Consumer Expectations, Opportunities
and Challenges for the Industry

The connected car topic is not a new one – it has occupied the thoughts of automotive manufacturers and suppliers for many years. However, although the topic is not new, OEMs continue to invest billions into R&D efforts in order to provide vehicle users with enough added value to influence their choice of brand, their purchasing decisions and eventually, leverage connected car services extensively enough to establish a new source of revenue. In addition, the collected customer information will be used for further product development, personalization, improvements in service quality or customer loyalty.

But is this really happening? Is the potential of connected cars being properly utilized by end users? How are end customers benefitting from connected car solutions?

Against this background, NTT Group, in collaboration with teknowlogy | PAC, conducted an online survey of more than 3,000 drivers from Germany, UK, Italy and Spain to evaluate today’s drivers’ experiences, expectations and concerns regarding connected car services and technologies. In order to include the industry perspective, 20 expert interviews were conducted with automotive experts from OEMs, automotive suppliers, IT and insurance providers as well as the public sector.

Consumer Awareness and Expectations

47%

are willing
to switch brands to get
new/innovative connected
car features and services
While the technology is ever evolving, the question that presents itself is whether these technological advancements actually matter to the drivers of today. It appears that almost every second driver (47%) would be willing to switch brands in order to get new/innovative connected car features and services. This would suggest that the general belief that drivers value “classic” technologies (i.e. engine power, gas consumption) over “new” ones is not true.
 
However, based on the results of our study as well as on our discussions with the industry, first and foremost connected car services that are already well-established are demanded, whereas drivers continue to be rather skeptical when it comes to still relatively new services and features.

The ability [of the vehicle] to be connected has gained in importance and will continue to increase. It is less an additional feature, but will rather become more and more common...

(statement by an automotive service company)

Brand Loyalty

When considering the differences by vehicle type, premium car drivers are more likely to base their choice of brand on the availability of connected car features than on traditional criteria (58%). At the same time, however, premium drivers are more likely to regard connected features as a necessity, justifying higher prices, rather than true differentiators.

Detailed analysis also shows that in particular the younger generation of drivers (17-29 years old) are more likely to base their choice of brand on connected car features, whereas Generation X (+45 years) more often base their choice of brand on traditional criteria. This would reinforce the general assumption that the topic of connectivity has a much higher value among younger people, and that the mindset in which engine power or consumption matter more, will continue to subside with the generational change.

From a country perspective, the study has shown that German drivers are overall much more traditional in their decision-making than their European counterparts in the UK, in Spain and Italy, as they put more value on traditional criteria than on connected car functionalities and services.

Which statement applies best to you?

  • Traditional criteria, such as engine power or gas consumption, matter more for my choice of brand
  • I would be willing to switch brands to get new/innovative connected car features and services

Connected Car Availability and Adoption Level

Across all connected car services examined, on average

56%

are not yet available to drivers.

A number of common connected car services and features have been reviewed in our study. These range from traffic- and driver-safety-related features (e.g. street condition warning) to services targeted at improving the level of convenience (e.g. remote services, offboard journey planning) and comfort (e.g. digital personal assistant, concierge services).

When it comes to the availability of connected car services and technologies, it can be observed that use cases which have been available for some time now (i.e. remote services, real-time traffic information and street condition warnings) are also the most prevalent.

[Webasto] prioritizes features that target the actual driving experience and give tangible added value to the customers.

(Dr. Karl Kolmsee, Director PPM Energy/Charging, Webasto Group)

Which of the following connected car services and technologies have been available to you and which have you used or would like to use?

Awareness

  • available
  • not available
  • dont know if available

Usage

  • already used
  • not used, but would like to use
  • not used and not of relevance to me
  • dont know this feature

Most respondents say that the presented connected car services are not yet available to them. This is especially the case for “premium” use cases (e.g. concierge services are not available for 69% of respondents).

However, the availability of services increases proportionately with the price of the vehicle. Many more connected car services are available to premium vehicle drivers than they are to mini and compact car drivers.

Connected car services which have been available for some time now (e.g. real-time traffic information, remote services, street condition warnings) are also the ones which are more likely to have already been used by drivers. For instance, real-time traffic information is already available to 50% of respondents, and with 40% adoption, this is certainly one of the more mature connected car use cases. As a result, with increasing maturity, well-established connected car services can be seen as a differentiator when choosing a car.

Safety is the top priority. Everything that has to do with improving driver safety is already experiencing high demand.

(Dr. Robert Nahm, Industry Executive, Automotive Sector, Microsoft)

Reasons for a Negative Experience

Among the drivers who have already used connected car services, bad usability has been named as the major reason for their negative experience with these services and features. For 46% of respondents, the complexity of using connected car services has resulted in an overall bad experience. For 37% of respondents, a bad experience is the result of features or services that are not yet working as well as they should.

Reasons such as data privacy (28%) or data security (27%) are much less likely to cause a bad experience than one would expect. This would suggest that topics which may be perceived as requiring much more marketing effort are actually not as negatively perceived by consumers as might be expected.

The closer [connected car services] impact the vehicle and the actual driving experience, the more customers expect developments to come from the manufacturer; the further away (e.g. surrounding entertainment), the less – here, [digital] partners are accepted.

(statement by a premium OEM)

Future Direction of Connected Car

With the topic of the connected car advancing further, so does the availability of ever more possible use – and business – cases. Results have shown that at this point, there has not appeared “the next big thing” yet – or in other words, a connected car service or feature in which consumers see an extraordinary added value. Indeed, all connected services examined in this study appear to produce a more or less similarly large added value to drivers.

Proactive services in particular, namely a car suggesting the cheapest gas station or favorite restaurant nearby, as well as detecting a driver’s fatigue, is regarded as the most valuable future connected car function, with 43% of respondents seeing a large added value in this feature.

Most striking is the question about self-driving and autonomous driving capabilities. 42% of respondents see a large added value in this feature. However, this number will be expected to significantly increase in the future as more people actually experience some form of autonomous driving.

The seamless integration of personal devices is considered by 42% of respondents as producing a large added value. However, the industry expects this to gain in significance over the next few years as the vehicle will be seen more and more as another digital touchpoint rather than just a tool for transportation.

In which of the following future connected car services do you see a large, small or no added value to your driving experience?

  • large added value
  • small added value
  • no added value

Consumer Perception of Connected Car Services

What is your general perception regarding connected car services?

  • do not agree at all
  • rather disagree
  • somewhat agree
  • fully agree

Consumers have a pretty clear perception when it comes to connected cars. Respondents across all considered countries agree that, with the addition of connected car services, the overall (monetary) value of their car increases (81% agree or somewhat agree).

At the same time, for 80% of respondents the active and passive safety increases with the help of connected car services. Drivers of premium and economy vehicles in particular believe that with the help of connected car services, the overall driving experience becomes more convenient.

Although 66% of respondents agree or somewhat agree that driving becomes more unsafe due to increased distraction, almost the same number of drivers (63%) believe that with the addition of connected car services, the driving experience will also become more fun.

Especially German drivers are a bit more skeptical when it comes to the collection of driving behavioral data in order to improve the driving experience. Only 45% of German drivers would agree or somewhat agree to this, whereas the average European driver is much less concerned (64% agree or somewhat agree).

As the vehicle turns more and more into a wallet, the question arises who will have to pay for the [connected] services? The owner or driver of the car?

(statement by a premium OEM)

Consumer Obstacles Towards Connected Car

The arrival of the digital world in and around the vehicle offers an incredible range of potential value-added services for customers, an which at the same time, provides manufacturers with a great opportunity for numerous new revenue streams.

At the same time, however, this study has found that additional costs that might be created are the most widely named obstacle associated with connected car services.

A large number of respondents also consider issues such as privacy concerns (43%) or cyber security (42%) as significant challenges. The maturity and quality of the technology seem to be perceived as a much smaller challenge than one would expect. It appears as though consumers are well aware of the fact that connected car technologies and services are still developing and that it will take some time for these functionalities to be truly mature.

Are the following aspects a major, minor or no obstacles to your using connected car technologies/services?

  • major obstacle
  • minor obstacle

Privacy concerns will become more and more an issue; comfort benefits will trump privacy concerns, however in the long term.

(statement by a Tier-1 supplier)

Monetization of Connected Car Services

39%

are not willing to pay for connected car services

Connected car services have until now been very cost-intensive special features, especially in the area of driving assistance systems. In order to keep costs clear, car manufacturers have started to offer various payment options for the usage of connected car services.

While we have observed that additional costs are seen as the major challenge for access to connected car services, the question that remains is how willing are tomorrow’s drivers to pay for access to connected car services?

Overall, we have seen that 2/3 of all consumers surveyed would only be willing to pay 3% on top for comfort-related features (e.g. concierge services, real-time navigation, apps usage) and even less for driving assistance systems.

Older people may pay once or twice for services and then not pay any more. Younger people will directly use services from Google.

(statement by a Tier-1 supplier)

Most striking is the fact that out of our pool of respondents, 39% are not willing to pay any additional fee for connected car services or would accept in-car advertisements if they can get free access to connected car features in exchange. Given the still-to-be-improved usability, industry experts agree that as long as the user experience is not as smooth and intuitive as Smartphone applications, the willingness to pay for connected car services will continue to be rather low.

At the same time, almost every second person (45%) would prefer a one-time payment for connected car services when purchasing the car. This is even more pronounced in premium car drivers, who already have to accept higher prices for a vehicle and are, therefore, even less willing to pay for services on a monthly basis.

Also, the older the respondent, the less likely they would be willing to pay for connected car services. However, younger drivers in particular (17-44 years) would be more likely to accept in-car advertisements in exchange.

Which payment model do you prefer in general for connected car services?

It is not surprising that the willingness to pay for [connected services] is still low, if the user experience is still in need of improvement.

(statement by a Tier-1 supplier)

Data Security

89%

are willing to share their vehicle break-down diagnostic data.

Car connectivity does not only increase drivers’ comfort and safety, but it also produces an enormous amount of data. In the connected car, data is continuously recorded, processed and shared with the environment. This not only generates information about the location, speed and condition of the vehicle, it also collects information about driving behavior, habits and interests of the driver, for example through the use of entertainment or concierge services.

Of course, there is tremendous interest from various parties for this data, be it from the car manufacturer, insurance providers or advertisers. The usage and protection of this data is not yet sufficiently clarified, and it remains rather ambiguous who this data belongs to – the manufacturer, the driver or the highest bidder?

In addition to vehicles, OEMs will also offer digital services and, with the consent of vehicle owners, will also market data directly to insurance companies, for instance.

(Dr. Robert Nahm, Industry Executive, Automotive Sector, Microsoft)

Acceptance of Data Sharing

Public awareness regarding data protection has significantly increased in recent years and consumers have realized that they may have to give their personal data to third parties in order to access specific types of services.

Interestingly, the willingness to share personal data (e.g. location, entertainment preferences) with the manufacturer is significantly higher with premium car drivers than it is with non-premium car drivers. 66% of premium car drivers feel comfortable or somewhat comfortable about sharing their location data, whereas 53% of non-premium car drivers feel comfortable about sharing this data. Similarly, 68% of premium car drivers would share their entertainment preferences, whereas 57% of non-premium car drivers feel comfortable doing so.

However, German drivers in particular are much more concerned when it comes to sharing their data with the manufacturer. For instance, only 55% of German drivers feel comfortable about sharing their driving profile, whereas in the other countries considered, more than 70% of drivers feel comfortable with doing so.

When it comes to connected car features, how comfortable are you with sharing the following vehicle data with the car manufacturer?

  • not comfortable at all
  • less comfortable
  • somewhat comfortable
  • very comfortable

The connected car has many [service] advantages. For example, cars can directly call the police in case of danger. But we give a lot of personal information away in order to use these advantages.

(Andreas Krohn, Department Manager IT, Christoph Kroschke GmbH)

Data Security Concerns

Which of the following concerns do you have with regards to the security of your personal data?

I am concerned, that...

  • fully agree
  • somewhat agree

Although the majority of respondents have no major concerns about disclosing their data, there are some fears about the subsequent whereabouts and usage of their data. Consumers are particularly concerned about the idea that their data could be shared with third parties (86%). A large number of respondents (83%) are concerned that their vehicles might be hacked and manipulated. Many respondents (70%) are concerned that data about their driving behavior might be stored and passed on to third parties.

These findings would suggest that consumers are still very much concerned about sharing their data. Moreover, the basic idea that the less data I give away, the better, is still very much present. However, the industry expects that, over time, a certain “data culture” will manifest itself, in which consumers may be willing to “pay” with their data in order to access certain connected services.

Free access to data is the central point for the further development of connected services.

(Dr. Christoph Lauterwasser, Director, Allianz Center for Technology)

For more information download the full study

The results of this study are based on an online survey with more than 3,000 drivers (excluding commercial drivers) from Germany, Spain, Italy and the United Kingdom.

In addition, a number of telephone expert interviews were conducted with representatives from the automotive industry (including manufacturers, suppliers, insurance providers and public sector institutions). The field research was undertaken during the second quarter of 2019.

This interactive website with an overview of the key findings, as well as the study report (accessible via download) are available to readers free of charge thanks to the sponsorship of NTT.

[German] OEMs have always had the urge to advance already existing technologies... Today we have to look through the customer's eyes: What does the customer really want? How can I improve the driving experience?

(statement by a tier-1 supplier)

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