Wednesday, 2 February 2011

Connected cars: real-time data means new business models for many motoring-related industries

Over the last couple of days I've been looking at various applications of M2M in motoring and the automotive industry. One interesting dynamic that emerges is that connectivity to vehicles allows a shift in motoring-related transactions from batch to real-time with major implications for new business models in associated industries. Wherever a business model can take advantage of real-time information we can expect change.

On a basic level, M2M is most applicable where the connected 'thing' is mobile (and so it can't be attached to a cable) and where it benefits from real-time transfer of data for some reason (such as a heart monitor). Cars certainly fit into the first category. Certain applications also require or substantially benefit from the latter, such as in-car entertainment. There are others which don't require real-time data (i.e. they've been functioning fine without it until now) but where the availability of such data can open up new opportunities and create new challenges.

Take satnav for instance. Companies involved in that market were historically involved in selling boxes with little after-sales support. Now that satnavs are becoming connected the relationship with the end-user changes to a term relationship, i.e. x per month. This is a fundamental shift from device vendor to service provider. The nav companies are working through the implications for support and customer care.

There are numerous other examples where motoring-related services and payments will be changed by connectivity. Today in most countries people pay road tax on an annual basis regardless of how big their car is, how much they use it, where they go etc. A fairer* system would include charging for road use based on all of those metrics. M2M can, obviously, create a system whereby users' driving is tracked and appropriate charges applied. So far so good. The usage is definitely mobile. But not necessarily real-time. Users would probably pay on a monthly basis anyway, so uploading usage on a monthly basis would be fine.

With car insurance the ability to charge real-time could have more substantial implications. With insurance you effectively pay your premium based on how you've driven in the whole of the last year. If you didn't claim, it should be a bit less than last time. With connected cars your insurance company can microbill depending on how much you're driving, where you go and how good/bad your driving is. Too much doughnutting in Tesco's carpark and you'll be charged extra. Again, this could be done in batch form, although in an extreme case, a driver could be informed that their insurance would be invalidated if they continued to drive at 90MPH. That needs real-time information transfer. The inclusion of real-time raises the prospect of a whole new dynamic for how insurance is charged for. Prepaid has been well established for mobile for many years, courtesy of real-time charging. The ability to measure in real time opens up the possibility for industries such as car insurance to introduce innovative new charging methods such as prepaid.

*I was hesitant to use the word as these fairer systems almost always end up costing the public more overall than the less fair systems they replaced.

No comments: