I love your connected car but I am not paying
It is a well-known fact that one
of the top most challenges that the auto industry is facing in pushing the
connected car is in getting customers to pay for connectivity services within
the car. A recent McKinsey report on connected car states through its survey that,
though more than 25% of buyers had prioritized internet connectivity over
features such as mileage and engine power, not many were ready to pay for smartphone
integration or for in-car subscription services. This is a deadlock that will
hinder growth and cast unnecessary apprehensions during this new technology adoption.
OEMs will want to pass the additional (and recurring) connectivity cost and
subscription charges to the customer and customers would want everything for
free. This is a classical stand-off as seen umpteen number of times with new
technology. And there's always one winner - the customer.
I am reminded of the TV show on National
Geographic channel about the migration of wild beast in the Sahara. There comes
a point when the first batch of wild beast standing at the edge of the river
and staring at the hungry crocodiles and surging river are no longer able to
contain the push and pressure of the millions that have gathered behind them
and urging them to move on past the clear and present danger. Automotive companies
are facing the same pressure when it comes to emerging technology like Internet
of Things (IOT) or Connected Cars. There will be a breach and in spite of the
data privacy concerns or the payment terms for connectivity and subscriptions,
the technology surge will ensure that some or the other company finds the will
and means to reach out to mass customers. It is hence, in the best interest of all
auto OEMs to acknowledge this change and make it easier and convenient for
customers to be part of the connected car story immediately.
What this means is that auto OEMs
will have to work in close coordination with telecom service providers to provide
internet connectivity within cars at bare minimum, if not zero, cost. There is
also a thing or two to learn from the telecom service providers. In the
beginning, mobile charges were exorbitant and mobile phones were scarce. But
once the industry expanded and the virtues of using a cell phone became evident
to customers, adoption rates increased and prices crashed. Same goes for data
plans well. Telecom providers attracted and encouraged early adopters to use
internet on their smart phones by providing lucrative pricing. Once the
customers poured in by the millions and were hooked on, there was no turning
back and telecom companies could then re-look at their pricing model and focus
on profitability. I think auto OEMs will have to do something similar with pricing
for their connected car services and subscriptions.
Our cars of the future would
definitely be connected and auto OEMs may have to bear the initial cost of
connectivity in addition to spends on R&D around connected cars. Once
customers are able to see and experience the benefits of in-car connectivity,
OEMs will be able to better harness the power of data to provide further
applications and services which will make life easier and make car driving a
better user experience. Stay connected!
Comments
Well written Avinash!
I fore see not only the OEM's providing the data connectivity service, but also third party providers giving value added services on connected cars.
Posted by: Chandra | December 16, 2014 12:24 PM
Thanks Avinash for suggesting this valueable strategy to the car manufacturers looking to push connected features in their cars.
The concept can be actually generalised for any new value adding feature in the existing products for which customers are unwilling to pay.
Posted by: Pawan Rampuria | April 6, 2015 6:12 AM