The Value of Connectivity in the Automotive Sector

This report explores the actual value that connectivity in vehicles can bring to society and the different sectors affected. Connectivity is one of the four critical mega-trends facing the automotive industry. These trends are autonomous driving, shared mobility and electrification, yet connectivity is both separate and integrated to these other mega-trends. The importance of connectivity is therefore fundamental to the future evolution of the industry.


1. Introduction

The automotive industry is rapidly adopting connectivity technologies for diverse reasons, including safety, infotainment, and preventive maintenance to name a few of the emerging smart car applications, which are often collectively termed, the connected car or vehicle. Connectivity technologies are not only providing the means for these smart vehicle services, but they are also facilitating the transformation of the industry from an automotive to a mobility focus that is disrupting traditional value propositions and creating new business models and sources of value. For example, McKinsey Advanced Industries (2016) predicted that on-demand mobility and data-driven services could account for approximately $2 trillion (or approximately 30%) of the automotive revenue pool by 2030, with data connectivity services accounting for between $450-$750 billion per year. This growth is built upon advanced mobile telecommunication standards, in particular, cellular standards, which provides the enabling infrastructure for new connectivity-based products and services to emerge in the automotive/mobility sector. These standards are developed in an open, consensus-based process by a consortium of market actors through what are known as standard development organizations (SDOs).

In general, it is not controversial to state that the emergence of the connected vehicle is a great source of value for producers, consumers, and society as a whole. A review of the annual reports of leading automakers confirms that connectivity is considered one of the four critical megatrends facing the automotive industry together with autonomous driving, shared mobility, and electrification, where connectivity can be seen as both a separate and integrated value proposition to these other megatrends. 4 Below are just two examples of many where automotive leaders have defined the importance of connectivity.

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