Why connected cars are poised to have a fundamental impact

Profile picture for user prakash.darji By Prakash Darji December 15, 2015
Summary:
SAP's Prakash Darji takes a break from working on SAP's connected vehicle platform to make his case for why connected cars are a fundamental change. He also looks at the obstacles connected cars face and why the economic and lifestyle implications are underestimated.

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There’s so much activity on self-driving cars that no matter where it goes from here, it will have a fundamental impact on the automobile industry. Recently, Forbes outlined some key challenges in developing the automated self-driving car, such as mobile vs in-car services, legal liability, and even the tech savviness of consumers. The industry moves forward as Google, Uber, and others work on prototypes and field tests to overcome those challenges.

According to the U.S. Department of Transportation (USDOT), connected vehicle technologies aim to tackle some of the biggest challenges in the surface transportation industry. The Intelligent Transportation Systems Joint Program Office FAQ addresses three areas of concern: safety, mobility, and the environment.

  1. Car safety can be improved: as per the USDOT, in 2009, there were 5.5 million crashes, resulting in 33,808 fatalities and 2.2 million injuries. Children and young people are particularly at risk. Motor vehicle crashes are the leading cause of death for ages 3 through 34. Connected vehicles could change that substantially:
  • Connected vehicle technologies provide the tools to make transformational improvements in safety – to significantly reduce the number of lives lost each year through connected vehicle crash prevention applications.
  1. Mobile traffic routing could change workplace productivity: U.S. highway users waste a staggering 4.8 billion hours a year stuck in traffic – nearly one full work week, or vacation week, per traveler. The overall cost (based on wasted fuel and lost productivity) reached $115 billion in 2009 – more than $808 for every U.S. traveler:
  • Delays in Truck operations alone result in $33 billion. Connected vehicle mobility applications will enable system users and system operators to make choices that reduce travel delay.
  1. Connected vehicles could reduce fuel waste and lessen environmental impact:
  • The total amount of wasted fuel topped 3.9 billion gallons in 2009 according to the Texas Transportation Institute – 130 days of flow in the Alaska Pipeline (nearly a third of the year). Connected vehicle environmental applications will enable system users and system operators to make choices that reduce the environmental impacts of surface transportation travel.

We're missing the (digital) economic impact

Those are worthy objectives and need solving, but what’s missing from the broader conversation of the “connected” car are the other opportunities that a connected car can bring to the digital economy.

It’s more than just the driving that will become automated. As the car becomes more connected, there emerges an opportunity to solve not just the self-driving problem, but to simplify a whole host of services.

Those services might help with parking and refueling, or perhaps the capability for cars to detect what types of drinks are in the cup-holder, and recommendations for places to pull off for that next coffee when your drink is running low. These aspects will take time to mature, but given how crucial a car is to our everyday activity, there is an opportunity to think horizons beyond just self-driving. As we evolve further, the integration of AI and machine learning and its impact on transportation could be enormous - but let’s leave that for another day.

Connected cars need a new kind of business network

At the core of this is a new type of business network, where many industries from financial services, retailers, entertainment, sports, healthcare and other industries will work with car manufacturers to add service features to cars.

These features will be be used to connect a driver to the car via mobile devices to help them prepare for a trip without being in the car. What’s great about this new business network is it will cross multiple industries and improve the cost structure for consumers. While this will likely start in the luxury car segment, the automotive industry has repeatedly demonstrated that today’s luxury is tomorrow’s standard.

The automobile industry is moving in the direction of connected cars. and solution providers are following suit. This has involved co-innovations with auto makers - as well as oil & gas providers - to bring together multiple companies to make the lives of all “drivers” easier, and hopefully safer.

It’s not just about the car driving itself that simplifies your life. It’s now about simplifying all the aspects of why you drive a car. In my opinion, this is a fun problem, because it gets to all the reasons we drive in the first place (besides the pure joy).

Privacy, safety, and the connected car dichotomy

There is still some trepidation on the topic. McKinsey and Co. authored the report: What’s driving the connected car: New technologies are transforming the automotive sector, with major implications for industry players and consumers alike. That report is available here. (free registration required).

For the report, McKinsey interviewed industry players and surveyed almost 2,000 new-car buyers from the U.S., Germany, China and Brazil. McKinsey found that 13 percent of buyers will not even consider a new vehicle without Internet access. More than 25 percent already prioritize connectivity over features such as engine power and fuel efficiency.

But from the report, we also see the dichotomy of the situation:

Yet while drivers are eager for the benefits of car connectivity, they also express concerns that may hamper its rapid and broad adoption. First, consumers worry about digital safety and data privacy. An average of 37 percent of respondents would not even consider a connected car, although there were major regional differences.

That regional variation was lower, however, when it came to fears about vehicles being hacked, where significant concerns were evident in all markets. Second, consumers indicated limited willingness to pay for car connectivity features. For instance, only 35 percent of new-car buyers said they would spend an additional $100 for smartphone integration, and just 21 percent said they would be willing to pay for subscription-based connectivity services.

It will be intriguing to see what other value-added services can be delivered to drivers in their car as time goes on.  As the car gets smarter, it will be interesting to see whether these services are delivered through the car directly, or through a smart-phone paired to the car. Everyone remembers the excitement that comes with purchasing your first car, and that great feeling doesn’t lessen with car two, three or four. Imagine combining the rush of the new-car-smell with creating personalized settings for your connected car.

Music, of course, is a given, but the majority of my settings would dovetail with my day: traffic reports from home to day care to office. Favorite gas station, ATMs and coffee house along the route. Open spaces in parking lots near my client meeting. Directions to my son’s soccer game, and restaurant options for after the match. Household security settings and adjustable temperature settings for when the family comes home.

Our connected cars will be an expression of our lives, and while The Connected Vehicle Platform is still under development at SAP’s Palo Alto Labs, we are enjoying dreaming about what our car-driving future holds.

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