Car data could be a much bigger business than electric or driverless vehicles
But with electric vehicles making up on about 1% of global auto sales, and fully autonomous vehicles still in the deeply experimental phase, we might be overlooking the largest new business to emerge as cars are increasingly enmeshed with Big Data.
"The overall revenue pool from car data monetization at a global scale might add up to $450 billion-750 billion by 2030," concluded a group of McKinsey & Co. researchers, in a new report titled "Monetizing car data: New service business opportunities to create new customer benefits."
"Not every car manufacturer is at the same level," said McKinsey's Michele Bertoncello, one of the authors of the report. "But it's a huge industry topic as of now.
"Industry players are highly interested in this," he added. "More than the public is."
He's right. Ford CEO Mark Fields has taken to describing the automaker as both a car and information/date company, and Tesla CEO Elon Musk often touts the "fleet learning" aspects of his car maker's Autopilot-enabled vehicles as they rack up more and more semi-self-driving miles.
The public probably should ramp up its interest because as technology firms and major automakers alike seek to capitalize on this trend, issues will arise around who owns the data captured by vehicles and the networks that they feed into.
No data to Big Data
In the recent past, cars generated basically no data. And what information they did capture was stored in onboard repositories that we only accessed when something went wrong with, for example, the engine.
But with many vehicles now connected to the internet at almost all times, a trickle of rarely used data has now become a flood. And much of that new information being generated might be described as belonging to to vehicle owners.
"The car data monetization opportunity begins with an environment in which customers believe that there is something of value in it for them and that the cost is worth the benefit," McKinsey's analysts wrote, summarizing the results of a survey of owners they conducted.
"The survey revealed that, in general, customers are interested in data-enabled features that make mobility safer or more convenient and save them time or money."
According to Bertoncello, "Safety and time-related use cases were the ones that encountered the highest interest among the surveyed people."
He offered the example of "networked parking" - a sort of tech-enabled, crowdsourced parking-spot finder - as being appealing. Survey respondents, he said, would be "more than willing to pay for it" and would be "perfectly OK with giving away their location."
Attitudes differ by country
He noted, however, that attitudes toward monetized mobility do not arise from what he termed a "homogeneous landscape."
He said that it "varies use case by use case and country by country"
Chinese customers, for instance, are quite open to sharing data, but they have high expectations for what they'll get in return. Germans are preoccupied with privacy, and people in the United States are somewhere in between.
Tech companies, given their rapid pace of product innovation, are better equipped to grab a share of this new market.
"High-tech companies, start-ups, alternative mobility operators, data management services, insurers, roadside assistance providers, and infrastructure operators will all be players in the car data monetization landscape," the McKinsey team wrote.
"It is the most traditional of automotive players, however, who may find staking a claim most challenging. OEMs and suppliers are accustomed to seven-year product cycles, full control over a stable value chain, consolidated monetization models, and few interactions with end customers. They are also used to delivering products and services with limited digital capabilities."
McKinsey laid out some ways that traditional automakers can avoid getting steamrolled - and left out of a business that could push toward $1 trillion by the middle of the century.
But a bigger impediment to making money off all this vehicle-related data could be the occupants of cars. On this front, design comes into the picture.
In-car assistants - that know everything about you
"If you're able to shape human-machine interface, you can control how it reaches customers," Bertoncello said. "If you can control the data gateway, you can control access to data."
Tech companies, he said, are interested in this opportunity because of the chance to capture the car as a new environment.
"If you allow [online] assistants to read your communications, you can suggest better ideas, can respond to inputs, and can be more useful," he said.
But consumers find the current systems "cumbersome," he added. The holy grail is developing simple method of making voice communication the main way of interacting with vehicle systems.
The bottom line is that consumers need to see real value to be willing to pay for services based on their data generation. And the McKinsey researchers also provided some guidelines - called "golden rules" - to ethically handle consumer information:
- Never use data against your customers, but rather in their service. Frequency of interaction is critical, as customers do not want to be stressed by continuous questions or propositions.
- Provide clarity and education on what kinds of data are to be used, why and how (e.g., anonymized vs. personalized), with a simple experience in the "terms and conditions" acceptance.
- Do not misuse and do not allow potential third parties to misuse data, aggressively promote data security and respect of privacy, and be clear on "legal aspects."
- Give customers the choice of what to share and what not to share and for which purposes (i.e., customers need to be in control of their own data); periodically remind customers that they can revise the parameters of data sharing.
- Make gathered data available to customers.
As this new business develops, McKinsey thinks it will be difficult for ambitious tech players to dominate.
"Even high-tech players do not have all the knowledge they would need to address customers holistically," Bertoncello said. "Everyone needs to partner anyway. There's a massive fixed investment that will deliver a limited return initially, but scale massively later."