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How to make money on the connected car?

Make Money overlayed on connected car on blue background
Make Money overlayed on connected car on blue background
Make Money overlayed on connected car on blue background
June 20, 2016

by

Mark Thomas

A simple google search will pull up headline after headline with the same theme: Silicon Valley Takes on Detroit. A big disruption is coming, and we are getting a better idea of what that will look like.

 

At TU Detroit last week, the flavor of disruption centered around the on-demand economy and autonomous driving. Independently, each is a massive disruption. Together, they will redefine transportation as we know it.

On-demand service economy comes to the car

“We’re rapidly moving from an era when people buy cars to an era where people buy a trip,” Kaye Ceille, president of Zipcar, said in her keynote. The advent of one-way, on-demand car sharing, where there is no obligation to return the vehicle to the starting point, is an important next step in on-demand driving.

Today’s car-sharing services, increase vehicle utilization but do not help fill the car during transit. Yet, the growing popularity of Uber Pool indicates that people are willing to share a car with strangers to save money. Even if cars were filled, today’s pool model still requires a paid driver.

Autonomous cars may be closer than they appear

Companies have now adopted a common nomenclature to define levels of autonomous driving. There is a great article in TechRepublic, which goes into more detail on each level, but here is a quick overview:

  • 0 – no assistance whatsoever
  • 1 – brake assists, as seen in today’s cars
  • 2 – two driver assists, such that both the hands and feet can be off the controls
  • 3 – still requires a driver, but the driver is not required to pay attention in most situations
  • 4 – the car drives itself, but there is the option for the driver to drive
  • 5 – fully autonomous (driverless) with no controls for human interaction

Better together

Levels 1-4 of autonomous cars are driver assistance tools, but it is not a paradigm shift in how we consume transportation.

When cars are truly driverless, level 5, transportation will pivot to mobility-as-a-service.  Subscription transportation will be a preferable model to traditional car ownership.

Today, leasing is a form of transportation subscription. In the future transportation subscription might allow drivers to subscribe to a vehicle class rather a particular actual vehicle, and opt for a private ride or a less expensive carpool.

Show me the money

Bringing mobility-as-a-service with on-demand services will completely transform the transportation experience. Automotive OEMs will need to transform as well to become mobility providers.

Automotive OEMs know how to make money from subscription business models. But as cars become consumer internet devices, monetizing services using “Internet” style monetization models presents new challenges. Forward-thinking OEMs are already enabling split billing to monetize Wi-Fi as a connected car service, and in the future can use split billing to offer services that are free.

Hear how the Internet of Things is changing the connected car at:

Next up, my travels take me to London for Connected Cars World ’16. Send me an email if you’ll be there so we can chat.

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