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The expert view: connectivity and data in the automotive sector

There are numerous use-cases around connectivity and data in automotive, but they require industry-wide cooperation and sharing if they are to work. A recent Business Reporter breakfast asked why that isn’t happening, and how it might change

 

From connected cars to autonomous vehicles, the automotive sector is ripe for digital transformation. Business models, manufacturing priorities and customer behaviour could all be radically changed by the availability of data, Equinix’s Global Lead for Future Mobility, Petrina Steele, told attendees at a Business Reporter briefing at London’s Goring Hotel.

 

However, Steele said that making the most of these opportunities would require lots of players, such as OEMs, insurers, energy companies and others, to share their data. What could this emerging ecosystem do? And what is stopping it from developing to the fullest?

 

Enabling new business models

 

The development of connected cars promises all kinds of new services, from navigation and safety services to mobile entertainment and location-based offers and alerts. Attendees, all senior executives from the automotive sector agreed that services such as these will enable new business models.

 

In the insurance sector, for example, connectivity and data will enable companies to assess risk more accurately and offer fairer prices. An attendee from an insurance company explained that connected vehicles bring numerous benefits, from knowing whether a vehicle is being parked in a safe place to determining the extent of the damage immediately after an accident.

 

Better data also makes “mobility as a service” models easier to implement. Customers will pay a subscription to have access to the vehicle they need when they need it, and the data flowing back from the car will ensure that they are charged appropriately, the vehicle is kept secure and that vehicles are distributed to the areas with the greatest demand.

 

Obstacles to sharing

 

However, several attendees, from automotive OEMs, noted that the industry is being slow to embrace these services, for a number of reasons. First, they aren’t necessarily profitable at the moment, so companies are focusing on where the money is today.

 

Second, for these services to work customers must be willing to share data. Regulations around data collection and use, such as GDPR, make companies cautious about collecting data that they might not be able to manage, while customers are reluctant to share without a clear “value exchange” – an understanding that they benefit from data sharing.

 

Third, connectivity is not reliable enough for every use-case. For example, the kind of vehicle-to-vehicle communications required to relay granular safety data to drivers is not possible with current technology. Some UK motorways have large sections without mobile data coverage. This could be fixed by relaying the signal from one vehicle to another, though this would have privacy implications, or by new technology, such as 5G connectivity or edge computing, but this will take time.

 

Finally, to make connectivity work most efficiently vehicle manufacturers would need to share data with third parties and, importantly, with each other. Lack of data standardisation makes this difficult but, as some attendees argued, a bigger challenge is lack of trust. OEMs in particular are worried about security and keen to protect their IP.

Re-thinking business models

 

One industry that has solved this well is aerospace, said one attendee from an OEM. Companies in that sector share lots of data, to everyone’s benefit. But they do so because of safety concerns and regulatory obligations not present in the automotive sector. It’s possible that government encouragement is needed to bring the industry together and persuading them to collaborate without being forced to by legislation.

 

It might also be the case that entirely new business models are needed to drive the kind of change that is possible. This might come from an external disruptor – attendees mentioned possibilities such as Tesla or even Amazon – or from an OEM that decides to pursue a new vision.

 

A mobility-as-a-service model changes the ownership of vehicles from a B2C to a B2B model. This in turn changes the way vehicles are manufactured and kept up to date. Car makers currently produce vehicles that last for 10 years, but the software in those vehicles will become obsolete much more quickly. If the companies themselves owned the vehicles, they would be incentivised to construct long-lasting platforms that could be easily upgraded with the latest technology.

 

This is a radical re-think of business models in the sector, which is perhaps why change is slow. It’s possible, said Steele as she summed up the briefing, that the industry will need to focus on collaborating within clear value stacks, for example between OEMs, insurers and consumers. This approach could lay the foundations for a data ecosystem that could expand into new areas as the automotive industry grapples with changing models.


For more information please visit www.equinix.co.uk

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