Reach Out and Touch the Future: Connected Vehicle Solutions in
Introduction Mr. Zhang Bo is driving his new car on the superhighway when its intelligent navigation system sends out a warning about an accident ahead. This immediately sets in motion the car s interactive vehicle information system, which alerts the vehicles nearby about the current location and speed of his car so that another accident is averted. At the same time, the navigation terminal automatically sends a message to the hotel where Mr. Zhang has reserved a room that he will be delayed and updates the arrival time in the navigation system. While he waits for the traffic to clear up, Mr. Zhang completes the last chapter of his favorite audiobook selected from the car s entertainment terminal. This is an age of connectivity and information explosion, with various digital technologies touching almost every aspect of our life. The automobile industry is no exception to this connected world. Fuelled by the rapid development of the Internet of Things, the connected vehicle solution is developing fast. Indeed, the development of technologies for the connected vehicle is seen as critical for winning the competition in the future. But this will involve all kinds of industry players, both old and new. Unlike traditional technology upgrade that occurs from the inside to the outside, the emerging connected vehicle follows a path of development from the outside to the inside. With Big Data transforming how we live and work, it is necessary that automobile companies have an in-depth understanding of various digital forces, and employ them to reinvent and integrate themselves into the new digital ecosystem. 2
Connected Vehicle Solution: A New Chapter for the Automobile Industry A survey on connected vehicle solutions conducted by Accenture shows that for many consumers a primary consideration in choosing a new automobile is in-car technologies. s car owners have the strongest interest in these technologies compared with their counterparts in other countries. In making their purchases, they place more emphasis on in-car technologies than on the car s performance. This presents a huge opportunity for the connected car industry. As urbanization speeds up in, the country s love for automobiles has grown rapidly. In 2013, s auto production and sales exceeded 20 million units. It has already replaced the United States as the world s largest auto market. With the explosive growth of car owners across the globe, there will be an increasing demand for traffic safety, social media, navigation and entertainment services, and so on. With car owners in emerging nations keen on in-vehicle technologies that enhance the driving experience, the connected car market is set to grow. The rapid increase in mobile communication is also fuelling the growth of the connected car market. The number of mobile phone subscribers is expected to increase by 7 percent annually and touch 1.75 billion in 2014. 1 The number of registered smartphones is expected to exceed that of traditional mobile phones by 2016 and hit 5.6 billion by 2019. 2 3 With a rapid increase in the use of personal mobile equipment, data communication is invading all industries in full force, including the auto industry which is closely linked to consumers daily lives. Connected vehicle solutions based on new technologies and Big Data analytics will help automakers develop better products and meet consumers increasing demands. Also, they will help governments plan and regulate the auto industry more effectively to bring greater benefit to customers. Our survey of Chinese car owners/drivers shows that they use connected vehicle technologies and services quite frequently, especially navigation, convenience facilities, and information and entertainment services. So what are the in-vehicle technologies the Chinese are most interested in? Safety and comfort: Chinese consumers are generally interested in in-vehicle media streaming and Internet functions as well as safety warning services. This is because they often use cars for family trips. Thus, safety and comfort are their biggest concerns in choosing auto services (see Figure 1). Interactive social functions: In the choice of auto products, Chinese consumers tend to pay particular attention to the availability of interactive social functions. This is not surprising as Chinese consumers use some social media apps quite frequently. A survey of 12,221 registered social media users (through the real-name registration system) reveals that Chinese consumers (73.4 percent) generally have a positive attitude toward social media. As many as 76.8 percent of the respondents said social media had positive influences on their lives, 67.2 percent said social media helped them improve mental health and alleviate pressures in daily lives and 48.3 percent believed that social media made their lives 4 more convenient and efficient. Customized Internet services: More than 54 percent of Chinese drivers prefer customized Internet services higher than that in any other country (see Figure 2). With far more big cities than in Western countries, has a rich variety of Internet services and a large number of active Internet users. Besides, an average Chinese works more hours a day than his or her Western counterpart. This, among others, explains the Chinese desire to stay connected with their families and friends by using technology. has more mobile phone and social media users than any other country. The combined active Weixin and WeChat accounts crossed 468 million in September 2014, with a monthly increase of 39 percent over the same period last year. 5 1. Internet Consulting Center, smartphone subscribers reached 1.75 billion in 2014, http://www.199it.com/archives/188425.html, January 21, 2014 2. cell phone users exceed global population, http://tech.sina.com.cn/t/2014-06-04/00029415094.shtml, June 4, 2014 3. 21cn Technologies; s smartphones stood at 580 million units, up 60.3% year-on-year; http://it.21cn.com/prnews/a/2014/0123/12/26175341.shtml. 4. Kantar Corporation, Influences of s Social Media 2014, http://www.17pr.com/viewnews-131331.html, January 22, 2014 5. Tencent s Operations in Third Quarter 2014, http://www.askci.com/finance/2014/11/13/105756upl_all.shtml 3
Figure 1. Which of the following is your priority style for Services Usage while driving? 54% (36%) I value personalized & consistent usage of connectivity 40% (51%) Use in-vehicle functions only as meant for better driver 6% (13%) Use my smartphone/ tablet with full access *() Figure 2. On a scale from 1 to 10 (10 meaning that in-car technology has the greatest influence over the car purchase decision and 1 meaning that the car s driving performance has the greatest impact on the car purchase decision), what score would you assign for your view? The cars driving performance has the greatest impact 3% 4% 8% 7% 6% 8% 14% 23% 20% The in-car technology has the greatest influence 7% 3% 4% 7% 7% 12% 12% 15% 20% 12% 7% 4
Navigation technologies: Chinese drivers use intelligent navigation technologies to stay away from traffic jams (see Figure 3). is the most populous country in the world, with an high concentration of big cities. Also, the roads are generally narrow with numerous traffic lights. As a result, traffic congestion is frequent and speed restrictions are common. Therefore, Chinese drivers care more about a vehicle s technological and service functions than its performance indicators. Driving a car fantastically is more important than driving a fancy car, they feel. Traffic and weather information: Chinese drivers mainly use navigation services to get real-time traffic and weather information and data services. Applications for these services are well developed and are maturing (see Figure 4). Convenience services: Chinese consumers care about convenience services, such as remote car diagnosis, car condition reports and vehicle life cycle management data services, all of which received high levels of attention in our survey (see Figure 5). Figure 3. How important is it for you to have the following Connected Navigation Services on your car? 71% 7% 1% Traffic Information 3% 33% 41% 22% Speed Camera 36% 41% 21% 2% Car Park Spaces 51% 29% 15% 5% Weather Information 35% 41% 20% 4% In-Car Search, POI Already using Very likely to start using Will consider for future usage Not using, nor interested 5
Figure 4. How important is it for you to have the following Convenience Services in your car? (By Convenience services we mean services that allow drivers to activate commands remotely or reduce insurance costs using data on drivers behaviour) Remote Services Vehicle Health report Vehicle Lifecycle Management Second Used Car report 2% 2% (11%) (12%) 19% 19% (28%) 25% (13%) 35% (36%) (30%) 44% (31%) 53% (39%) 26% (37%) 3% 8% (13%) 15% (8%) 19% (21%) (12%) 52% (37%) 37% (39%) 41% (32%) *() Already using Very likely to start using Will consider for future usage Not using, nor interested Figure 5. How important is it for you to have the following Infotainment Services in your car? (Services that deliver in vehicle real time information services such as web radio or video news through the IVI and access to entertainment content like music, gaming and social networks) Productivity Educational (elearning) Entertainment (internet, music, gaming) Information (news, stocks and sport) 10%(23%) 4%(14%) 3%(19%) 28%(29%) 17%(18%) (32%) 17%(30%) 31%44%(30%) 15%(11%) 32% (26%) 38%(27%) 14%(22%) 50%(37%) 32%(24%) 12%(21%) 53%(37%) *() Already using Very likely to start using Will consider for future usage Not using, nor interested 6
Entertainment services: Chinese consumers have a higher demand for auto entertainment services than their counterparts in any other country (see Figure 6). This is because people often drive long distances. The demand for entertainment services is also there thanks to traffic congestion, which is common especially in cities usually plagued by inadequate infrastructure such as roads and highways. Figure 6. Which of the following services do you think is important for your passengers (partner, children etc) to have access to in the car? Streaming music for in-car use Surfing the Internet via a monitor in the car 50% Car identifies traffic signals, congestion, accidents, delays, warning the passenger in advance of such situations 46% A system that allows the passenger to stop the car if, for example, the driver suffers a heart attack 42% Front/rear end collision alarm warning Night vision device Fatigue Warning device Access to social media while in the car 34% Lane changing warning systems/ Blind spot warning system 40% In-car feature enabling the ability to read and dictate E-Mails Car-to-car communication Lane-keeping system Autopilot 24% 36% 34% 43% 43% 44% 59% 74% 7
The pattern of wealth growth varies between consumers in and those in Western countries. Research shows that an average Chinese sees her wealth increase rapidly in a linear fashion during the first 10 years of her working life. In contrast, her counterpart in Western countries tends to experience a more stable linear increase in wealth. Thus, young Chinese consumers are more willing to change their cars, which fuels growth in the used-car market. At the same time, Chinese drivers expect more from their cars services that enhance the driving experience. In summary, Chinese drivers are keen on in-car technologies and services, and expect more of them in the future, especially smarter navigation services, convenience services and entertainment functions. Connected vehicles also fit in with regulatory requirements for environmental protection and personal and national security. The Ministry of Transport, the Ministry of Industry and Information Technology and other government departments will require that automobile manufacturers connect vehicles on-board diagnostics (OBD) to the Internet. Pertinent laws and regulations and policies are being formulated. Connected vehicle solutions will reflect compliance with regulatory requirements for the auto industry (see Figure 7). Figure 7. Indicate whether you are using or interested in using the below technologies: Surfing the Internet via a monitor in the car In-car feature enabling the ability to read and dictate Emails while driving Operate a smartphone using controls on the steering wheel while driving Streaming music 10%(29%) 14%(35%) 8%(20%) 3%(11%) 20%(9%) 27%(14%) 25%(17%) 54%(38%) 43%(51%) 63%(57%) 66%(56%) 67%(63%) *() Use Would like to use Not interested in it 8
The New Ecosystem of Connected Vehicle Solutions: Survival of the Fittest With the advent of the information revolution, traditional industrial boundaries are being blurred. While newly emerging industries in the Internet age are competing with traditional industries, the latter are striving to improve their digital capabilities. The Internet of Things has become an effective means through which traditional businesses achieve digital connections to consumers. In the Internet age, companies should transform themselves from bottom up by reshaping their business and organizational processes. However, they pursue different paths of development as IT capabilities vary from industry to industry due to differences in target markets and complexity of businesses. The automobile industry is expected to go through four phases of the connected vehicle solutions. In the first phase, vehicles serve as a means of transportation without data connection capabilities. In the second phase, data connections are formed through the connected vehicles in the equipment of automobile manufacturers or PSP service providers. In the third phase, a vehicle is connected to other vehicles or infrastructure facilities through an intelligent terminal, thereby achieving information sharing between vehicles and between vehicles and things. In the fourth phase, an entirely new ecosystem for the auto industry will be established by reaching consumers through mobile equipment and using cloud technologies to seamlessly combine mobile phones, vehicles and computers. Connected vehicle solutions will be the new gateway to the Internet after mobile phones, tablets and smart TVs. Through car terminals, cloud computing and data analysis, new technologies will integrate information, data, services and social media functions, thus achieving real-time information sharing between vehicles, between vehicles and equipment, and between vehicles and human beings. Hence, a new industrial ecosystem will be created. In the process, the traditional automobile industry will become increasingly open and join forces with various stakeholders in building a new ecosystem centered on connected vehicles. Service providers devoted to innovation are already taking advantage of a series of maturing technologies, such as 3G and 4G telecommunications, cloud computing and voice recognition for potential development. New industrial rules spawn new business models. Automakers, car dealers/4s shops, auto parts manufacturers, insurance companies and other stakeholders are trying to create their own niche in the new industrial ecosystem. Leading players should endeavor to provide customized innovative services to various stakeholders and facilitate cooperation in the new industrial system, thus promoting development of connected vehicle solutions and helping build a vibrant industrial chain. Currently, connected vehicle solutions are in the process of rapid development, being driven by diverse forces. In riding the Internet wave, automobile manufacturers are faced with a variety of challenges. On one hand, while applying cutting-edge technologies, they need to meet stringent regulatory and policy requirements. On the other hand, they need to cope with competition from emerging enterprises. In the new competitive landscape, all players need to rethink their strategies and look at things from new perspectives in their efforts to expand services and create innovative business models. To meet the challenges posed by the changing rules of the game, it is crucial that companies position themselves well and seize opportunities. Accenture has come up with the following findings based on a review of the automotive industry. 9
Opportunities Challenges Automobile manufacturers 1. Include connected vehicle system configuration in product development 2. Build connected vehicle after-sales market 3. Expand the value chain for connected vehicles by developing innovative service models 4. Include automobiles into the closed-loop business system to increase product attractiveness 5. Improve customer relationship management via connected vehicles (for instance, continuous connectivity to customers) 1. Service providers from outside the auto industry are trying to redefine their value chain and capture vantage points (for instance, free navigation services for mobile equipment) 2. Expected price cuts for auto Internet systems 3. Potential security risks entailed by third-party open source 4. Low level of willingness among consumers to pay for connected vehicle services. Hence, the need to tap customer data New entrants Insurance companies Auto parts manufacturers Dealers / 4S stores 1. Young consumers are paying more attention to in-vehicle technologies and entertainment functions. Enhancing services helps increase sales 2. More precise prediction at car maintenance shops reduces customers waiting time and their own operating costs 3. Design more appropriate marketing programs by keeping a close watch on car owners 1. Automakers seek opportunities for cooperation with qualified auto parts manufacturers to quickly increase pre-installation rates of OBD products and thus improve customer satisfaction 2. Extend analytical capabilities in data collection, vehicle conditions and driving habits, based on the mastery of OBD production technologies 1. OBD connections enable quick maintenance of vehicles 2. Provide customized insurance services to car owners based on data analysis 1. A big customer base 2. Powerful system platforms and applied platforms 3. Abundant apps and Internet resources (music, navigation, traffic information, image and voice recognition) 4. Mature data storage and data analysis solutions 5. Adaptability to new market conditions 1. The need to coordinate and integrate with pre-installation systems of auto makers in order to provide seamless auto Internet services 2. Difficulty in mastering core technologies; limited control over the industrial chain The value chain for sensor components is under the control of automobile manufacturers, third-party data analysis platforms, and value-added service providers 1. Insufficient technological capabilities; difficulties in independent research and development, such as data collection and analysis 2. Cost concerns in cooperation with third parties, which affect profits in the short run 1. Lack of experience in automobile production, with potential risks in safety of vehicles 2. Lack of experience in operations and management for the auto industry 3. Systematic differences between automakers including in data standards; difficulty in developing uniform platforms that support multiple brands 10
Conclusion Recently, Alibaba and Shanghai Automotive Industry Corporation have formed a strategic alliance to jointly manufacture cars with Internet connections. 6 And both Dongfeng and Changan automobile manufacturers have signed agreements on technological cooperation 7 with Huawei Technological Co. Ltd. The open market environment promised by connected vehicles puts traditional automobile makers at a strategic bend. How can they expand information and data sources? How can they ensure that operational processes are safe and efficient? These are challenges to be tackled. Also, which direction will the auto industry head for as the connected vehicle forges ahead? Will pre-installation determine post-installation or post-installation dictate pre-installation? Who will dominate the new marketplace? We may not have the answers yet but we are convinced that only those who successfully ride the information technology wave will emerge as winners in the future. 6. Netease Tech, Shanghai Automotive and Alibaba announce plans to jointly build Internet cars, http://tech.163.com/14/0724/07/a1tdcm22000915bf.html, July 23, 2014 7. Hexun Net, Cross-industrial Cooperation between Dongfeng and Huawei, http://news.hexun.com/2014-11-11/170273584.html, October 17, 2014 Auto Quality Net, Changan and Huawei sign cooperation agreement, http://www.12365auto.com/news/2014-11-14/20141114082554.shtml, November 14, 2014 11
For more information please contact: John Shen Managing Director Accenture Strategy Accenture Greater john.jun.shen@accenture.com Ben Wang Managing Director, Automobile Lead Accenture Greater ben.h.wang@accenture.com Author Huang Luchuan Director - Accenture Strategy Accenture Greater luchuan.huang@accenture.com About Accenture Accenture is a global management consulting, technology services and outsourcing company incorporated in Ireland, with more than 305,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014. Accenture has been operating in Greater for more than 25 years. Today, the Greater practice has approximately 10,000 people servicing clients across the region and has offices in Beijing, Shanghai, Dalian, Chengdu, Guangzhou, Shenzhen, Hong Kong and Taipei. For more information about Accenture, please visit its corporate homepage www.accenture.com and its Greater homepage www.accenture.cn. Copyright 2014 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.