As the industry unveils its latest models at the 2012 North American International Auto Show in Detroit, many automakers will be trying to keep one eye on the latest consumer technology news. This is because car design is becoming ever-more focused on not just how the next model looks, but how much of the latest technology can be packed into its in-vehicle infotainment (IVI) system.
IVI and telematics systems are forcing automakers to move closer to a connected vehicle vision as a way to differentiate brands, and grow. The connected vehicle refers to the rising number of cars or trucks that use the latest in on-board devices, telematics and mobile connectivity that are being demanded by drivers. But competitive pressures may have some focused more on individual functions, rather than the operating systems that can ensure long-term success.
The IVI and telematics global market is expected to exceed $70 billion in 2012 and $80 billion by 2014, according to Accenture studies. And, while research found that IVI penetration is relatively low in the mid and lower-priced vehicle segments, penetration is expected to grow among all segments in the near future and will reach almost complete penetration in the luxury brand segment.
And now new Accenture research among consumers in seven countries reveals the extent of consumer desire for new in-car technologies. Despite differing levels of maturity in the markets, auto drivers from the US and Brazil, France, and Italy, as well as those in China, Malaysia and South Korea have a universal desire for the latest technologies in their next car. These include streaming music as well as reading and dictating emails, support services such as automated breakdown calls, automated warnings for issues such as congestion or accidents and lane-changing warnings, fatigue warning and night vision systems. This demand will directly contribute to IVI and telematics systems growth, including eco-efficiency, security and safety, and comfort. In terms of in-vehicle services, it is anticipated that the global market will grow up to $20 billion in 2014.
A convergence of on-board devices with the latest mobility services is aiding auto companies in their pursuit of competitive positioning and their response to consumer demand for the next in-car technologies, services and capabilities. The marketplace is exploding with a proliferation of connected vehicle solutions and applications to meet customer priorities. Accenture estimates that IVI could add up to $200 in revenues per car in mature markets every year as drivers and passengers increase the use of services provided by in-car technology.This will gather pace as systems are being produced to give consumers access to new technologies, such as cloud computing, and provide full Internet capability.
Consumers are, for the first time, determining in-car technology with the automakers now forced to satisfy demand, not create it as they used to. This means shorter timeframes for new ranges and changes to vehicle specifications. This consumer desire for ever more sophisticated in-vehicle systems that can accommodate the latest advances in technologies, such as smart phones, portable devices, and applications (apps) store capability, will make it increasingly difficult for companies to keep up with and monetize changing preferences unless they have the right operating systems and processes in place to absorb them. Providing the newest technology is important, but even more important is developing the operational capability to effectively respond to any potential advances down the road. This will be critical to sustaining success in the connected vehicle market.
The industry is already beginning to move in that direction, adopting operating systems to match consumer technologies. Such systems and others like them will give auto companies the agility required to respond to the aggressive pace of technology change, as well as address the emerging trend of product and services customization, while reducing R&D costs.
The Promise of the Connected Vehicle
Over the next decade, in-vehicle services that will drive market growth will include security, multimedia, safety, and navigation services. This makes sense because, although consumers have been exposed to such technologies for only a decade, they are increasingly connected electronically through email, social networks, smart phones messaging, apps, and portable devices, such as Bluetooth mobile phones, and handheld computers. Some forecasts call for one-quarter of the world's population to be connected to the Internet by 2012. This expectation of being connected anywhere at anytime suggests strong demand for IVI and telematics.
What is now apparent is that flexible operating systems will become even more pivotal to the ability of auto companies to capitalize on the connected vehicle market's potential in the coming years.
Preparing for the Future
This potential growth will mean that automakers and their suppliers will not only need agile operating systems to respond to ever greater connectivity and the new services associated with it, but back-office processes, capabilities and infrastructure to support such services and reinforce an enhanced, sustained connected vehicle experience. The consumer demands a new digital service in their car, and the OEM is forced to consider the impact of introducing this capability from manufacturing through to the back-office that supports such a service.
These back-office solutions include administration; a focus on dedicated content management; contact centers to facilitate various in-vehicle service needs, analytics, and other business processes. As consumer interest in IVI and telematics technologies grows, having robust analytics capability will be particularly important, as it will help companies gain greater insight into how best to meet consumer expectations and continually improve upon IVI and telematics functionality. For example, our research shows that over the next 20 years the next of wave of enhanced and connected-vehicle services will not provide one killer application, but rather multiple big-ticket services. In the future, there will be new opportunities for consumers to download applications they need and want directly from their vehicle. There also are major trends that suggest both embedded and standalone in-vehicle systems will be part of the market.
As demand for IVI, telematics and the connected vehicle experience accelerate, auto manufacturers have an opportunity more than ever to ramp up their capabilities in this area to continue achieving competitive differentiation and build toward future success. They and their suppliers need to start developing strategic partnerships with companies that compete in the connected vehicle market. To speed the process, some may want to take a managed approach, focusing on three key areas involving IVI that merit the greatest consideration -- safety, eco-efficiency, and entertainment.
But, whatever the strategy, key for auto companies will be adopting an open-source operating system approach flexible enough to help them effectively respond to the continued evolution of the connected vehicle experience and move closer to high performance.
James Robbins is automotive industry & industrial equipment industry North American managing director with Accenture, a global management consulting, technology services and outsourcing company.