2025 Every Car Connected: Forecasting the Growth and Opportunity

There are many reasons why connectivity in the car is likely to become ubiquitous over the next decade. However, for telecom operators, the ubiquitous future of connectivity is not on its own sufficient reason to celebrate. In-car connectivity can be enabled for a range of different applications and using various different technologies. Some of these applications and technologies could prove more or less profitable for the telecoms industry.

This whitepaper analyses not only how fast in-car connectivity will grow over the next 15 years, but also what type of connectivity will eventually become predominant. By doing this, a clearer picture emerges of the true opportunities (and risks) faced by the telecom industry.

Note. This whitepaper and the associated forecasts focus only on passenger car telematics solutions that have been factory-fitted by OEMs. Aftermarket solutions for passenger cars or fleets are not analysed.

The major barriers that have prevented this hypothesis from becoming a reality in the past still exist today. Consumers are reluctant to pay the additional costs associated with embedded connectivity and instead view their smartphones as the solution to many of their in-car connectivity needs. In the short term, these barriers will continue to exist, which is why vehicle manufacturers are justifiably turning to smartphone integration in an effort to satisfy consumer thirst for connectivity

In the longer term, however, there are three disruptive triggers that could eliminate many of the barriers that have prevented embedded telematics from succeeding. These triggers include:

• A growing number of telematics mandates are being introduced by governments for services such as eCall or Stolen Vehicle Tracking. All of these mandates are expected to require (or strongly recommend) embedded telematics, which will in turn reduce the cost of hardware for consumers.
• A revolution in pricing models is becoming more likely within the telecom industry as the number of connected devices owned by each consumer grows. Solutions such as shared data plans, split billing and reprogrammable SIMs could lead to significantly more attractive pricing models for embedded telematics.
• A decoupling of Apps from phoness may eventually become reality as more content and services are shifted to being hosted on the cloud rather than on native Apps. This could potentially reduce the motivation for smartphone integration in the longer-term and encourage the use of embedded telematics.

None of these disruptive factors are guaranteed to occur. Instead it is likely that each market will experience unique combinations of these triggers at different times over the next 15 years. But the impact of all three triggers occurring within a market is clear: a major growth in fitment rates and revenues for OE embedded telematics.

Directly or indirectly, the telecom industry will benefit from the growth in connected cars. However, the size of the opportunity will depend on the type of connectivity that prevails in the car:

• Smartphone integration and tethering will lead to greater data consumption in the car, but will effectively restrict the value of telecom operators to selling more data.
• A Embedded telematics provides telecom operators with a much broader opportunity to provide more advanced M2M support to vehicle manufacturers, including network security, billing, CRM and device management.

Telecom operators are often said to be nervous about being restricted to the role of data pipe providers. Within the automotive industry, there is an opportunity to become much more if embedded telematics becomes the long-term de-factor connectivity method.

The future of embedded connectivity in the car isn’t completely in the hands of the telecom operators, but there is one area in which the telecom industry can support: enabling more flexible pricing models through solutions such as shared data plans. Despite the challenges in implementing new pricing

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