Consumer interest in connected cars gaining speed in top markets

23 May 2016

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.

Connected car market share

Connected services
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.”

Connected car market of China

Market specifics
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.”


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Four ways digitalisation is transforming car brands and dealers

16 April 2019

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”