In the coming decades hundreds of millions of new cars will be connected cars. Consumers are generally positive about the new features, with many willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are particularly interested in paying a little more for navigation and diagnostic features in their future new car.
The share of connected cars on the road is set to explode, with OEMs seeking to develop a range of new propositions for customers, opening up new revenue streams through a wide range of connected services. In a new report, Accenture considers the development of connected car penetration across the rapidly growing global car market, as well as consumer sentiment toward the new propositions. The report was developed from a survey of more than 5,111 respondents in China, Germany and the United States. All respondents were over the age of 18 and drive a car regularly, own a smartphone or plan to buy one within the next year.
The research found that the proportion of new cars sold featuring a range of connectivity features is rising rapidly. Of the 88 million cars sold in 2015, 35% of them had at least one connectivity feature. The largest proportion featured embedded connectivity, including remote diagnostics and location based services, while smartphone/mirroring came in second. By 2020, the number of new vehicles sold will breach 100 million, of which, 98% are projected by Accenture to have at least one connectivity feature. Almost half will sport embedded connectivity, while 31% will in some way engage a smartphone.
The survey found that consumers are interested in a range of different digital services, with many willing to pay more for them. For instance, 71% said that they would pay up to 10% of the car price on infotainment services relevant to their needs. Functionalities such as eCall, through which a vehicle sends an automated distress signal in an emergence, as well as bCall, in case of breakdown, were also cited by consumers. 61%, for instance, would want an eCall function, with 41% willing to pay for the service. Furthermore, 75% said that they would be interested in receiving vehicle health reports, with 43% saying that they are interested in spending extra for the feature, while 55% say they want to be able to track their vehicle, with 29% willing to pay for it. The demand for many of these features, the survey found, is set to increase in the coming decade.
In terms of paying for the services, around half (47%) would pay for the digital service up front as part of the car purchase, or pay for connected services over the lifetime of the services. Around a third would prefer to receive the basic service for free, in exchange for in-car advertising with an option to upgrade the services to premium versions. 32% prefer some form of a subscription based model, using credit cards or another payment service.
“Consumers are becoming more inclined to make separate purchases of the in-car functions they want most, offering automakers the opportunity to increase revenues and create aftersales relationships with their customers – but only they can better accommodate demand for the right functionality and services,” says Axel Schmidt, Managing Director in Accenture’s automotive practice. “We believe that the demand for a range of features, from safety systems and remote services to parking assist technology, will increase in the coming years.”
The research also considered country specific trends related to consumer sentiment for the technology, and willingness to pay. One major market for new connected cars is China, where the value of the market will jump from $7.7 billion today to $216.2 billion by 2025. The total market size will hit 26% of the global more than $950 billion market.
The research found that in terms of paying for services, 46% of the Chinese market segment prefers to pay for the service up front, compared to 49% for the German segment and 45% for the US segment. Chinese respondents surveyed are particularly interested in remote diagnostics, 65%, and remote health check 72%, compared to 47% of German respondents, who were interested in vehicle diagnostics. The most appealing feature for the Chinese consumer was found to be high quality navigation solutions. Remote engine functions too scored highly, at 63% in China and the US respectively.
“Consumer interest in spending more on desired in-car functionality and services in three of the world’s largest automotive markets reinforces Accenture’s belief that in-car technologies and the concept of the connected vehicle itself – are defining the automotive industry, and transforming the way consumers view the automobile,” says Schmidt. “We also believe that the willingness of consumers to pay for in-car services separately from a new vehicle’s purchase price will provide the industry with new sources of revenue, further enhancing the global connected vehicle market. We estimate that in China alone, the value of the connected vehicle market could be as much as $216.2 billion by 2025.”