary
The diffusion of connected cars has been advancing continuously in recent years. Data transfer via cellular networks is essential for connected cars. Commonly, data transfer is realized using SIM cards which are either already built into a car (built-in) or brought into a car and inserted into a dedicated slot (brought-in). Brought-in solutions also comprises bringing a device (smartphone, tablet) into the car and linking its SIM card to the connected car system (tethering).
WIK estimates that there are currently approximately 4.6 million cars (out of 44 million in total) with connected car systems in Germany. Thereof 3.1 million rely on built in technology whereas 1.5 million use brought-in solutions. WIK forecasts that this number will double (to approximately 9 million) until 2018. In 2015, about half of the newly registered cars in Germany had connected car technology installed; this share has increased tremendously in contrast to recent years. Built-in technology is mainly used by premium OEM, whereas brought-in solutions are predominantly relied upon by OEM in the volume segment. In order to forecast the emerging data volume (and thus the increasing demand for cellular networks), WIK has employed different scenarios: Depending on the usage intensity, the total data volume accounts for 1.15 to 5.58 petabyte. Due to the rapidly rising number of vehicles with connected car technology, the data volume has soared in past years; it can be assumed that this trend will continue.
Services based upon the connectivity of vehicles are not solely offered by OEM and component suppliers; also telecommunication companies and over-the-top (OTT) service providers are operating in the connected car market. The significant connected car services can be classified into three categories: security, infotainment and comfort. However, one service might be assigned to more than one category. For the implementation of the services the suppliers mentioned above cooperate with one another. Telecommunication companies provide their SIM cards to the OEM and operate their backend infrastructure. Google and Apple whose services can be used in vehicles have forged global alliances with numerous OEM.
In light of the increasing number of services, the actors mentioned above might pursue new strategies and business models in the context of connected car. MVNO models for OEM and the operation of platforms by telecommunications companies are viable options. With more and more data from vehicles becoming available, analysis of these data may hold additional business potential. Ultimately, this may lead to OEM moving into adjacent areas of connected cars, such as the health and the insurance sector. In spite of present legal uncertainties automated and autonomous driving represents a very significant market in the foreseeable future.
Discussion Paper is available for download.
