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Automotive sector failing to see return on M2M investment

Sophie Curtis | July 3, 2013
Only 14 percent of companies have noticed a significant ROI.

The automotive sector is the largest adopter of machine-to-machine (M2M) technology thanks to the growth in connected cars, with 19 percent of organisations having already launched an M2M strategy, and 40 percent expecting to do so in the next two years.

But automotive is also the sector where organisations have seen the lowest return on investment in M2M. Only 14 percent have noticed a significant ROI — compared to 37 percent of all businesses — while 29 percent note little or no return, according to Vodafone's recent 'M2M adoption barometer' report.

This is partly due to the fact that connectivity in cars is used predominantly for providing services such as emergency breakdown assistance and stolen vehicle recovery, where the revenue from end customers is relatively small.

The European Commission has now mandated that all new car models in member states from 2015 are fitted with a European eCall system, which will connect a vehicle to emergency services following a collision and provide location and impact information.

As a result, car manufacturers tend to view in-car connectivity as an obligation rather than an opportunity, and have struggled to see a meaningful return on investment.

"For them it's a little bit like the airbag. Every car has an airbag at the moment; of course it's great, it saves lives; but honestly for the automotive industry, from a profitability point of view, it was a cost initially, and then they just had to adopt it," said Erik Brenneis, head of M2M at Vodafone.

Once the M2M technology is in place, however, manufacturers can start to look at providing more lucrative in-car services such as infotainment systems, usage-based insurance packages and vehicle relationship management.

Vodafone explained that this is a complex value chain, and it is currently not clear how revenues will be distributed, but there is nevertheless a general shift from basic services to delivering a broader set of capabilities.

"Take BMW ConnectedDrive — that's a luxury car, but depending on which country it is, BMW invoices their customers 300 a year for the complete package, and in this BMW makes a nice margin," said Jari Salminen, Head of Business Development for M2M at Vodafone.

"It's clear that the Fiat drivers will be less willing and able to pay 300 a year than the BMW drivers, but depending on what kind of service you offer to the customer, I am convinced that you can offer some services that the consumer will be willing to pay for."

Brenneis said that, although in some cases it is possible to deliver similar services via a smartphone or 3G-enabled box under the dashboard, in-car telematics allows for a much more sophisticated range of applications.

 

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