Connected Business Should OEMs reconsider their make/buy strategy for connected car services? April 12th, 2023 The automotive landscape we are entering is even more complex than we have anticipated. Geopolitics, financial instability, and supply chain management are but some of the key factors that will affect the automotive industry for quite some time. Add to that the speed of the digital transformation of the automotive industry, which shows no signs of slowing down. With this in mind, should OEMs reconsider their existing make/buy strategy for connected car services? What are the most important issues to take into account, in order for this strategy to be successful? The next phase in connected car service development For the first fifteen years of its existence, the connected car industry’s main focus was on the sheer technical capability to build and deliver connected car services. Third party service providers were essential in this process, ensuring that connected car services could be realized and maintained. In the later part of the 2010’s, many OEMs decided that they wanted to do most of this work themselves. This was at a time when electric vehicles started to emerge in the market, and the talk of autonomous vehicles became more substantial. Given this trajectory, it is understandable that OEMs wanted to get a better understanding of – and control over – their connected car service programs, platforms and development. New business models and opportunities (such as car sharing, mobility, and the changing role of car dealerships) also contributed to these decisions. OEMs invested major resources in their expanding organizations, making them more multifaceted and capable, but also more costly. Now we are entering the next phase in connected car service programs, where these services are increasingly becoming a commodity. By commodity, we mean that the service or services are not a differentiator. That said, it is important to recognize that a commodity is still extremely complex to deliver across multiple regions. Connected car services need to cater to drivers in both mature and emerging markets, which will require a variety of regional and national adaptations, not to mention continued service development for new and existing car fleets. What does this mean for OEMs? How OEMs can find a cost-effective make/buy strategy for their connected car services Over the past decade, many connected car services that once differentiated OEMs have become established commodities, especially in mature markets. Launching these services – call center related services such as emergency call or stolen vehicle tracking, for example – in an emerging market can certainly still help differentiate an OEM from its competitors there. Now, doing that as part of a make strategy is not going to be easy, especially as these services will need to keep developing over time in order to keep up with technology, cybersecurity measures, regulations, customers’ expectations, and more. It is simply not cost-effective for OEMs to rely on their own organizations if these organizations are not creating services that set the company apart from its competitors. The focus should be on what OEMs should do themselves, rather than what they are capable of doing. As OEMs decide on what make/buy strategy to pursue, here are some concrete examples to consider: Successful digital integrations Connected car services require smooth integrations with Mobile Network Operators (MNOs), call centers, content providers, etcetera. Can this be done better and faster by the OEM’s own organization? Would that be a more cost-effective option than turning to a third party connected car service provider? Ensuring connected car operability over time – across models, digital platforms, and software versions Most connected cars will be on the market for many years, often well over a decade. Consequently, their digital services (and OEMs’ digital platforms) will need to stay relevant and updated over that timespan. That requires experience, and a technical capacity to serve a multitude of connected fleets, vehicles, and car models over long periods of time. Business-to-consumer preparedness OEMs do not have a history of interacting directly with their end customers, other than through their dealerships. Moving into the customer/B2C domain will be a challenge for many OEMs, and will require time and resources they have previously been able to spend elsewhere. Regulatory, compliance and cybersecurity Each region today has different levels of engagement that range from a market-driven approach to government oversight to nationalism. The U.S. has largely let the connected vehicle market play out with few limitations, while the EU is setting strict laws to be followed, e.g., eCall regulations. Meanwhile, China is demanding a strict policy on personal and mapping data. There is a very broad spectrum of compliance across regions, not to mention the risks of malicious cyberattacks in the industry, making cybersecurity more and more critical. When should OEMs stick with their make strategy? OEMs can certainly follow a make strategy when it comes to the overall structure of their digital platforms. Most OEMs have decades of experience building cars from components and putting them out to the market. Structurally, the connected vehicle space is not all that different. Putting all the digital components of their mobility platforms into place, and making them part of their digital offering, is something OEMs will want to own. Included in this are customer-facing services that will differentiate their brands and bring customer value. However, this does not mean that all the components and building blocks that make up these platforms should also be made or maintained by the OEM’s own organization. OEMs should simply look for the best products and solutions; those that will support their mobility strategy, changing business model, and connected car services as a whole. OEMs will also need a plan for how they will support their platforms over time. This will only become more relevant as their connected cars and fleets grow in number. Their operability must be ensured over time and in a cost-effective way, with excellent connected car service reliability. Whether considering a regional or global program, an OEM needs to contemplate where the biggest risk for failure is within their overall strategy. Can it be mitigated by building their own organizations to manage or through a partner? Their need for fast time to market, global rollouts, maintenance, etc., should all be considered in their make strategy. Key questions that should help determine OEMs’ make/buy strategy 1. What is the strategy of our digital platforms, and how do they differentiate us from our competitors? What are the commodities that do not set us apart from our competitors? 2. What are our costs associated with differentiation and the launching of connected car services? Can a third party do it better, cheaper and/or faster? 3. What is our TTM (time to market) in markets where we are not present today? What does our capability look like when it comes to launching new connected car services in markets where we are present? 4. How do we ensure the quality of our connected car services – service reliability, maximum uptime, customer experience – in all of our markets and over time? 5. Are we able to monitor, implement, and maintain services and solutions that meet all regulatory requirements around the world? 6. Do we have the appropriate cybersecurity infrastructure in place to ensure both the security of our services and our customers’ data? WirelessCar as a connected car service developer and partner Even a multi-faceted, comprehensive, global platform will need to be regionalized to a great extent. Different regions will inevitably present different needs and wants, just like call centers and map and content providers will also vary around the world. OEMs may not want to commit to the kind of micromanagement this requires, whereas WirelessCar’s bread and butter largely lies in these very integrations. Not only making them work, but making them work over time, across markets, and for different fleets and car models. WirelessCar spends a lot of time and effort to ensure that our systems are as secure and reliable as they possibly could be, and that our products and solutions are cybersecure by design. Understanding all the issues I have brought up here, and how to address and work with them over time, is a challenge for the entire automotive industry. One that is not going to become any less complex in the future, either. At WirelessCar, we have over twenty years of experience building, maintaining, and launching connected car services, in close collaboration with the automotive industry. That makes us a robust and innovative partner, in both good and uncertain times, regardless of what your digital needs or strategy look like. Want to know more about how WirelessCar can help ensure the success of your digital strategy and business model? Or how we may support you in defining your make/buy strategy? You can reach me, Greg Geiselhart, via this link. For more on the work we do, have a look at our other Insights articles, and visit our website to learn more about WirelessCar’s products and solutions. Greg Geiselhart VP Sales & Marketing Contact
