Connected vehicles – Damaging lethargy

Sirius XM capitalises on OEM lethargy.

• Sirius XM is launching a series of services for its customers which are exactly the sorts of services the OEMs should have launched years ago in yet another sign that car makers are at risk of completely failing in digital services.
• Automatic (Sirius XM subsidiary) has launched an OBD-II dongle that adds connectivity to any vehicle manufactured before 1996 as well as a suite of services.
• These include location, break-down service, crash assistance, wireless payments, smart home integration (e.g. garage doors and alarms) and engine diagnostics.
• This is significant because these are exactly the sorts of services that OEMs should be launching themselves and is yet another sign of their lethargy.
• The downside to this service is that it is being offered via the OBD-II port which is always going to offer a substandard user experience compared to something that is fully integrated into the vehicle.
• However, seeing as almost all OEMs are offering nothing in this space and seem to think that their involvement with vehicle ends when it leaves the factory, it represents a step up.
• RFM research (see here) has identified that the one area where the OEMs have a chance is in vehicle data where no one else has good access to the data.
• However, their lethargy means that they are incentivising 3^rd parties to come in over the top and offer services based on vehicle data using sensors fitted in the aftermarket.
• If this continues, then the aftermarket sensors are going improve to the point where they are able to independently collect enough, good quality data to obviate the need for the data generated by the 1^st party sensors.
• This will seriously damage the OEM’s ability to monetise the large data opportunity that RFM sees emerging over the next 30 years.
• This opportunity is fundamental to their ability to offset falling vehicle sales with high margin service revenues which I think is critical to their long-term survival.
• Integrated sensors, embedded software, and services are always going to be superior to anything added in the aftermarket but if the after-market becomes good enough, the OEMs will be in real trouble.
• These are long-term trends but given the long design cycle, OEMs need to be implementing this now and encouraging 3^rd parties to develop on their platforms rather than by themselves.
• Instead, they are incentivising 3^rd parties to render them obsolete.
• The long-term outlook for the OEMs remains bleak indeed.