CES, the Consumer Electronics Show, is a globally recognized electronics and technology trade show, which is held in January each year at the Convention Center in Las Vegas, USA. Traditionally, it has focused on consumer electronics products, and it has featured previews of products and new product announcements. Beyond this traditional focus, the conference has increasingly become an important stage for automotive companies in recent years, such as BMW, Mercedes, and Ford. Moreover, upcoming competitors, such as Tesla and – this year – Faraday Future, have presented concept cars and new ideas at CES.
Digitization and connectivity
Consequently, CES increasingly goes automotive, and it may become an important complement or even a competitor to established automotive trade shows, such as the International Automobile Exhibition (IAA Cars) in Frankfurt, Germany, or the Detroit Motor Show (North American International Auto Show) in Detroit, USA. This increasing role of CES for automotive companies particularly derives from the trend towards digitization and connectivity, which has long been a strength of CES. The slogan of IAA Cars 2015 was ‘Mobility Connects’, and it described the major innovation topics of networked and automated driving. As such, this particular focus of IAA Cars 2015 also was a move of IAA to secure its position as the leading automotive trade show in a future world of digital and connected driving.
Nonetheless, the importance of CES in Las Vegas for automotive companies is expected to further grow in the next years with a continuous trend towards digitization and connected mobility. These topics are at the core of the strategic consulting approach and of the competencies of ILI CONSULTING AG in the fields of innovation and growth – at the Palo Alto office, but also at all other offices of ILI CONSULTING AG. This year’s CES has further underscored that automotive OEMs and suppliers currently have to cope with substantial transformations of their industry and environment in a variety of dimensions, including market evolution, technology trends, and regulatory requirements. In particular, the race over data sovereignty in cars has flared up. Today, cars are already very well connected. But, where do the data end up? From the internet to the car or back to the manufacturer as well?
In this regard, automotive OEMs face growing international competition from other established OEMs, but also from new competitors, such as Tesla and Faraday Future. The growing relevance of these new competitors has been acknowledged by many OEM representatives at CES – even if the presentation of Faraday Future has left many questions concerning the firm’s future products unanswered. In addition, further technology companies, such as Google and Apple, move into the automotive arena – not necessarily by developing entire cars, but at least with a strong focus on the information and data that are relevant for connected mobility.
In this respect, established OEMs face the challenge of sustaining their competitive positions relative to new automotive competitors, such as Tesla and Faraday Future, and relative to leading electronics firms and information service providers, such as Apple and Google. These firms have actively hired experts from OEMs in order to strengthen their automotive expertise and empathy. In response to these moves of the technology service providers, many automotive OEMs have considerably strengthened their internal competencies in the fields of digitization and connectivity in recent years.
Data collection and usage
Connected cars are no longer a notion of the future. Today, internet connections are already common in many cars. With the built-in mobile communications unit, traffic information constantly flows into the car. The navigation device takes into account possible traffic congestions in route planning. However, the data do not only flow from the network into the car but also back to the manufacturer. Through navigation, telematics, infotainment, emergency calls, and theft protection, vehicle manufacturers can acquire and store information about the vehicle’s geographical position as well as the target destination of the navigation device and current location of the parked vehicle.
Car manufacturers integrate accident data recorders in the various models. These can, among other things, detect sudden changes in speed, the steering angle, braking performance, and the state of the safety belts. Manufacturers say that the following information is recorded constantly when the vehicle is running: the vehicle’s speed, direction of travel, travel distances and times, average fuel consumption, tire pressure, status of the engine, battery, air conditioner, and the outside temperature.
Data about both the user and vehicle are also transferred to data centers via mobile radio where an evaluation is carried out. Therefore, this paints a picture of total surveillance.
The end-effect can be described perfectly with a story from a “New York Times” journalist who, two years ago, was on the road with a Tesla S and reported negatively on the limited range of the electric vehicle. This was strongly countered by Tesla: The company had the car on electric radar surveillance during the test drives and contentedly counted the various points where the journalist had made false reports, including the minor details regarding the setting of the heating.
Accident data recorders record data constantly but only save it for 30 seconds to identify the cause of the accident. The question whether drivers are spied on by modern on-board electronics requires a different approach. Especially if the networking is soon going to be intensified through autonomous driving as well as car-2-car and car-2-X communication.
Nevertheless, data transfer is not always reprehensible. It might be undisputable that the diagnosis systems collect a lot of far-reaching vehicle information. This includes data on acceleration, speed, engine oil level, or even the break pad wear. These details on the various control units are stored in the vehicle and are not only useful in determining the respective service intervals but also come in handy in the car workshop. BMW also uses analysis data for quality assurance. Not person-related.
In addition, some employers, car rental companies, leasing banks, and insurers have also shown interest in the evaluation of individual driving and behavioral data. For instance, Allianz and others offer policies depending on driving style. If the customer can expect a discount in exchange for providing data about his/her driving style (acceleration, speed at curves, and braking behavior), then the business can pick up speed. The anxiety among vehicle manufacturers is enormous. By no means would Audi, BMW, or Daimler leave the business with data to their competitors. And it is not without reason that the three German premium manufacturers recently took over the Nokia subsidiary, Here, for close to 3 billion Euros. They obviously wanted to prevent the highly-precise, digital maps from being sold to Internet companies such as Facebook or chauffeur placement services such as Uber. The Here maps are indispensable as a basis for new assistance systems and other digital services. It will certainly develop into a billion dollar business.
If the insurers are to use the new telematics services for claims management, the automotive industry as well as the very lucrative repair businesses will be at stake. Discount policies already exist, which commit customers to exclusively have their vehicles repaired in certain workshops specified by the insurer. HUK-Coburg, the leading vehicle insurance company in Germany, has already entered the maintenance and repair business – much to the annoyance of the vehicle manufacturers who fear for the operation of their own workshops. On the other hand, should insurance companies fear that vehicle manufacturers will start offering their own insurance policies just like they offer financing services for their vehicles? A lot will change in the process of digitization. The business models of car manufacturers are just as affected as those of the insurance companies. Nevertheless, the fact is: With comprehensive automotive data preservation, new vehicles would become practically unsalable from now on.
Collaboration and interfaces
At CES 2016, a major example of data management in cars is BMW, which was recently evaluated as Germany’s most innovative large company and which has presented the concept car ‘BMW i Vision Future Interaction’ at CES. For this concept car, BMW has developed all relevant user interfaces internally rather than collaborating with Google or Apple. On this basis, BMW ensures that the data about driving behavior, phone connections, internet usage etc. that are generated by means of connected driving are fully controlled by the firm internally – and not by Google, Apple, or any other technology firms. In this respect, it is key to control the head unit for the data management and transfer. The data that may be collected with this head unit allow for direct contact and customized information about the users.
As such, the management of valuable data is key for the automotive OEMs to ensure a leading competitive position in the future while avoiding to be downgraded to a mere supplier of automotive hardware, whereas the technology companies would benefit from the data and direct customer access. At some point, however, close collaborations between traditional automotive OEMs and information technology firms will be inevitable unless the OEMs plan to internally build large data processing centers. In this respect, the opinions of many industry experts at CES reflect previous assessments of the experienced consultants at ILI CONSULTING’s Palo Alto office. The particular forms of collaboration and the specific technology and data interfaces will be critical for both – established automotive OEMs and technology service providers.