Vehicle data platform: How to connect OEMs and third-party service providers

 With the automotive industry seeking to create a more comfortable and enjoyable travel experience for its customers, automakers and designers are stepping up investment in in-car infotainment solutions. These technologies aim to personalize the travel experience by providing noise reduction, in-vehicle sound zones, and immersive audio/video content tailored to the driver's lifestyle. And more importantly, they contribute to building OEM customer loyalty, new revenue streams, and creating lasting customer relationships.

Four in-car entertainment strategies, almost endless opportunities to build a new offer

There is no turning back from in-car entertainment. The development of flat screens, broadband internet access, and the possibility of personalization and customization of content to the viewer are the reasons why no one is willing to give up this form of service.

 For automakers, it's an opportunity to build a stronger relationship with their customers and create new (often  subscription-based) revenue models .

 For the driver and especially for passengers, it's about overcoming the boredom associated with long journeys and introducing solutions into vehicles that until now have been known for their high-end audiophile systems.

No wonder an increasing number of OEMs today are consciously developing the concept of the  digital cockpit of the future . This approach is supposed to shift the focus from the practical functionality of the vehicle to providing compelling entertainment.

Most popular in-car infotainment strategies

Of course, the process of change is not simple and cannot happen overnight. It requires continuous growth in vehicle technological performance, partially related to the car's GPU, E/E Architecture, 5G Internet access, and the development of new display forms. Nevertheless, OEMs have at their disposal one of the following four strategies for developing such solutions.

1. Rear-Seat Entertainment

Using this strategy, entertainment is streamed to displays located in the rear seats or on the roof of the vehicle (for example, the BMW i7)... The user does not need to use a smartphone or tablet in addition to this solution to enjoy the leisure experience.

2. Any-Seat Entertainment

In this solution, content streaming can apply to all displays of the infotainment system in the car (including the driver's seat) - again without having to use smartphones and tablets to navigate. This concept allows video viewing, e.g., while charging an electric car.

3. Augmented Entertainment

A step further can be taken by manufacturers who incorporate the capabilities of 4D cinema and AR applications into their offer. This approach creates a whole new kind of driver's cockpit and develops a unique UX that may become a vehicle's trademark. This type of screen has a variety of potential applications, such as displaying destination-related information, traffic warnings, or intelligent terrain mapping of other vehicles. In the near future, this technology may also be used for augmented marketing, such as showing interesting offers and discounts from nearby restaurants, shops, or malls on the windscreen.

4. Live Entertainment

Finally, real-time entertainment services enable car-to-car interaction and/or social networking among vehicle users. These types of solutions can be used to share viewing, commentary, and engagement among vehicle users through cultural events or music concerts, for example.

New possibilities of infotainment in cars. The 2022 perspective

The ability to combine modern audio-visual technologies with  data analytic s and personalized user information allows OEMs to create entirely new services and products, often ones previously unrelated to the automotive industry.

•  Among these the most notable is, of course, streaming     video and audio content,    which is usually based on partnerships with third parties (e.g., Netflix, Amazon, YouTube, Apple TV or Spotify) and usually operate on a subscription model. In the future, the car is likely to become another medium where we can simply activate the service and continue watching videos, as we move from the living room to the vehicle.

•     Access to gaming platforms and services    that will provide an interactive way of spending time for the driver and passengers while traveling or charging their EV.

•     A tourist offer that is related to visiting a particular place -    acts as a virtual travel agency, which highlights specific points on the map and expands the knowledge of the visited locations (also in the form of quizzes or riddles for passengers).

•     Audiovisual, highly personalized ads,    tailored to the context of where we are traveling, the driver's needs, or resulting from the wear and tear of the vehicle components.

Dynamic growth of the in-car infotainment market

With each passing year, there are new examples of interesting implementations in in-car entertainment, and the market itself is growing rapidly. In 2020, it was valued at more than $21 million, while by 2028 it is predicted to grow to more than $37.5 million, registering a CAGR of 7.5% from 2021 to 2028.

Below is a rundown of the most interesting advanced infotainment solutions that are becoming increasingly popular and have been implemented by specific OEMs in recent times.

•     Larger display and video entertainment on demand  

With large displays and the increasingly widespread streaming of video and audio content into the vehicle, a substantial base is becoming established for the development of infotainment in the automotive industry.

It is all about introducing more immersive services and features in vehicles. This is especially relevant for EVs, because, after all, drivers need to pass their time somehow while charging their vehicles at public stations, and this can be done from the comfort of the car seat.

    Total spending on video on demand is expected to reach $127 billion by 2025       (11.8%       CAGR). Video streaming alone is expected to account for 86% of revenues       .  

The chart below illustrates how trends are changing in terms of screen sizes in today's  automotive market . It is noticeable that, roughly since 2017, there has been a marked increase in the use of large displays in vehicles.

Continuing down this path, major OEMs are already announcing in-vehicle video streaming services that use this type of display and video entertainment. Some of the latest examples from the market are as follows:

•     Jeep Wagoneer    and     Grand Wagoneer    from the Stellantis fleet have recently been offering Amazon Fire TV as infotainment for rear-seat passengers. It allows users to stream movies, shows, or games via a Wi-Fi hotspot or download content for later. The same service will also be implemented in vehicles from     Ford Motor Co    . factories.

•     Volvo    intends to implement a YouTube app, available via the Play Store in vehicles equipped with Google Automotive Services. The idea is to provide entertainment while charging an EV.

•     BMW    has recently unveiled its proprietary     Theater Screen    concept. This mode adjusts lighting and dimming, converting the car's interior into a mobile theater. The idea is supposed to be workable thanks to a 31-inch widescreen display. It offers a 32:9 aspect ratio and 8K resolution and includes built-in Amazon Fire TV and smart TV features.

•     Enhanced in-vehicle display capabilities with flexible interactive displays  

Design teams are persistently seeking ways to further integrate displays into the surface of a car's dashboard. Some of the most remarkable solutions in the automotive market today are  Flexible Interactive Displays (FITs).

They allow manufacturers to  provide more display areas for infotainment functions . All vehicle elements, such as Center consoles, pillars, and seat backs, can potentially be converted into one large screen. It could extend across the entire passenger space, turning the vehicle into a mobile movie theater or high-tech office. These types of solutions are already being tested by     ROYOLE.  

This technology is essential not only for convenience but also for safety. This is due to the idea of replacing layers of glass (traditionally used in automotive electronics) with durable plastic.

In the future, it might be possible to build sensors (e.g. fingerprint reader) into the display area. This will enable the  interface to be controlled from a screen spanning the entire surface.

•     The sound provides       a       more comfortable       experience  

While video content has only recently begun to make its way into cars, a good sound system and access to music have always been part of the automotive experience (in fact, for many consumers they were an essential factor in deciding whether to purchase a particular vehicle). Car manufacturers and designers are well aware of this and are stepping up their investments in the following solutions.

•     Noise reduction.    A focused anti-noise system prevents the penetration of noises common to driving but does not block sounds important to maintaining safety (such as emergency sirens). Next-generation active noise cancellation has been applied, for example, in the new Cadillac Lyriq, where it intelligently measures road vibrations and, using an AKG speaker system, actively reduces noises from outside.

•     In-vehicle Sound Zones.    This allows the driver and passengers to access different audio content. There is also an option to share the same sound at different volume levels. An additional advantage of such solutions is that unwanted music from the back seat does not distract the driver during the ride.

 Hyundai , for example, is testing such a solution. Whilst using the latest-generation  Separated Sound Zone  (SSZ) technology developed in-house, the Asian brand is able to create and control sound fields in the car. Both the driver and each passenger are able to hear isolated sounds without a headset.

•     Immersive solutions customized to the driver's lifestyle  

Key players in the market are becoming bolder in developing immersive technologies in their vehicles and emphasizing personalized options to tailor the journey to the user's specifications.

Developed by Mercedes-Benz,  MBUX Hyperscreen is a prime example. It is designed to provide  a high degree of individualized infotainment content. The vehicle users can determine for themselves which information to display in a specific place, in a specific order, and in line with a selected theme. In order to aggregate streaming content from various sources within its own vehicles, Mercedes has partnered with California-based ZYNC. The collaboration is expected to help develop a platform and interface that will allow access to digital entertainment from different providers.

The designers of the         NIO ES7     Electric SUV are taking it even further. This vehicle will be equipped with Banyan smart OS software and NIO's Aquila Super Sensing and Adam Super Computing platform. All of these will be combined with a compatible digital cockpit based on AR/VR.  This is a golden opportunity to"immerse" yourself in a world filled with colors and sounds . The passenger riding in the back can delight in a 200+ inch "screen" and a 7.1.4 Dolby Atmos sound system.

After all, the aforementioned EV is already being advertised by the developers as a "second living room," being a continuation of home entertainment. What is noteworthy is not just the audiovisual system itself, but also the options for dimming the lights or the appropriate choice of seat positions, which are supposed to make the viewer feel as if they are watching a movie at home. This is a perfect example of how  the automotive industry is getting closer to the users, their daily life  ,  and  their  habits.

Why is in-car infotainment a key to building long-term relationships and new revenue streams?

Tremendous competition and market oversupply make it more difficult than ever to commit a customer to a brand. User loyalty needs to be built in many possible ways and new ways to reach out with an offer need to be sought.

 Car infotainment is at the cusp of dynamic development and is certainly one of the leading areas that can help find new groups of customers and create lasting relationships with them.

This type of technology is no longer an add-on option, but an indication of "being up-to-date." Manufacturers who focus on the development of car infotainment become trendsetters and initiators of change. They make it clear that they follow their consumers, and understand their lifestyles and expectations. And this is not insignificant for the modern consumer.

 Research shows that customers are willing to pay more for a vehicle with these types of solutions - we're talking about up to $10,000 for a single car. In contrast, more than 70% of younger millennials list infotainment technology and features as "must-haves" when buying a car.

With these statistics in mind, it is necessary to remain competitive in this area and constantly develop the offer.

A special focus should be also put on the areas that build customer loyalty and connect them more strongly with the brand, for example:

•  access to media- based on a subscription model,
•  rich entertainment offerings for the driver and passengers;
•  personalization features and adjusting to users' lifestyles;
•  a fine-tuned user interface (UX), for a seamless and intuitive experience.

If you combine seamless and intuitive in-car infotainment with a deep understanding of consumer needs, chances for building long-term relationships and unlocking new revenue streams grow dramatically.

Data is the currency of the 21st century. Those who have access to it can manage it wisely and draw constructive conclusions to get ahead and outperform the competition. The business model based on their monetization is no longer the domain strictly reserved for the Silicon Valley giants. Also, companies whose products and services are not directly related to data trading are trying their hand in this field.  The automotive industry is one of the market sectors where data monetization will soon bring the greatest benefits. It is estimated that by 2030 it will be as much as $ 450-750 billion on a global scale.

 In this article, you will learn:

 What are the 4 megatrends to increase the amount of data from cars.

 * Which technologies will enable better data downloading.

 * Who can earn money from vehicle data monetization.

 * What are the three main data monetization strategies.

 * 28 practical use cases of how you can generate revenue.

The increase in revenues on this account is not only due to the electronics and sensors that are installed inside the vehicles. Social and cultural changes will also contribute to the increase in the amount of generated data - for example, the need to reduce city traffic and the search for ways of traveling alternative to vehicles with combustion engines.

Among the megatrends that will contribute to a greater inflow of data for monetization, the following are usually mentioned:

•     electrification;  
•     connectivity;  
•     diverse mobility / shared mobility;  
•     and autonomous driving.  

The trends that will transform the way we travel and use vehicles today are opportunities not only for OEMs (original equipment manufacturers), but also for insurance companies, fleet managers, toll providers, fuel retailers, and companies dealing with parking or traffic.

All these industries are increasingly joined by technologies that not only help to collect data but also to process it. The flow of information between these market sectors will enable the development of effective methods of obtaining data and creating new services that can be monetized.

In particular, it will be enabled due to the 8 developing technologies:

 1. Big data analytics

 2. High-speed data towers (5G)

 3. Software platforms

 4. Data cloud

 5. High definition maps

 6. High-resolution positioning (GPS)

 7. Smart road infrastructure

 8. V2X communication

Due to the extensive technological infrastructure, the amount of data that can be obtained from the vehicle will increase immeasurably with today's possibilities. It is estimated that in the near future, up to 10,000+ points from which data can be collected will be accessible in the car.

Understand the drivers and their needs

 /„The challenge for industry players is that data will not be car-centric, but customer-centric.” – European premium OEM”/

While technology plays a key role in converting data into real currency, we should bear in mind one thing. In fact, the data is generated not by the vehicle, but by its user. It is the user’s attitude towards technology, privacy, and convenience that determines the success of obtaining information. Without their consent and willingness, there is no effective data monetization strategy.

As the examples of Google or Facebook show, the use of data without users' knowledge sooner or later ends in lawsuits, reluctance, and consumers turning their backs on the brand.

So how can you get users' consent to share data?

The answer is simple - although putting it into practice may be a real challenge - offer something in return. If you give something to the driver, they will share the data you care about the most.

Among the universal benefits on which you can build a strategy for obtaining data from drivers, the following are especially noteworthy:

•     time savings,  
•     greater overall comfort and driving comfort,  
•     increased level of safety,  
•     reduction of vehicle operating costs,  
•     entertainment or increasing driving experience.  

Research shows that drivers are much more willing to share data about the external environment of the vehicle - e.g., driving conditions, the technical condition of the vehicle, or even its location. However, they are not so eager to share data from their vehicle interior, e.g., the possibility of recording conversations. However, the percentage of such approvals increases dramatically, up to 60%, when drivers are offered more safety in return.

Younger customers and frequent travelers (who spend over 20 hours in their cars weekly) are also more open to this type of service - which results from their attitude to life, as well as personal needs. Differences in attitudes to privacy can also be shown in different markets (e.g., in Asia, Germany, or the USA). This is due to cultural differences, data regulations, and the technological advancement of a given region.

Regardless of where the company operates, in order to consider effective data monetization, you need to answer three key questions:

1.     WHO drives a given car?  
2.     HOW do they behave behind the wheel?  
3.     WHERE do they drive?  

Understanding the consumer's needs and the way they travel is the starting point for developing an effective data monetization strategy. Only then can we choose the right tools and technologies enabling us to turn data into profits.

Monetizing car data - 28 practical use cases

Each case of data collection in a vehicle can potentially be turned into a benefit. It may concern one of the three areas:

1.     Generating revenue  
2.     Reducing costs  
3.     Increasing safety and security  

Data monetization strategies can be based on only one of these assumptions or be a mix of activities from different areas. Let's have a look at the specific methods that are currently developing in the automotive market.

1. Generating revenue

Generating revenue from data in  the automotive industry is frequently done by selling new functionalities and services. Usually (but not always), they are directly linked to the vehicle and are aimed at the driver (  direct monetization ).

Due to a large number of sensors and the fact that the car of the future will perfectly know and read the driver's needs, this type of vehicle is also perfect for being fitted with  tailored advertising .

The third way of generating income can also be  selling data to advertising companies that will use it to promote third-party brands. Obviously, this model causes the most distrust and reservations among the majority of consumers.

Direct monetization

1. Over-the-air-software add-ons / OTA

Do you want your car's operating system to be faster and more efficient? Or maybe you need to have it repaired, but you are too busy to visit your car dealer? Updating your software in the cloud will let you avoid stress and save you time. Analysts estimate that by 2022 automotive companies will have made about 100 million such vehicle updates annually.

2. Networked parking service

Being able to enter the car park without paying the traditional fee, and a suggestion where you can find a free space. Who wouldn't take advantage of such a convenience in congested cities, for a small surcharge or by providing the registration number of their own vehicle? The system of  smart car parks connected to the network offers such possibilities.

3. Tracking/theft protection service

A car is often a valuable and indispensable resource for company activities (but also for private individuals). Vehicle theft does not only involve a financial loss but often logistics-related issues, too. Users increasingly often agree to share their location and modern tracking systems that will easily locate the vehicle in the event of theft.

4. Vehicle usage monitoring and scoring

Who wouldn't want to pay less for vehicle insurance or its rental? Systems monitoring drivers’ behavior while driving and evaluating them in line with the regulations may soon become the standard of services offered by insurers and rental companies.

5. Connected navigation service

Real-time road traffic updates, current fuel prices at nearby filling stations, possible parking options, access to repair stations or car wash - all that by means of voice commands and questions we ask our GPS while driving. For such convenience, most drivers will be delighted to share their data.

6. Onboard delivery of mobility-related content /services

7. Onboard platform to purchase non-driving related goods

Just as the phone is no longer used merely for telephone calls, the car increasingly often plays additional roles. Listening to music from the Internet or streaming videos by passengers (or by the driver, when the car is parked) is completely normal today. Soon we can expect that shopping from the driver's seat will also become the order of the day. And not necessarily only shopping for goods related to mobility and the car.

8. Usage-based tolling and taxation

Each road user and road infrastructure is subject to the same tax obligations and fees. Meanwhile, modern technology allows us to monitor how we use the infrastructure and how often we do it. There is an extensive group of drivers who could save a lot by sharing this type of data with road management.

9. „Gamified” / social like driving experience

“Tell me and I will forget, show me and I may remember; involve me and I will understand.” - Confucius said over 2,500 years ago, and nothing has changed since. Having fun, competing with friends, and having personal experience are still the strongest incentives for us to take new action. It also relates to our purchases.

10. Fleet management solution

Managing a fleet of vehicles, each in different locations, driven by a different driver, and carrying a different load is a real challenge. Unless the entire fleet is managed using one central platform that collects data from individual vehicles. Then everything is close at hand.

11. In-car hot-spot

Mobile internet onboard? Not only the driver who can update necessary data and stay in touch with the base (in the case of a fleet vehicle) will benefit, but also the passengers. In-car hot-spot is an ideal product for companies from the telecom industry, travel companies, insurers, and fleets.

Tailored advertising

12. Predictive maintenance

Advertising is not scared of any medium and, like a chameleon, it adjusts to the environment in which it appears. A car that, just like a smartphone, gets new functions every now and then, becomes an ideal place for such activities. Especially those messages that help drivers predict possible breakdowns and remind them about the upcoming service or oil change are highly appreciated.

13. Targeted advertisements and promotions

Apart from targeting advertisements in terms of the needs related to the vehicle operation, advertisers can also select ads based on who and where is driving the car, the driver's age, gender, or interests. Of course, the accuracy of targeting depends on the amount of data that can be obtained from the vehicle user. Drivers can therefore see displayed ads based on their current and past behavior and linked to the businesses and places featured on their route.

Selling data

 Gathering vehicle data and selling it to third parties ? We only mention this point because, being experts, we feel it is our duty. As the previous and subsequent use cases show, there are many more creative ways, approved by drivers, that will allow them to benefit from car data.

2. Reducing costs

Data is a mine of information. Companies from the automotive industry can earn money not only by selling new products but also by enhancing existing solutions, reducing R&D costs, or offering cheaper services to users. Potentially, not only producers but also end users can benefit from data acquisition.

R&D and material costs reduction

14. Warranty costs reduction

Every year, companies from the automotive industry spend huge amounts of money on user warranty services. Data on how the vehicle is used, or what breaks down the most often can not only improve the service process itself and increase consumer satisfaction but also help make real savings in companies. Based on the analyzed information, it is possible to more precisely select the scope of warranty and its duration and even adjust it to specific users.

15. Traffic data based retail footprint and stock level optimization

By using advanced geospatial analysis, traditional stores and malls are capable of locating heavy-traffic areas. Wherever the number of vehicles and the frequency of trips increases, there is a potential for greater sales. It is also easier to plan and adjust the stock, expecting potential consumer interest. Companies from the automotive industry, which have data from vehicles, are a natural business partner for this submarket.

16. Data feedback based R&D optimization

Regardless of the sector in which we operate, the R&D department cannot exist without market feedback, looking for new trends and insights. In the automotive industry, continuous product optimization is the key to success. Data provided by managers is a constant source of inspiration and optimization that can contribute to a company's market position. Of course, provided that they are properly analyzed and used for new products.

Customers cost reduction

17. Usage-based insurance PAYD / PHYD

Switching from an insurance based on accident history to insurance based on date, time, and actual driving style? The advantages for the insurer do not need any explanation. For drivers who travel safely on the road and have nothing to be ashamed of,  pay as you drive (PAYD) or  pay how you drive (PHYD) insurance certainly has unquestionable benefits and is worth sacrificing a bit of privacy.

18. Driving style suggestions

Do you want to know how to drive more economically? How to adjust the speed to the road conditions or shorten the travel time? Systems installed in connected cars will be happy to help you with this. All you have to do is share information about how you are getting on behind the wheel.

19. E-hailing

24/7 availability, the possibility to order a ride from a location where there are no traditional taxis, the ease of paying via a mobile application. There are many advantages to using the services of brands such as Uber or Lyft. Although no one heard about these companies a few years ago, today  they set trends related to our mobility . All due to the skillful use of data and the creation of a business model based on the driver and passenger benefit.

20. Carpooling

Fuel economy and pro-ecological trends increasingly contribute to our conscious use of vehicles. Instead of driving alone, we share travel costs increasingly often and invite other people to travel with us. The creation of applications and infrastructure based on consumer data, which will facilitate driver and passengers recognition, is an ideal model for companies from the automotive industry.

21. P2P car sharing

Your car is parked in the garage because you cycle daily or use public transport? Rent it to other drivers via the  peer-to-peer platform and earn money. Of course, the company behind the mentioned application that connects both parties will also earn a few bobs on it, as that's what its business model is all about.

22. Trucks platooning

Connecting vehicles into convoys has existed as long as traffic. However, today's technology and data flow offer additional benefits. Trucks platooning is the creation of a convoy using communication technology and automated driving assistance systems. In such a convoy, one of the cars is the "leader", and the rest adapt to its actions, requiring no or little action from the drivers. Advantages for companies organizing a convoy? Lower Co2 emissions (up to 16% from the trailing vehicles and by up to 8% from the lead vehicle), better road safety, saving drivers time, and getting tasks done faster.

Improved customer satisfaction

23. Early recall detection and software updates

The data received from the vehicle enables early detection of faults and prevents unnecessary problems on the road, and even more - it allows to repair them remotely in the OTA (over-the-air) model. Thanks to such amenities, the driver does not have to download the required software or visit their authorized dealer in person to repair the vehicle.

3. Increasing safety and security

24. Driver’s condition monitoring service

Drowsiness and fatigue are some of the most common factors contributing to road accidents. Thanks to driver monitoring systems in the form of infrared sensors and a camera integrated into the steering wheel, the vehicle can warn the driver in advance and recognize symptoms that could lead to an accident or falling asleep at the wheel. This is one of the amenities that drivers most often agree on when it comes to sharing vehicle data.

25. Improved road/infrastructure maintenance and design

Analyzing data from vehicles can help both the drivers themselves and the road service. For instance, when cars regularly skid at some point - which is detected by ESP / ABS systems, road workers can introduce certain speed limits or improve the road profile. This type of data is also useful in planning road repairs when the renovation needs to be planned during less traffic volume.

26. Breakdown call service

Tyre pressure monitoring, battery and engine condition, fuel level, and electricity drops in the vehicle. Monitoring such data can prevent more than one accident, and should it happen, it helps the driver overcome the obstacles much faster. When roadside assistance knows where the driver is and what exactly happened to the car, it can react much faster or instruct the driver how to fix the problem.

27. Emergency call service

Data from connected cars can save not only our holidays but also our lives. When every second counts and the driver or other road users cannot call an ambulance or fire brigade,  the connected car will do it for them. Thanks to the emergency call service option, the vehicle sends information about the location of the vehicle and its status to the appropriate services.

28. Road laws monitoring on enforcement

 Data collected from vehicles - especially on a large scale - can tell a lot about the way a given group drives or about the compliance with the rules of the road. Providing data from your own vehicle to the traffic law monitoring services can improve our habits, reduce the number of road hogs and drunk drivers, and help adjust the law to new conditions.

Crucial factors in data monetization

The data stream generated by vehicles will increase year by year. In order to be well prepared for the monetization of this information and not to miss the opportunities for the automotive industry for additional sources of income, it is crucial to take care of several key issues.

•     First of all    : find a steadfast IT partner with experience in the field, who will supplement the competencies of the OEM with cloud solutions, AI, and building platforms based on data monitoring and analysis.
•     Secondly    : constantly create and test car products and services based on real needs and amenities for customers - which is inherently related to the next point.
•     Thirdly    : create an open policy for the management of customers’ data that rules out trading in confidential information or unclear or misleading regulations of data use.

Only the development of a business strategy based on all these assumptions can bring real benefits and help stand out from the competitors.

As you can see, this is not a simple and quick process to implement, as many entities are involved in it, and various interest groups may clash. So, is the game worth the candle? The answer is in the stories of telephone companies that used to believe that the telephone should only be used for making calls, and it did not have to be smart.

Whether we like it or not, vehicles are changing right before our very eyes and are increasingly often used not only for getting from A to B. People who do not understand it and do not see the opportunities facing  the automotive industry may soon share the fate of the mobile giants from over a dozen years ago.

 By 2025, over 400 million connected cars will be on the road. Car rentals and fleet managers can use connected car data to manage their vehicles more effectively and increase revenue. A huge part of that approach is related to dynamic pricing – a data-driven technique enabling you to set the best prices for your service. Let’s have a look at how your business can benefit from dynamic pricing and connected car data.

Vehicles generate tons of valuable information. Most of it comes from their  engine control units (ECUs) that collect data from many different sensors within the engine and  controller area networks that enable microcontrollers and devices to communicate.

Thanks to data coming from these and other sources, the car rental company can have immediate access to telemetry data, including:

•  The specific vehicle’s location
•  Its current engine status and speed
•  The vehicle’s status (e.g., if the car is locked) etc.

As a derivative of the telemetry data, you can also understand the driving style of a given driver.

 Interestingly, the connected car penetration has already surpassed that of non-connected cars (     over 50% market share in Q2 2022    )        [1]      .

Because connected car data provides automotive businesses with useful input (especially when combined with  web and market data ), car rentals and fleet managers can use it to adjust their offers and, thus, grow revenue. Here, dynamic pricing is the most prominent solution.

What is dynamic pricing?

In a nutshell, it’s a data-driven strategy that exploits intelligent algorithms (frequently based on machine learning and automation) to set and maintain the best prices within specific market conditions.

Dynamic pricing algorithms continually analyze the available data (coming from the website, the market, and the vehicles themselves) and use it to automatically adjust prices and other service conditions available on your website or in your app.

 As a result, prices for renting a car can be optimized multiple times a week (or even a day) depending on:

•     Current demand and car availability  
•     Time of day  
•     Traffic conditions  
•     Fuel prices  
•     Previous driving history of a given user  
•     And even the likelihood that a given person will be happy to pay more for the service    (e.g., because they are running out of battery in their cellphone and they need to arrange transportation quickly)

Dynamic pricing is prevalent in both large car rentals, rideshare companies, and mobility-as-a-service providers, such as Uber. And speaking of Uber, some time ago,     Forbes   published an article explaining how Uber’s pricing works. They use an advanced dynamic pricing algorithm based on AI and multiple price points to determine the optimal price each user sees in their app.

As a result, Uber can charge the optimal rate for every ride, which helps them make more money. A similar solution can be introduced in any car rental company.

But the price of the service is just one puzzle piece. When it comes to car rentals, there are  other conditions and fees renters have to be aware of before signing on the dotted line. Here, connected car data can also be of help! Let’s dig a bit deeper.

Dynamic pricing, connected car data, and the question of the insurance

Renting a car involves additional fees, primarily  insurance, which is almost always mandatory . It stands to reason that this fee should also be dependent on a given driver and their experience and driving habits.

Insurance companies have been collecting data about drivers’ behaviors for years. And yes, they’ve been using it to calculate insurance premiums and offer discounts (so-called  usage-based insurance – UBI ). Today, it’s possible thanks to mobile applications that have to be always on when driving a car. Such an app can track each driver’s behavior on the road. Soon, though, connected car data will replace these apps altogether.

Although this idea is still in its infancy, we can expect that it will be shortly doable on a large scale, especially given the fact that the number of connected vehicles is continually going up (the global connected car market size is projected to reach almost  USD 192 billion by 2028 – CAGR of 18.1%  [2] ).

The first applications enabling the implementation of dynamic pricing in car insurance are already here. Thanks to millions of connected cars offering trillions of data points, car rental companies can understand their customers and their driving behaviors.

This knowledge can be used to  offer cheaper insurance and other rental fees to renters with a proven history of safe driving. Another idea worth considering is using data from connected vehicles to improve  reward and loyalty programs (a safe driver could get discounts to rent a car or get additional loyalty points).

However, there are still some challenges that need to be addressed.

The challenges of making the most of connected car data...

As McKinsey explains in their     recent report   , “  many OEMs have struggled with connectivity or related software developments, resulting in poor customer reviews and delayed start of production ”. Car manufacturers and other OEMs struggle with convincing customers that car-connectivity services deliver additional value. Add poor execution of services and communication issues to the mix, and it becomes obvious that consumers are still a bit reluctant towards such services. It’s the same story with usage-based insurance.

 In 2021, there was a survey conducted in Canada concerning UBI. 77% of Canadians are concerned about potential rate hikes. And 51% are hesitant in case it negatively affects their current insurance rates        [3]      .

And then, there is the data management issue. McKinsey estimates you need to access  1 to 2 terabytes of raw data per car each day to fully benefit from connected car data. That means huge data centers capable of processing all that information daily.

…and the inevitable future

The future of the automotive industry is software-centric, and car rentals and  fleet management companies are no exception. As the number of connected vehicles goes up, we will be able to benefit from more advanced data-driven solutions.

At GrapeUp, we tirelessly work on them every day! We develop custom solutions for both OEMs and car rental companies that enable collecting data, seamless processing, and even distributing it further. All to allow you to make more money.

If you run a car rental company, we can help you implement the solutions discussed in this article. To find out more, see our  offer for the     automotive sector   .

 [1] https://www.counterpointresearch.com/global-connected-car-market-q2-2022/

 [2] https://www.globenewswire.com/en/news-release/2022/08/17/2499966/0/en/Global-Connected-Car-Market-Size-to-Hit-USD-191-83-Billion-at-a-CAGR-of-18-1-for-2021-2028-Fortune-Business-Insights.html

 [3] https://www.ratehub.ca/blog/ubi-saves-money-but-87-per-cent-not-trying-survey-data/