Connectivity and convenience across channels
It is important to understand how connected features are realized by OEMs and how they can be accessed by the car owners. Automakers are distinguishing features that can be accessed directly from vehicles (e.g., OnStar and SafetyConnect) vs. features that are accessible via mobile apps or web applications. The diagram shows high-level categories of the various connectivity features and the channels they can be accessed from.
Simply put, by leveraging connected services, automakers are looking to enhance the convenience and experience factor such that customers will be willing to pay more for that additional value. Each channel introduces a new layer of convenience for drivers and can in turn be monetized by OEMs.
Connected services: Are they delivering on revenue expectations?
Automakers have announced ambitious revenue goals for their connected services. GM, Ford and Stellantis are expecting to generate upwards of 20 billion USD by 2030. Other OEMs are chasing equally ambitious goals commensurate with their size and scale.
A recent study conducted by Publicis Sapient in the U.S. indicates that OEMs are largely focused on subscription as a revenue source. The study mainly looked at apps rolled out for luxury car models, as buyers for this segment often get to experience new features and conveniences before they trickle down to the mass segment. However, these buyers—having paid a large sum upfront for the car—tend to be put off by the expectation of paying even a small amount on a recurring basis. In other words, the subscription model is not very popular with consumers and is only compelling when there’s a substantial value add presented.
So, the question is: Is subscription revenue alone enough to help OEMs meet their revenue goals?
Simply providing more and more digital capabilities to car owners is not enough. OEMs need to think about the Post-Digital Era and focus on leveraging the overall ecosystem of dealers, finance & insurance (F&I) partners and other stakeholders vis-à-vis their connected services investments to create value for all stakeholders and increase revenue in this space.