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Connected Car Study 2015

Racing ahead with autonomous cars and digital innovation

Executive summary

In 2015, our annual study of “connected car” technologies shows innovation racing ahead as auto makers unveil new digital services and autonomous driving features. The connected car is an automobile designed with direct access to the Internet, enabling automated links to all other connected objects, including smartphones, tracking devices, traffic lights, other motor vehicles — and even home appliances. Volkswagen and Daimler led the industry in a year that saw high general levels of innovation in infotainment systems and safety-assistance technology. We foresee annual sales of connected car technologies tripling to €122.6 billion by 2021. This is a slight slowdown in adoption speed compared to earlier estimates, attributable to the decision by European regulators to give OEMs a three-year extension until 2018 to install automatic emergency calling systems.

Both premium and volume auto makers clearly see connected car technologies as essential to their futures. They also realize that overall vehicle prices aren’t rising as rapidly as the prices charged for digital capabilities. This means returns on investments in traditional car components are shrinking.

Over the next five years, the connected car could disrupt the entire automotive ecosystem. The industry will undergo fundamental change as semi-autonomous driving emerges, followed by an eventual shift to full autonomous driving. Auto makers that have always seen themselves as product suppliers will take on a new identity as providers of mobility services. This will open the door to lucrative new digital revenue streams, especially as they begin to explore opportunities in other digital areas such as entertainment, commerce, and monitoring a driver’s health and fatigue level.

Of course, auto makers aren’t the only ones pursuing these opportunities. Technology companies such as Apple and Google have staked their own claims to the connected car and autonomous driving markets. Auto makers will need new capabilities and cultural change to compete.

No one will win, however, if security concerns undermine consumers’ trust in connected car technology. Recent widely reported incidents have focused public attention on the vulnerability of Internet-enabled autos to hacking. To ease these fears, auto makers need to embed security in every aspect of their designs. Those that convince consumers their digital networks are secure will win the trust essential to capturing the connected car opportunity.

The connected car accelerates

The annual Connected Car Study conducted by Strategy&, the strategy consulting team at PwC, tracks the growth of connected car technologies and their impact on pricing, sales, and innovation in the auto industry. The 2015 study shows innovation accelerating as more manufacturers develop smart driving systems. Recent advances include BMW’s remote parking valet, which autonomously parks a car after passengers exit, and Volkswagen’s Emergency Assist, which automatically stops a car in an emergency. All OEMs are seeking a path for creating value in this digital arena. At the high end, car companies and their suppliers are differentiating themselves by creating digital experiences that stand out in a crowded market. Mass-market auto makers are looking to incorporate basic digital capabilities on a cost-effective basis. This may require them to join forces with outside partners.

Connected car developments continue to center on seven functional areas:

  • Autonomous driving: Operation of the vehicle without a human driver at the controls, existing only on a partial basis. Examples include self-parking cars, motorway assistance, and the transportation of goods by trucks on well-delineated routes.
  • Safety: The ability to warn the driver of road problems and automatically sense and prevent potential collisions. Examples include danger warning signals and emergency call functions.
  • Entertainment: Functions that provide music and video to passengers and the driver. Examples include smartphone interfaces, Wi-Fi or Local Area Network hotspots, access to social networks, and the “mobile office.”
  • Well-being: Optimization of the driver’s health and competence. Examples include electronic alerts that detect or mitigate fatigue, and other forms of individual assistance.
  • Vehicle management: Support for minimizing operating cost and increasing comfort. Examples include remote control of car features, displays of service and vehicle status, and the transmittal of traffic data.
  • Mobility management: Guidance on faster, safer, more economical, and more fuel-efficient driving, based on data gathered for the vehicle. Examples include real-time traffic information displays, displays of repair and service-related information, and the transfer of usage data.
  • Home integration: Links to homes, offices, and other buildings. Examples include the integration of the automobile into home alarms or energy monitoring systems.

About the study

The market volume projections in this study are based on the IHS Light Vehicle Sales Forecast, and analysis by Strategy& and Professor Stefan Bratzel of the Center of Automotive Management (CAM). Underlying this analysis are estimates of offer and take rates in each region and year for seven connected car product segments. Individual products within the seven segments were determined using CAM’s innovation database, supplemented by additional research.

The innovation strength index is calculated by Professor Bratzel, based on four criteria: degree of innovation, focus, originality, and maturity.

Contact us

Dr. Sebastian Jursch

Dr. Sebastian Jursch

Director, Strategy& Germany