Connected car market to grow to 122 billion by 2021

15 October 2015 4 min. read
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The connected car market is expected to grow 204% from 2016’s €40.3 billion to €122.6 billion in 2021, research by Strategy& shows. The biggest growth is expected to come from safety features, such as the EU mandated eCall technology as well as collision control functions. Consumers remain tight fisted about their investment in connected technology according to the report, while OEMs are investing the heaviest in safety technologies.

Every year Strategy& releases an analysis of connectivity trends in the automotive industry. This years’ study, titled ‘Racing ahead with autonomous cars and digital innovation’, explores the connectivity market in terms of the implementation within cars as well as the introduction of more autonomous driving options. The connected car is an automobile designed with direct access to the Internet, enabling automated links to all other connected objects, including smartphones, tracking devices, traffic lights, other motor vehicles and even home appliances.

According to the study, the connected car market will continue to grow at pace, up 10% annually until 2021. As it stands, safety devices are projected to be the largest segment of the €40.3 billion market in 2016, with a market potential of €15.5 billion, followed by autonomous driving features at €9.5 billion. Entertainment options come in third at €6 billion while vehicle management has a potential of around €3.6 billion.

Estimated market for connected car technologies, 2016–21

The consulting firm foresees the total market to grow 204% in the interim to 2021, when the market is projected to be worth €122.6 billion. The largest segment in 2021 will be safety features, at €49.3 billion, followed by autonomous driving – whose total share increases more than 10%. Entertainments total share drops slightly, and accounts for €13.4 billion of the total market in 2021.

Catalysts for growth, according to the research, stem from the EU’s requirement that new vehicles have emergency calling technology (eCall) installed – automatically connecting vehicles to emergency services on the detection collisions. The demand side of the equation will see consumers seeking other digital driving features and entertainment options, such as internet connectivity and advanced traffic information. This, in turn, will encourage investment in connected car services, and give rise to aftermarket demand for connectivity equipment from owners of cars manufactured without digital features.

Demand for connected-car services among volume car customers

Pricing demand
Although OEMs need to invest in the R&D mainly to stay competitive within their industries, the report finds that the large expectation shift towards connectivity in cars is not transformed into consumers willing to pay more for these cars. They will often turn to third party options to provide the feature – forcing OEMs to provide features at below cost. According to the survey, vehicle information and internet show the biggest disparity, while mobility information has the most consumers willing to pay for it.

As a result of this, the luxury car segment has not changed greatly in price from the development of digital features, sticking to the €60,000 to €70,000 range – a 4% increase, despite all the investments in digital features that auto makers have made. A similar story follows for the mid-market, where prices remain relatively fixed, even while digital features which in 2015 cost 0.5% of the total car cost, rise to 2.6% by 2021.

Cumulative connected car innovation activity by automakers 2009-2015

Innovation drives
The study also considers in how far different OEM manufactures invest in the development of digital technologies, which are divided into two categories: safety-related driver assistance technology and infotainment innovation. The largest investor in infotainment between 2009 and 2012 was BMW, followed by Daimler and VW. Since then BMW has curtailed its investment in the segment, while VW and Daimler have continued to invest relatively heavily in the technology over recent years.

The largest investments have been in safety related connected technologies, with VW by far out ahead across all years, followed by Daimler. BMW invested heavily between 2009 and 2013 before slowing its investments, while Ford started to invest more heavily in the technology in 2014 and continues to do so this year. In the safety segment, Mazda is the lowest scoring manufacturer.