The Potential of Connected Mobility

Overview of the Automotive Sector’s Evolutions

The global automobile industry is on the brink of a vital transformation. Technology is driving this shift, shaped by demographic, regulatory and environmental pressures.

Mobility management has developed into a multi-billion $ industry in Europe and around the world in recent years.

More importantly, connected vehicle data continues to grow and is gaining significant strategic importance in a world of changing mobility. I.e. firstly, the trend towards sharing instead of owning, and secondly, the trend towards self-driving vehicles and electrification.

For example fleet management enables enterprises to track and maintain their vehicles in a cost-effective, quick, and accessible way. It involves functions such as vehicle tracking & diagnostics, financing, driver management, and others. It helps business organizations that depend significantly on transportation to lower or completely eliminate the risks associated with staff cost, operations, and others. Reduced fuel & overall running costs, enhanced safety, and optimized fleet operations, with real-time fleet tracking and monitoring, are the benefits offered by fleet management, which covers only a small part of the overall mobility transformation. However, fleet management is part of the solution towards some of the megatrends in the automotive industry, which will be outlined in the following chapters!

Overview of the “Connected Vehicle Data” Opportunity

A connected car is known to be a vehicle that can communicate bi-directionally with other systems outside of the car. It is armed with internet connectivity and, in several cases, a WLAN. This permits the car to download software and patches, contact and share data, connect with other internet of things (IoT) devices, and offer Wi-Fi for on-board passengers.

• Connected cars are comfortable and easy to use as they are equipped with advanced technologies which enable the driver to use apps, connect with IoT’s for safety and security, contact the dealer for maintenance and download software.
• Connected cars allow the driver to reach a destination speedily, safely, and in a cost-efficient manner.
• The connected car can even automatically stop and start the car just before the lights turn green.
• Connected cars not only connect with people and services, they can also connect with each other and the road infrastructure. These impute will become more important as self-driving cars appear.

Connected cars provide a unique customer experience while simultaneously delivering cost and revenue benefits to mobility companies, including OEMs, suppliers, dealers, insurers, fleets, tech players, and beyond.

• To date, however, most players have overlooked opportunities to monetize data from these vehicles—a significant oversight, considering how companies in other industries are aggressively generating value from data.
• In fact, seven of the ten most valuable companies in the world already generate billions in profits from data-based services. These businesses include both new attackers and tech companies.
• Players in traditional industries are increasingly following the same path and transitioning from hardware to software-as-a-service (SaaS) and subscription businesses.

The global connected car market was valued at $ 63 billion in 2019 and is projected to reach $ 225 billion by 2027, registering a CAGR of 17.1%.

Analysts predict that worldwide sales of connected vehicles will reach 76.3 million units within two years, meaning nearly 70% of worldwide new light-duty cars and trucks will ship with embedded connectivity.

The connected car technology of the near future will be a digital platform that uses a multitude of sensors, such as radar, LIDAR, cameras, ultrasonic sensors, and vehicle motion sensors to safely transport passengers and goods. Inside the vehicle, connected cars will provide immersive experiences, in some cases turning the interior of vehicles into virtual theme parks through extended reality (XR) technology. Connected car facilitates connectivity on wheels offering comfort, convenience, performance, safety, and security along with powerful network technology. This enables the driver to connect with online platforms, thereby facilitating real-time communication and sustainability.

• The amount of data that these transportation platforms must capture, transmit, and receive will grow accordingly, with data traffic from connected vehicles expected to exceed 1,000 times the present volume, surpassing 10 exabytes per month by 2025.

• Vehicles are getting increasingly more connected to each other, and advancements in road infrastructure and increasing number of sensors being used are resulting in the generation of vast data volumes.
  • Factors such as technological advancements, a rise in the production of vehicles, and an increase in demand for luxury & comfort in vehicles are expected to supplement the growth of the market.
  • Moreover, factors such as improvement in global standards for vehicles and the high maintenance cost of advanced suspension systems are anticipated to hamper the connected car market growth.
• Data collected can be leveraged and monetized, but this is currently at a nascent stage.

Smartphones have changed the definition of connectivity over time. People wish to stay connected with the outer world even while travelling. Now that connectivity has become the need of the hour, automobile manufacturers adopt connectivity solutions in their vehicles to boost their automobile sales. Consumers are expecting their vehicles to perform tasks similar to computers and smartphones.

• Adding connectivity solutions in vehicles has become the top priority for automobile manufacturers.
• Many connectivity solutions are integrated into modern cars that require internet service to perform their respective functions. Connectivity can be provided in a car using embedded, integrated, or tethered connectivity solutions. One of these connectivity solutions is used to offer Internet connection to the driver as well as the passengers who travel in the vehicle.
• Advanced diagnostic system is a feature that is expected to boost the connected cars market growth. In advanced diagnostics, the system in the car will supply data of the vehicle to both the automobile dealer and the customer, which can help predict potential automobile issues before they take place.
  • In fleet management, it is easy to track vehicle records and decide which vehicle has travelled the most and accordingly offer service with the help of connectivity solutions.
  • The diagnostic service offered is an efficient way to diagnose the status of the vehicles. It allows the consumers to manage the maintenance of their vehicle, thus saving money and time by avoiding unwanted expenses & breakdowns. The system provides a maintenance schedule and timely reminders to the consumer. The diagnostic system keeps track of the smoke emission and fuel consumption of the vehicles, thereby monitoring their engine health. The diagnostic service sends a detailed report about the vehicle to the decision maker, who decides on the service schedules for the automobile.
  • Thus, ease of vehicle diagnosis with the help of mobile applications is expected to fuel the connected car market growth.

• The safety services offered in connected cars are an appropriate example of cutting-edge aftermarket technology, which involves sharing data between the vehicle and humans.
  • Safety is a combination of telecommunication and automobile technology used to improve vehicle efficiency, reduce fuel consumption & maintenance cost, enhance security & safety measures, and assist the driver to enhance his overall driving experience.
  • Driver assistance system is another feature of the connected cars that helps the driver find the most appropriate route to reach the destination. It also prompts alert messages regarding traffic jams and parking space availability.
  • All these connected car features provide intelligent transportation systems, which are designed to improve the overall driving experience.

The automotive data monetization is segmented into on-premises and cloud.

• The Cloud segment accounted for a larger revenue share in 2020 due to better scalability, improved cost-efficiency, increased reliability, and faster time to access new technologies as a readily available service. Cloud-based deployment is a key solution for OEMs due to these benefits.

Mobility Management – Cloud Solutions Opportunity

Cloud-based solutions have become the most essential technology for many business professionals across the globe for several simple to complex operations.

The Mobility industry is one of the complex environments that have witnessed rapid technological growth in the last decade.

• Nowadays many automotive company giants are opting for cloud-based solutions for handling different aspects ranging from engineering simulations to business dealings.
• Cloud bases solutions offer many cutting-edge solutions to the automotive industry, it can automatically create data backups, so automotive entities don’t need to worry about important data in case accidental data loss occurs and also help manufacturers to access green technology to develop environmentally friendly vehicles for consumers.
• The usage of cloud computing technology has enabled the automotive industry to store data reliably in the cloud storage and then later relay this data to the vehicle’s infotainment and telematics system, advanced driver assistance systems, and mobility services. Cloud computing ensures a seamless distribution of data within all the vehicle’s systems.

Cloud-Based Solutions Market designed for all aspects of Mobility is segmented on the basis of deployment type, application, vehicle type and region. Based on deployment type the global market is segmented into private cloud and public cloud. Based on application type the market is divided into Fleet management, infotainment, over-the-air (OTA) updates, telematics, ADAS and other services.

Mobility Cloud-Based Solutions facilitates the flow of data generated from the vehicle, vehicle users and surrounding environment around vehicle and processes the data in order to provide actionable insights, decisions, or tasks to the user.

• In connected vehicles using cloud-based advanced driver-assistance systems (ADAS) services like Collaborative Intelligent Transport System (C-ITS), Vulnerable road user protection, and Human-Machine-Interfaces (HMI), the driver is informed about the road & traffic conditions, pedestrian’s presence in blind spots, lane assistance, charging stations, parking assistance, and simplification of road signs along with the navigation. Stringent government policies related to autonomous vehicles’ safety issues and privacy concerns are expected to increase the deployment of cloud solutions that are able to enhance the decision making of the autonomous driving algorithms.
• The increasing favorable trend towards the connected and autonomous vehicles that enhance the safety of driver and pedestrians are the driving factors for the increased deployment of the cloud solutions in automotive. Smartphones and internet connectivity with developments in the 5G technologies is expected to contribute to rapid growth in the connected vehicles as well.
• Increasing penetration of ride-sharing service providers that are driven by the virtues of affordability and eco-friendliness utilize cloud-based automotive telematics technology to provide on-demand mobility, as outlined in the following chapter.
• The use of telematics technology facilitates the ride-sharing service company to optimize the fleet by means of planned maintenance, remote monitoring of vehicle health, and reduce accidents by eliminating the harsh drivers.
• Increasing consumer demand for cloud-based infotainment services has urged ride-sharing service companies to integrate different cloud solutions into the vehicles.
• Expansion of the logistics & transportation sector on account of the booming e-commerce sector and growth in supply chain optimization efforts has led incumbents to employ fleet management cloud solutions in order to optimize the operations & supplement cost reduction. The use of fleet management cloud solutions is contributing to Global Automotive Cloud-Based Solutions’ market growth.

Vehicle Electrification and the trend towards sharing instead of owning

The Global Electric Vehicle Market size is projected to grow from 4,093 thousand units in 2021 to 34,756 thousand units by 2030, at a CAGR of 26.8% according to MarketsandMarkets. Factors such as growing demand for low emission commuting and governments supporting long range, zero emission vehicles through subsidies & tax rebates have compelled the manufacturers to provide electric vehicles around the world. This has led to a growing demand for electric vehicles in the market. Countries around the world have set up targets for emission reductions according to their own capacity.

Increasing investments by governments across the globe to develop EV charging stations and Hydrogen fueling stations along with incentives offered to buyers will create opportunities for OEMs to expand their revenue stream and geographical presence. The market in Asia Pacific is projected to experience steady growth owing to the high demand for lower cost-efficient and low-emission vehicles, while the North American and European market is fast-growing markets due to the government initiatives and growing high-performance Passenger vehicle segment. However, the low presence of EV charging stations and hydrogen fuel stations, higher costs involved in initial investments, and performance constraints could hamper the growth of the global electric vehicle market. In addition, there is still no comprehensive solution that covers all aspects of the 4 ACES and is accessible as a one-stop shop solution, whereby the number of API interfaces to vehicle data, process data and charging infrastructure in connection with real-time IOT plays an essential role, especially for commercial and public purposes.

Summary of the EV market dynamics

• Driver: Reducing the cost of EV batteries

Due to technological advancements and the production of EV batteries on a mass scale in large volumes, the cost of EV batteries has been decreasing over the past decade. This has led to a decrease in cost of the electric vehicles as EV batteries are one of the most expensive parts of an electric vehicle. In 2010, the price of an EV battery was around USD 1,100 per kWh. However, by 2020 their price fell to around USD 137 per kWh while the price is as low as USD 100 per kWh in China. This is because of reducing manufacturing costs of these batteries, reduced cathode material prices and greater volumes of production, etc. The prices of EV batteries are expected to fall to around USD 60 per kWh by 2030, which will greatly reduce the price of EV’s making them cheaper than conventional ICE vehicles.

• Restraint: Lack of EV charging infrastructure

There is a low number of EV charging stations in many countries around the world. This makes the possibility of public EV charging less thereby reducing the demand for electric vehicles. Although many countries are working on developing EV charging infrastructure, most countries haven’t been able to develop an appropriate number of EV charging stations except in some states. The demand for EV’s will increase once there is a well-developed EV charging network across the world. Most countries are yet to develop such charging networks across their region. The Netherlands has the highest EV charger density per 100 km’s.

• Opportunity: Government initiatives pertaining to EV’s

Countries around the world have set up targets of around 2050 to reduce vehicle emissions. They have started promoting the development and sales of EV’s and related charging infrastructure. For instance, the US government invested USD 5 billion in 2017 to promote electric vehicle infrastructure such as charging stations. Several governments are providing various kinds of incentives such as low or zero registration fees and exemptions from import tax, purchase tax, and road tax. Furthermore, countries such as Norway and Germany are investing significantly in promoting sales of EVs. Thus, due to the large incentives and subsidies in Europe, a high growth rate in the sale of electric vehicles is observed. This has led to the growth in the demand for components and equipment associated with EV charging operations such as charging cables, connectors, adapters, and portable chargers. Also, as part of a partnership between the US departments of energy and transportation, a 2020 vision for a national fast-charging network has been developed, with potential longer-term innovations which include up to 350 kW of direct current fast charging. Stringent CO2 emission norms have increased the demand for electric vehicles. Governments are investing significantly in providing incentives and subsidies to encourage sales of EVs. These steps taken by governments around the world will help in increasing demand for EV’s in the coming decade.

• Challenge: Insufficient standardization of EV charging infrastructure and siloed data

Factors such as the growth of the electric vehicle market and variation in charging loads have emphasized the need for the standardization of electric vehicle charging stations as well as the corresponding underlying platform and software solution. Certain EV charging stations may only be compatible with a certain type of voltage. For instance, AC charging stations provide a voltage of 120V AC through level 1 charging stations and 208/240V AC through level 2 charging stations. On the other hand, DC charging stations provide fast charging through 480V AC. Governments need to standardize charging infrastructure for the development of a favorable ecosystem and an increase in the sales of EVs. Though, this mandate increased the installation cost of charging stations and hence in July 2019, the government changed the guidelines and allowed charging station developers to choose the method they prefer. US-based electric car maker Tesla uses high-performance superchargers that are unique to Tesla and cannot be used for other EVs (which might change in the near future). The lack of standardization across countries may impact the installation of charging stations and hamper the growth of the Electric Vehicle Charging Station market.

• The passenger car segment to be the largest segment during the forecast period

The electric vehicle market for passenger cars is largest in Asia Pacific followed by Europe and North America. In Asia, China, Japan and South Korea are the countries leading the passenger EV market in the region. This is due to the strong government support for passenger EV’s in these countries. Germany, France, Netherlands, Norway, Sweden, UK, etc. are the top countries in the European region with a growing demand for EV passenger vehicles. These countries have come out with string of emission regulations and a variety of subsidies, grants and incentives for shifting to EV’s. in 2020, due to these measures, Europe’s EV sales went beyond China’s EV sales. North America is also increasing EV passenger car demand with various states in US and Canada leading the electrifying trend. MEA countries have started to increase their EV’s market and are expected to be the fastest-growing market in the coming years.

Those who succeed in breaking down these silos will make an important contribution to simplifying and implementing sustainable electrification and accelerating mass adoption. This also goes hand in hand with the consumer shift from a seller’s to a buyer’s market and today’s trend to use goods and services cost-efficiently and sustainably in the short term to satisfy a specific need. Therefore, the idea of ownership is increasingly fading into the background in favour of shared services. Airbnb, Uber and WeWork are just a few prominent examples of this shift and especially in the transport/mobility and logistics sector (with almost no industry directly excluded), we see increased initiatives to further promote this. These include car, bike, scooter and other shared services, which should contribute to providing sustainable and cost-efficient solutions for reducing CO2 emissions in cities and suburban areas, reducing traffic congestion and making transport and mobility smarter, and also promoting safety and maintenance in the context of connected and autonomous vehicles.

The shared mobility trend

According to McKinsey’s 2020 ACES consumer survey, more than 60 percent of people would share their shared-mobility ride with a stranger if doing so would add less than 15 percent to their travel time while reducing their cost. In recent years, new modes and services have emerged, such as pooled ridesharing with strangers, peer-to-peer car sharing (driving a stranger’s private car), and shared electric scooters, pointing to a sizable potential market in the mobility space. The next big things include autonomous taxis (so-called robo-taxis) and airborne varieties, which have seen a huge investment acceleration and traction in recent months.

The shared-mobility market accounted for approximately $130 billion to $140 billion in global consumer spending in 2019. Out of this, e-hailing accounted for the largest share, $120 billion to $130 billion, which is more than 90 percent of the total market. Taken together, car sharing and peer-to-peer car sharing account for less than 10 percent of this market, which reflects e-hailing’s higher convenience (that is, the customer is driven, can spend the time in the vehicle on other activities, and does not have to find a parking space).

McKinsey’s forecast shows micromobility could reach a consumer-spending potential of $300 billion to $500 billion globally by 2030 (combining shared and private micromobility), thus becoming three to four times larger than today’s global e-hailing market. This amount could grow even higher as the pandemic winds down and normal activities resume.

Since 2010, more than $100 billion has been invested in shared-mobility companies. Looking deeper into types of investors, it’s not the automotive players that are investing in shared-mobility companies. Instead, around 72 percent of the total amount of disclosed investment since 2010 has come from venture capital and private-equity players, suggesting a bet on the future rather than on established and already sustainable business models. Tech players are second at approximately 21 percent, while automotive-company investments amount to approximately 4 percent. One reason for the traditional automotive industry’s lackluster showing could involve shared mobility’s potential for disrupting an automotive player’s core business. Some automotive OEMs have attempted to face the challenge through in-house initiatives rather than investments in external, new startups. This displays a mindset shift from selling vehicles to providing shared-mobility services, while the latter may even cannibalize OEMs’ core business of selling cars to private individuals.

Survey respondents said that their main reason for using shared mobility is convenience. This reflects today’s dominance of e-hailing over other shared-mobility modes. The most important features of shared-mobility services for consumers are safety, a competitive price, and availability. The latter, especially, might be an important factor in shared mobility’s ability to replace private-car ownership in the long term. Notably, availability is the most important feature for German consumers.