With reports of a sales slowdown for SDVs in recent months, the news that major automakers Audi, BMW, VW and Tier 1 supplier Continental are teaming up to manage the transition to SDVs comes as welcome relief to analysts concerned that the slump might be more than just a blip. While the move will be a costly endeavour as they try and shift consumer perceptions around SDVs, the aim is to recoup their investments thanks to $1.5 trillion in additional revenue that could be made from digital services by 2030.
With McKinsey predicting that, by 2030, most cars globally will be connected, automakers are starting to plan for a future where cars serve as smart hubs, collecting and analysing data from drivers, then serving them personalised services to enhance the safety, comfort, and performance of their vehicle.
Crafting compelling offerings
Nowadays, customers want their vehicles to be smartphones on wheels, capable of sharing data, communicating with other vehicles, accessing the internet, and interacting with various devices and services. Between 2020 and 2023, the proportion of customers willing to pay a premium for connected car features increased from 6.10 to 7.44%, highlighting how important they are to attracting and retaining customers.
Delivering these value-added features however, requires consistent, high-level connectivity, something which is complex and heavily regulated. Take data roaming for example, without OEMs having agreements in place, the consistency of service and customer experience are severely compromised. If manufacturers are unable to tackle connectivity challenges to deliver a consistent customer experience, they risk missing out on additional revenue generated from these value-added services.
OEMs that adapt their offering to suit this shift will be the ones that come out on top. Digital native entrants, like Tesla, have led the charge for years. They knew before anyone else that vehicles could become flexible platforms, harnessing smart software that could be personalised to the individual user. Now with several software-first firms entering the fray, those classic OEMs who adapt fast will be the ones to lead the market.
Adapting to thrive
The rise of software-defined connected vehicles is transforming the everyday driving experience – from AI-powered route planning and smart device integration to advanced infotainment and safety features. However, the user experience is only as good as the connectivity underpinning it. For OEMs to drive additional revenue streams through digital services, they will need round-the-clock connectivity to make it a success.
Those that embrace the revolution will lead the way in delivering value and fostering long-lasting customer relationships.
