Carmakers Must Adapt to Consumers' Expectations for In-vehicle Connectivity, Analysts Say
Consumers’ expectations about in-vehicle connectivity are rapidly changing and carmakers need to adapt, said separate reports from Parks Associates and Strategy Analytics Thursday. Roughly two-thirds of current car owners will look for “some kind of connectivity built into their next car purchase," said Parks analyst Jennifer Kent. Connectivity will “eventually disrupt the entire ownership model, to the point that millennials will have a very different relationship with their vehicles than their predecessors,” she said.
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Most connected activities in the car now are performed via smartphone, with no direct connection to the car, but consumers want those activities to be more convenient when they're on the road, said Kent. That demand has inspired solutions from Apple and Android, and automakers now “accept the inevitability of the tech giants’ presence in the vehicle,” said Kent. To avoid giving a competitive edge to their rivals, automakers are building in support for both CarPlay and Android Auto in new vehicles with the hopes that “smartphone mirroring solutions will provide car owners with a familiar experience in the vehicle.” The platforms have been adapted for distraction-free driving, she said.
In-vehicle entertainment is also increasing demand for vehicle connectivity, said Strategy Analytics. A Strategy Analytics survey said consumers in the U.S., China and the U.K. showed a preference for video streaming and tablet docking for rear-seat entertainment, which has implications for the type of Internet connectivity carmakers should choose for future car models.
Connectivity is playing a larger role in consumers’ purchase decisions but “large swaths of consumers are unwilling to pay a premium or a subscription for that connectivity,” said analyst Derek Viita. That’s one reason OEMs should consider reliable and fast on-board connectivity a "must-have" in future vehicle models, Viita said.
But in the U.S., where current vehicle-based Wi-Fi options cost more than having consumers bump up the data limits on their wireless plans, in-vehicle Wi-Fi doesn’t make sense for the video use case, said analyst Chris Schreiner, since “only a few hours of usage per month would use up all allotted data.” OEMs need to “better align in-vehicle Wi-Fi options with likely usage patterns” to meet consumers’ preference for streaming video content, Schreiner said.
Cost plays a factor in consumers’ interest in having rear-seat entertainment, said Strategy Analytics. While interest among consumers in the U.S., China and the U.K. was high for wanting the technology, U.S. consumers' interest in paying for rear-seat entertainment systems is “modest” regardless of price point, said the report.
Connected cars will lead the way in “crossing IoT boundaries,” said Parks, saying no other technology device, except smartphones, connects “so many touchpoints” across consumers’ lives. “Cars connect consumers’ home and work lives and connect community residents with their local infrastructure,” said Kent, and car-generated data will increasingly enrich connections outside the car. Parks said end-of-year 2015 numbers would show more than 40 million U.S. vehicles were connected to the Internet.
Parks also said a future shift in vehicle ownership models due to connected technologies and urbanization trends will increasingly make it possible for consumers to live without cars. Consumers, led by millennials, will adopt a relationship with vehicles that's defined by “experience, not ownership,” Kent said. She likened the shift to the effect millennials had on the music and TV markets.
Autonomous driving features are part of that new driving paradigm, said Parks. In the near term, semi-autonomous vehicles with specific systems that adapt autonomous features under certain environmental and road conditions will become reality, said Parks. But privacy will remain a consumer concern. More than half of U.S. broadband households currently have privacy and safety concerns about connected cars, and as more connected vehicles hit the road -- creating a larger addressable market for hackers -- privacy and security breaches will grow.
Consumers and regulators will continue to focus on the privacy issue “until connected car features are ubiquitous and necessary to the driving experience,” said Parks. “Only then will the consumer evaluation of the security/value trade-off relent, as it has with online banking, e-commerce, and other forms of connected living.” Parks said 64 percent of U.S. car owners want connectivity built into their next car.