Report: Automakers ‘missing the mark’ on connected car services

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Navigation, backup cameras, phone pairing—these are just some of the features in modern vehicles that many drivers now take for granted.

Car companies likely wouldn’t have much luck getting people to pay for them (just ask BMW how its attempt to charge a subscription fee for heated seats went). What consumers are willing to pay for in the age of in-vehicle digital connectivity is a multibillion-dollar question for an industry chasing new revenue opportunities.

A recent report from Escalent claims automakers are “missing the mark” on their quest to roll out connected vehicle services that consumers will pony up for—and offers some clues about how they can hit their targets.

“Real-world success has been limited, with many automakers struggling to translate this growing interest into a viable business model,” K.C. Boyce, a VP in Escalent’s automotive and mobility and energy industry practices, said in a statement.

“Consumer pushback and delayed rollouts of vehicle subscription service offerings in the market today point to a disconnect between what’s being offered, what customers actually value, and what they are willing to pay for—underscoring the need for automakers to realign their strategies.”

Connections: Connected services are nothing new; see GM’s long-running OnStar business and Tesla’s Full Self-Driving advanced driver-assistance system. Ford, for example, is leveraging vehicle connectivity to help commercial customers manage the EV transition.

By 2030, nearly all—96%—of new vehicles will be connected, according to API platform Smartcar. However, the company’s research suggests cost remains a major barrier to consumer adoption of connected services.

To avoid: Per Escalent’s report, pitfalls abound in how automakers go about offering such services. So how can automakers give consumers what they want?

Escalent analysts zeroed in on “safety, security, vehicle maintenance, and entertainment” as the connected vehicle services with the most mass-market potential, with consumers reporting a higher willingness to pay for services in these categories. More than 75% of respondents said they’d be likely to use safety-focused features like lane-keeping assist and automatic crash detection.

The report also homed in on niche services—like automated driving and concierge offerings—that had lower overall interest, but high willingness to pay by those consumers who were interested. Those intrigued by automated driving features were willing to spend more than twice the amount of money compared to the next highest-rated category (safety).

“The situational-type features that are a little bit more niche can complement those mass-market features to create an overall business structure that sustains what the automakers are doing,” Boyce told Tech Brew.

On the other hand, respondents were highly interested in services like navigation and mapping, remote control, and communication, but less willing to pay for them—likely because they expect these types of features to be standard.

“People don’t want to pay again for things that they already feel like they have,” Boyce said.

Instead, automakers should focus on differentiated services that add clear value consumers can’t find elsewhere, according to Escalent.

“Although they are unlikely to pay for features that have become standard, such as remote starters and seat warmers, there is clear revenue potential in offering new, differentiated services,” Ben Lundin, an insights director in Escalent’s automotive and mobility practice, said in a statement.

Analysts also emphasized the importance of giving consumers opportunities to become familiar with connected services—and hooking consumers at the point of sale, when they’re more likely to pay a one-time fee versus an ongoing subscription.

“GM and Ford, SiriusXM, trialing those features, allowing consumers to become familiar with them before they’ve got to put their money at risk,” Boyce said, “that’s a good strategy because it leads to a higher willingness to pay.”