How connected cars will impact the auto ecosystem in India

Auto space is at an inflection point. Autonomous driving & ride sharing are going to transform this industry in a way that nothing else has since its inception and most global auto giants are gearing up for it. All major global auto manufacturers, tech giants such as Google and Apple and communication companies have investments in autonomous driving and ride sharing or are building capabilities in-house. It’s simply when and no longer if these will come to fruition. Sooner than we can imagine, there will be a generation out there which is going to say, “You guys actually used to ‘drive’ your cars?”. Much like we now say about writing letters.

While we are waiting for this tsunami to hit the sector, there is a strong under-current in the form of internet-of-things (IOT) at play. Today, there is data generated everywhere – when you purchase a drug over the counter, disembark a taxi or even when you pass a tollway. IOT gives us the opportunity to capture this data, analyze it and take action, to make our lives better by being more connected.

Needless to say, this wave of connectivity will transform the auto sector dramatically. Unlike autonomous driving and ridesharing which threaten to disrupt the industry and challenge the incumbents, IOT offers an opportunity, a tool that every auto ecosystem player can leverage to drive the next wave of improvement in efficiencies across all functions and for all stakeholders. IOT will connect our cars to the rest of our digital world. Our phones will have an ‘app’ for our car and will allow us to manage all the different aspects of it from our phone.

Standing to gain the most from this are car manufacturers. According to SIAM data, a staggering 2.24 million cars in India have been recalled over the last 4 years. A significant number of these recalls are issues due to software upgrades, incurring massive avoidable costs. Volkswagen alone is planning to recall 3.24 lakh vehicles in India for a software upgrade following the emissions scandal. Connected cars, will be built like a platform, like our cell phones, which can be upgraded over the air. This will allow manufacturers to be able to identify and fix problems remotely, and also be able to anticipate problems well in advance through predictive diagnostics. Not only that, car manufacturers can ship performance upgrades to car’s already out on the road thereby offering a continuously improving & best-in-class performance. Today, ~50% of car owners continue to visit the authorized centres for services after 3 years. The other 50% start visiting their local mechanics or multi-brand workshop for servicing. Need based targeting can significantly help increase retention in servicing thereby helping unlock greater revenues. Car service centres that notify you when there is a problem on your car, will be far more effective in driving customer retention than those that call you once in every 3 months to check if you’ve covered 10,000km. Connectivity can also act as a great near term differentiator and can be a lower cost launch tactic to help boost vehicles sales, as compared to new car launches which are a more expensive and time intensive affair. The connected car platform can also act as a powerful CRM tool for manufacturers, thereby maintaining higher brand recall and driving greater word of mouth to help increase loyalty in the longer term. There’s several other benefits in store as well – service optimization & spares management, targeted buy backs etc. all that can significantly improve the ways car manufacturers operate.

With IOT, car owners will be able to connect their cars with the rest of the digital world. For the most expensive “tech gadget” surprisingly little “consumer tech” has crept into our car. A majority of our cars have worse UI than a smartphone costing INR 10k. Our cars still communicate with us through lights and sounds on the dashboard. The red check-engine light could mean one in 5000 things wrong with the car. They still get towed, stolen and vandalized, and there’s very little consumers today can do about it. Connected cars will change all that. Our cars will get smarter and one step closer to being autonomous. With one tap on the phone, car owners will be able to stay connected with their cars at all times. Not just that, cars will also be connected to infrastructure including our roads and homes, thereby enabling real-time traffic management, car pooling and a lot more!

Today a majority of the upcoming services startups in the auto space fall in the dead zone of being a low ticket size and low frequency use case service. Incredibly hard to build brand recall if you’re not solving a major pain point and have the opportunity to hook a customer only once in 6 months or even lesser. With IOT, there is an opportunity to create a go-to app for the car, which can neatly deliver all such services. An open system of connected cars, where all auto service providers can compete for the share of wallet of the customer is a future we’re headed towards. An open connected car platform, will help alert service providers on an issue observed in a car, request for a quotation and help the user book a service through the phone. Another example is auto insurance companies, who will be able to tailor their premiums based on how the user drives, as compared to the one size fits all approach, they’re now forced to adopt for the lack of data. Think of this platform as an Android for our cars, creating an API based delivery network for auto services. Google’s Android Auto and Apple’s CarPlay are a step in that direction, but who are yet to make inroads further than infotainment and navigation, due to the threat they pose to OEMs, who run the risk of being reduced to hardware providers with Google controlling the firmware and customer link.

In summary, the digital transformation of the auto ecosystem will serve to benefit each and every stakeholder in the auto space – consumers, car manufacturers and the full array of service providers. Pulling this off will require a convergence of technology across car manufacturers, tech giants and communication companies. No single ecosystem player can pull this off alone and everyone stands to gain. For full potential to be unlocked, car manufacturers will have to adopt a collaborative approach, coordinating across the different stakeholders, spurring dialogue on each player’s role, paving the way for adoption and realization of connected cars in India.

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