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January 6, 2022updated 09 Aug 2022 4:00pm

Monetising vehicle data a ‘key opportunity’ for auto manufacturers

By Chris Lemmon

It has been five years since consulting firm McKinsey & Company revealed its ‘Monetizing car data’ report – forecasting that the vehicle data industry could be worth up to $750bn in annual value by 2030. Sherif Malak, partner & member of the mobility team at Shoosmiths, writes

Since then, major automotive companies have entered the market, with a partnership announced between Honda and data firm Nightley. This collaboration will reportedly see anonymised vehicle data used to analyse ‘behaviour trends of consumers’, with information ‘provided as a basis for decision-making of marketing strategies and various measures of companies and local governments’.

Despite other high-profile entrances, the market for monetising vehicle data is on a slower growth trajectory than first imagined, with McKinsey revising its forecasts to show that the market could now deliver between $250bn and $400bn in annual incremental value by 2030.

The updated figures, however, show that successfully monetising vehicle data could see automotive manufacturers realise billions in new revenue, which in the current market, with car production falling amidst economic and supply chain disruption, is an opportunity they cannot afford to miss.

So, what can automotive manufacturers do to realise the full potential of monetising vehicle data? Before this question can be answered, it’s important to explain how the process works.

Monetising vehicle data

The growth of electric vehicles and connected cars is increasing the number of ways vehicle data can be collected. These are defined as ‘enablers’, spanning in-vehicle technology, including navigation and infotainment systems, Wi-Fi hotspots, as well as detection systems, with a typical car now featuring over 60 different sensors.

These technologies provide automotive manufacturers with numerous ways to collect driver and passenger data. For example, an automotive manufacturer could collect data using the sensors on a vehicle’s brakes or steering controls and use it to analyse driving behaviour. Alternatively, it could use the data collected from an infotainment system to understand a person’s media consumption habits.

How vehicle data is used can be split into three categories: revenue generation, cost reduction, and safety and security enhancement. McKinsey’s report listed 30 potential use cases in these categories, benefitting manufacturers, vehicle users and third-party organisations.

As new technology continues to be developed and infrastructure becomes more advanced – promoting a wave of smart towns and cities – it is possible to imagine a scenario whereby vehicle data is used to help manage transport networks, including planning diversions and directing traffic flow.

Also benefitting individuals, location data could be utilised by companies to enable products to be delivered directly to vehicles. Amazon launched a similar service in 2018, with Prime members able to have parcels delivered to their car boots.

When it comes to monetising vehicle data, these examples demonstrate how automotive manufacturers could create multiple revenue streams by charging third party businesses for access to vehicle data, as well as individuals for the benefits of data-enabled features.

Automotive manufacturers will have to navigate data privacy challenges. A survey from Federation Internationale de l’Automobile found that the biggest concerns regarding connected vehicles was the disclosure of private information (88%) and commercial use of personal data (86%).

However, if automotive manufacturers take a robust approach to privacy and consumers are assured that their data is safe and benefitting them, there is a market ready to be tapped into. McKinsey’s research revealed that drivers are interested and willing to pay for data-enabled features that make mobility safer, cheaper or more convenient.

A recent study from insurance company, Assurant, reaffirms the market opportunity, with the majority of car users surveyed stating that they were happy for vehicle data to be shared when it related to maintenance, use of internal technology and external road conditions.

A dilemma for automotive manufacturers

Though a potential customer base is in place and technology is maturing to a point where vehicle data can be collected and shared, automotive manufacturers are yet to fully grasp the industry and its financial rewards. Ultimately, many manufacturers are operating in a space that isn’t historically theirs.

Traditional automotive companies are not in the business of data engineering. This makes staking a claim in the industry challenging, with technology companies often already having the technical expertise needed to support collecting, interpreting, and commercialising data.

Automotive manufacturers also face competition with technology companies when it comes to control over data collection enablers. Integrating voice services such as Amazon Alexa into vehicles, alongside music or navigation systems, such as Google Maps or Spotify, creates a situation where automotive manufacturers are relinquishing vehicle data to other companies, which some may argue are better equipped for its monetisation.

Automotive manufacturers therefore face a choice of either partnering with a company that can help to monetise vehicle data effectively or invest in bringing this expertise in-house.

Various automotive firms have established partnerships with platforms such as Otonomo, which helps companies to sell vehicle data. Elsewhere, General Motors has backed Wejo – a competitor trading platform for voluminous connected car data that oversees collecting data in real time, before then processing it and providing the information in sellable, ready-to-use formats.

Partnering with an external company has financial implications, with data firms potentially taking up to a 35% cut of the sales generated from vehicle data. This is by no means a small amount, especially when compared to a market that could have an annual value of $400bn.

Pole position

The automotive sector faces a series of challenges in its bid to unlock the full potential of monetising vehicle data. However, this trend isn’t going away. The companies that fail to realise this are at most risk of being left behind by their competitors.

McKinsey’s 2020 consumer survey revealed that 37% of respondents would switch car brands to achieve improvements in autonomous driving, connectivity, electrification, and shared mobility. 39% of respondents were interested in unlocking additional digital features after purchasing a vehicle.

Whatever choices automotive manufacturers make to monetise vehicle data, the companies that are investing in its potential now, either through external partnerships or growing their own capabilities, will be in prime position to reap the industry’s long-term financial benefits.

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