Thought Floor

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!