Digital Car – Sitting ducks.

Reply to this post

The automakers are firmly in the crosshairs of the digital ecosystems.

• The Geneva auto show is in full swing and most of the automakers are all singing from the same hymn sheet.
• Top of the billing is VW which has said that it is convinced that it will become a leading provider of mobility by 2025.
• Many of the other automakers have said similar things, giving similar timelines, but crucially none of them have said exactly what they mean or how they intend to get there.
• If VW means that it will make products that can move then there is no problem but I suspect that it wants to become a company that sells products that are instrumental in the user’s Digital Life.
• For all of the automakers, this is crucial because Digital Life is increasingly becoming a factor in the purchase decision of an automobile.
• Therefore delivering Digital Life to a user in the auto in a way that is easy and fun to use but also unique to the automaker will improve preference and therefor pricing.
• It also gives the automaker an opportunity to have a much better relationship with the consumer which will also improve stickiness when it comes to buying another automobile.
• Unfortunately, most automakers are currently on a trajectory to become little more than handsets on wheels with a large part of their value accruing to the existing digital ecosystems.
• Apple, Google, Baidu and so on view the car as just another device via which they can deliver their services to users and the more important this becomes to the user, the less differentiation the automakers will have.
• Hence, I think that to preserve their brands in the digital age the automakers must achieve the following:
  • First. The automakers must engage the user beyond just a servicing relationship.
  • Most automakers practically forget about a vehicle as soon as it leaves the factory but if they take the time to understand what the users do and what they want from their products a whole range of possibilities emerge.
  • Second. The automakers must cease to deliver Android Auto and Car Play within their infotainment systems.
  • Both of these are highly detrimental (Android Auto more than Car Play) to the automaker’s brand and effectively reduce it to being a commoditising hardware vendor.
  • Instead the automakers need to deliver the Digital Life services that the user enjoys on his other devices in a way that is optimised for the use case in the automobile.
  • This is easier said than done but unless it is achieved, the automakers are almost certain to have no digital differentiation whatsoever.
  • Third. The automakers must keep the data that is generated through the use of their products and put it together with data generated elsewhere in the ecosystem to offer rich and engaging services to their users.
  • This is one example of why Android Auto is so dangerous.
  • There are four CAN Buses in an automobile that carry all of the critical data that allows the auto to function.
  • These four busses meet in the infotainment unit meaning that if the user gives Google permission, it will be able to suck out every piece of data the car generates.
  • This data is a key element that will allow a car maker to differentiate in the long-term meaning that anyone deploying Android Auto is likely to be giving that differentiation away to Google.
  • Fourth. Automakers must enable over the air updates for their vehicles.
  • There are all sorts of regulatory and process issues that need to be overcome to make this a reality but I believe it is critical.
  • Without OTA updates car makers will be unable to fix flaws in their software and unable to continuously improve their offerings.
  • Fifth. Automakers have to understand that good software is almost never the cheapest one on offer.
  • For many automakers writing software means creating hugely detailed specifications against which suppliers bid with the lowest bid winning.
  • To create a decent user experience in the car, the automakers need to think about design, security, stability and reliability and less about the cost.
  • I think that this will be an important element in creating a user experience that users are prepared to pay for.
• The game is far from over when it comes to the coming battle for the digital car, but most automobile companies appear to be completely unprepared to compete on a whole new level.
• An example of this is that car makers are already beginning to ship Android Auto and Car Play in the US.
• Just like it is now almost impossible to sell a handset in India without Google Play on it, the same may become true for an automobile.
• Once this happens, the war will be over and the automobile’s trajectory towards becoming a handset on wheels will be assured.
• This is why the auto makers have to act now or risk losing what could very well become the most important piece of their ability to differentiate in the long term.