With increasingly connected cars that generate humungous data, automakers may do well to become data companies and leverage the big data, to stay relevant
The automotive industry is going through its own transformations, starting from in-built GPS systems to automated driverless cars being tested. However, this is not enough to stay competitive and relevant. They will soon have to make data a core part for their future businesses.
The new age mobility giants like Uber and Lyft, are built on data. By acquiring Harman, Mobileeye, and Waymo, technology companies, Samsung, Intel, and Google are seen building mobility products. The tech giants have understood the scale of data that transportation and mobility sector can generate and are generating revenue from it.
According to a report from Wards Intelligence, an analytics company for the auto industry, the world vehicle population stands at 1.2 billion vehicles in operation globally where people travel over 23 trillion miles every year. By using GPS, car sensors, radar, cameras, and other technologies that generate data in a car, it is estimated that an average American will generate 1.8 TB of data every year. This number will increase dramatically to 4 Tb in less than two hours when autonomous and driverless cars will become the norm.
While the data is essential to Automakers themselves to track vehicles post-production and to understand better the way customers are using their products, the data can also be used to improve the product. As direct use, auto companies can use the data to push customers to dealerships for repairs and maintenance and to customers to enhance lifetime value. But, the new age cars are generating data that can have purposes beyond this. Not all data is that is created is equal. Customers seek different data points to expand their existing services.
In February this year, the importance of the data was evident when automakers like Daimler and BMW announced an investment of over $1.1 billion in their combined digital and mobile services. With this, the two luxury car makers proved that trustworthy handling of personal data would become a key competitive advantage.
According to a McKinsey report, vehicle data by 2030 can become as valuable as $750 billion. The reason this data has generated value is that telecommunication companies seek to provide in-vehicle Wi-Fi services. With all cars connected to the internet, from repair shops to diagnose and predict maintenance, to Urban planners & advertisers will want the data to access location-based analytics, to insurance companies for providing accurate premium estimates, the data will gain more value.
If strategized well, the automakers will have the easiest access to most of the vehicle generated. Collecting this data themselves puts the automakers in the best position to decide who can utilize the data and how.
That value of vehicle data will only grow as more sensors are added to vehicles. Automakers currently are in prime position to capture this value of data and but will need to move quickly and reorganize their priorities. By partnering with tech companies or acquiring start-ups, automakers will surely not let go of the big opportunity coming their way.