Why is the smartphone integrated into the vehicle’s onboard system is disrupting the car industry?

The digital technology is disrupting the car manufacturing industry and at the centre of it all is a smartphone’s data channel, SIM card and cellular radio integrated into the vehicle’s onboard system. By Gugu Lourie

The digital technology is changing the way we look at a vehicle.

The global connected car market will be worth €39 billion (R607 billion) in 2018 up from €13 billion (R202 billion) in 2012, according to new forecasts from research firm SBD and the GSMA. The report titled Connected Car Forecast predicts that over the next five years, there will be an almost sevenfold increase in the number of new cars equipped with factory-fitted mobile connectivity designed to meet demand among regulators and consumers for safety and security features, as well as infotainment and navigation services.

This point is reinforced and driven home by Dieter May, senior vice president Digital Services and Business Models at the BMW Group, who said last week on Friday that over the coming years, digitalisation is set to have a substantial impact on how we use our cars: ‘Digital services will emerge that connect us fully with our personal world, no matter whether we’re out on the road or at home.

“The car will be transformed into a smart device – intelligently connected, seamlessly integrated and perfectly tuned to the individual needs of each and every user.”

BMW Connected
Starting in September, users in the USA will also be able to access BMW Connected via an
Alexa skill for Amazon Echo, enabling them to get vehicle status like remaining range and execute remote commands like ‘door lock’, all through voice interaction. (Photo Credit: BMW South Africa)

No wonder why South Africa’s two biggest mobile phone operators – Vodacom and MTN – are battling to increase their market share of the connected car market as part of their diversification strategy. They recognise that in the connected world of Internet of Things (IoT) where devices are linked by machine-2-machine (M2M) SIM cards, the connected car offers opportunities for expanding their dwindling voice revenue streams.

Some would argue that both Vodacom and MTN are making enough money through diversification to mobile data. But the fact is operators are not keeping up with the fast growth in data consumption, and they are left licking their wounds as subscribers’ seek value added services from platforms owned by Over-The-Top (OTTs) players such as WhatsApp, Facebook and Instagram.

Vodacom and MTN are serious about developing their capabilities in the connected car.

It seems both operators are intent on building or buying their IoT expertise that is relevant to ensuring a connected car and vertical (such as telematics) markets flourishes in our country.

In June 2014, for example, Vodacom and BMW SA signed a partnership for ConnectedDrive services which made provision for SIM connectivity as a standard on vehicles produced from July 2014. Utilising a Vodacom SIM card embedded in the BMW car, ConnectedDrive provides a wide range of intelligent services and apps.

Tony Smallwood, executive head at Vodacom for business development in Machine-to-Machine (M2M) and Vertical Industries, told Techfinancials that the mobile phone operator is considering Internet-in-the-Car service offering.

While, rival MTN sees the provision of SIM cards and modems in the automotive industry as core of any telecom’s business. “MTN is working with car manufacturers to assist them to differentiate themselves in the market through the value they create to their end customer,” Alpheus Mangale: Chief Enterprise Business Officer, MTN SA, told Techfinancials.

Automobile industry is a low hanging fruit

It is no wonder why Vodacom and MTN are targeting the connected cars industry as one of the next big growth opportunities.

“The proliferation of connected devices is giving rise to the IoT and emerging technologies will enable users to remain connected through a variety of devices in any environment. The automobile is low hanging fruit in the IoT market as these machines are already laden with sensors and human to machine interfaces,” explains Peter Crocker in a recent note titled: The In-Car App Experience: Convergence and Integration.

This explains why both Vodacom and MTN are beefing up their IoT capabilities.

Underscoring Vodacom’s determination to be a big player in connected cars and across other verticals is the telco’s move to increase its shareholding to 100% in IoT player XLink Communications. The acquisition of XLink is a big leap for Vodacom into IoT but its parent company Vodafone is already a big player in this space.

MTN is innovative in the space. It has developed a Pan African IoT platform, offering African enterprises with greater control and advanced management features for their connected devices and SIM cards.

There is no doubt that there are rich pickings to be had from the connected car industry.

The growth in-vehicle connectivity and smartphone integration platforms in connected cars provides enormous opportunities for the likes of Vodacom and MTN and its smaller rivals if they can build their M2M capability.

One may ask why mobile phone operators are moving into the auto industry. It is part of the convergence of technologies and the drive to seek new revenue streams. What’s exciting about this move is that telcos such as Vodacom and MTN are not a threat to the car makers, but are a complementary fit.

What’s also interesting is that telcos have for years quietly played a big role in the telematics space dominated by Mix Telematics, Cartrack, etc. MTN seems to have been a leader in this space.

MyBMW Remote
BMW Connected (Photo Credit: BMW South Africa)

Using a bottom-up methodology, research firm SBD forecasts that almost 36 million new cars will be shipped globally with embedded telematics by 2018, which is the equivalent of 31% of the total number of cars shipped in that year. That compares with 5.4 million in 2012. An embedded solution is defined as a system, such as BMW ConnectedDrive and GM Onstar, in which both the connectivity and the intelligence are embedded into the car.

Mangale said that according to independent research MTN still enjoys a majority share of the telemetry market. “MTN has maintained this position through close relationships and understanding of the customer needs. We are continually innovating product offerings to meet and exceed customer requirements.”

He added that MTN was working on connected fleet (rental car, public transport, and logistics verticals) to not only create innovation for the sake of it, but to deliver solutions that will bring greater business innovation, public safety, interaction and real-time operational visibility of high value assets in transit.

The connected car and telemetry may assist telcos to create a new business model to help them diversify their income.

The smartphone in the car is an inevitable reality, says Crocker in a recent note, adding that: “An independent wireless connection between the car and the internet is an important competitive asset. Car companies need to work with wireless operators to create attractive service plans for users. Potential models might include bundling connectivity services with maintenance or anti-theft services. Car manufacturers should own safety. Safety features are important factors influencing car purchases and a core competency of OEMs.”

SBD and the GSMA are confident that the connected car market is on the cusp of rapid growth. Their research shows that automakers are gearing up to meet the strong demand for a wide range of telematics and infotainment services both from regulators and from drivers

Who will lead the pack in this space – Vodacom or MTN?

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