According to McKinsey, big data’s influence on the automobile industry has the potential to generate $750 billion in revenue by 2030. While only a few years ago the idea of integrating internet connections and web applications into our everyday vehicles seemed revolutionary, big data has become a norm in the automobile industry. These innovations have provided more customized and safe driving experiences for car owners. Additionally, big data has also enabled car manufacturers to produce more efficiently and understand the preferences of their customers more accurately.
One of the most significant advantages that big data offers to automakers is improving the manufacturing process. It is estimated that data from a car’s engine has led to significantly decreased maintenance needs, which on average allow companies to save 10 to 20% percent in maintenance costs. According to a report from McKinsey on the monetization of data generated from vehicles, 73% of consumers globally are willing to pray for predictive maintenance services.
On the other hand, the digitalization of the automobile industry has also led to new products and services which enhance the efficiency of transportation. Apps such as Waze leverage data provided in real-time by app users and report information on traffic, accident, and other alarming news. The app’s platform encourages users to share their personal data, including their live location, in order to increase value for other users. This crowdsourcing model is just one example of how a business opportunity was created from connecting vehicle data with a practical application.
Due to the rapidly changing demands of consumers, players in the mobility industry such as alternative transportation providers, insurance companies, and vehicle manufacturers must continue to adapt to the megatrends and will play critical roles in providing complementary services to vehicle owners using data. In order to get a closer idea at the drivers of innovation, the visual representation below illustrates the cyclic nature of four disruptive technological trends. These trends will require incumbents to strategically position themselves in order to derive value from data retrieved from vehicles.
Lastly, the following approaches are, according to McKinsey, fundamental for companies looking to capture value from vehicle data monetization. First off, developing a compelling value proposition is key for incentivizing customers to share their data. Second, it is crucial that industry players define use cases where data will be leveraged in their business model. Thirdly, in order for these strategies to be implemented, the right technical enablers must be present. Fourthly, and finally, developing the vital partnerships along the value chain will be key in gaining the right capabilities for data monetization.
Although this is a mere glance at big data’s impact on the automobile industry, it’s important to consider the different ways in which industry players are leveraging your data and how!
References
McKinsey Article: Monetizing Car Data
https://www.mckinsey.com/~/media/McKinsey/Industries/Automotive%20and%20Assembly/Our%20Insights/Monetizing%20car%20data/Monetizing-car-data.ashx
On the Road Trends Article: Big Data and the Automotive Industry: The Future is Here
https://www.ontheroadtrends.com/big-data-automotive-industry-future/?lang=en
Hi Victor,
Thank you for addressing this interesting topic. It is fascinating to see how the software industry and automobile industry are joining forces to create a ‘smart’ car. Like you mentioned, the demand of consumers is changing rapidly and traditional car manufacturers will need to adapt to mega trends. I think car driving is slowly but surely becoming more about the apps and complementary services rather than just mobility. I would expect that cars (when considered as the ‘hardware’) will eventually be commoditized. The software will be much more valuable to consumers and traditional car manufacturers’ core business will be threatened. Do you think this digital transformation will eventually lead to a car-as-a-service business model in the automotive industry? I can definitely imagine this shift.
Enjoyable article Victor
My team used the automotive industry for our IS assignment, so the past weeks I have read a lot on the developments and emerging technologies in this industry. I think you did a good job at summarizing them. To me, especially the potential market value of Mobility-as-a-Service (MaaS) was surprising. I believe you name it Diverse mobility here. Especiallyin densely urbanized areas, car ownership is expectes to decrease. The traffic jams cause slow transportation times. Cities try to reduce polution by discouraging or even banning cars from inner cities. And its estimated that a car is unused for 90% of the time. Owning a car while living, working, or having to be in inner cities will become more and more an irational choice. I think MaaS offers those people a cheaper and more effective alternative. Especially as technology and offering improve.