How Will the Auto Industry Capitalize on the Internet of Things?

The “Internet of Things” is a very broad term, but think of it this way: in the future, all of our devices could talk to one another, enabling new ways to interact with the world around us. According to ABI Research, there will be more than 30 billion devices connected to the Internet of Things (IoT) by 2020. The devices included in this vision aren’t just smartphones and tablets; potentially, just about anything that can connect to the Internet and transmit data wirelessly can be considered a “device”: one’s home, one’s office, and even one’s car.

Nearly everyone in the auto industry agrees that a sea change is coming five or 10 or 15 years from now—nobody is sure exactly how the timeline will unfold—when connected cars will talk to each other or the Internet infrastructure while sending and receiving data from the cloud. Already, related technologies are being used in cars to help keep drivers in the proper lane, guide parallel parking, and determine insurance rates by monitoring drivers, though not in a very widespread way.

Like the consumer electronics industry has done, automakers want to use the interconnectivity of devices to offer more attractive products and features to their customers. Mining the data from connected cars is potentially very lucrative, and the auto industry hopes for a big slice of the profits. As complicated as it can be to harness data from vehicles, the chance to use data and connectivity to make cars smarter, safer, more efficient—and even, perhaps, able to manage smartphone apps—is too powerful for automakers to resist.

But to deliver on this vision, observers say, car companies will have to break down the walls of competition and secrecy in an unprecedented way—and work together to develop common usage standards, which currently don’t exist. The auto industry has to agree internally (and with stakeholders) to collaborate in order to streamline data mining and enable outside developers to access software. This is a drastic change for a business used to strict secrecy and cutthroat competition.

Indeed, there’s plenty of uncertainty for the auto industry surrounding automotive IoT, so I spoke with some key people at the GENIVI Alliance’s open automotive conference held outside of Detroit in October. GENIVI is a non-profit industry group crusading for the broad adoption of an open-source development platform for in-vehicle infotainment. The conference attracted thought leaders from around the world in the realm of connected autos, and the agenda was dominated by how cars fit into the Internet of Things: What are the opportunities, challenges, and trends on the horizon? Will the auto industry be able to collaborate to the degree necessary to develop truly connected cars without killing competition?

Joel Hoffmann, Intel’s automotive strategist and a GENIVI member, is one person working to strengthen collaboration surrounding the connected car.“The Internet of Things in cars is inevitable—it’s just a matter of time,” Hoffmann says. When it comes to the subject of one of the conference sessions—“IoT: game changer or game over”—Hoffmann says he doesn’t believe the Internet of Things is necessarily either one. “The point of the session was to debate how the industry will deal with the coming challenges and opportunities,” he says. “If [automakers] don’t figure out a way to embrace it, they’ll be out of the infotainment business. The car industry doesn’t want to give up that business opportunity.”

Some of the breathless anticipation of an Internet of Things future might be “a little overblown,” he admits. Though lots of people might want their cars to sync up with the rest of the devices in their homes one day, not many are spending the money to do it yet. And if the prospect of smartphone-like infotainment is too daunting for the auto industry—the safety regulations automakers are required to abide by complicate things considerably—Hoffmann suggests they could concentrate their resources toward developing driver-centric or safety features. “People will pay for safer cars—that’s been proven,” he says.

Smartphone makers have figured out a way to monetize connectivity through advertising and collecting “actionable” data, and automakers seem eager to do the same. In vehicles, however, Hoffmann says there’s no single entity to simply analyze the data, let alone monetize it. “The car makers have plenty of space to bring new ideas to the table, even if that means giving up some of it to Google or Apple,” he says. “You can’t do IoT without collaboration and an agreement on standards. Current suppliers and OEMs [original equipment manufacturers] have to be more open. If they don’t collaborate and open up, someone else, like Silicon Valley, will take over. But the car industry doesn’t have to look at it as a threat. It’s an opportunity.”

Doug Gilman, an automotive analyst for Frost & Sullivan, is also keenly interested in how the auto industry adapts to an Internet of Things world. For a new vehicle today, he says, up to 25 percent of its value consists of electronics, and by 2020, that percentage will increase to nearly 45 percent—and that’s a conservative estimate.

“Collaboration is a huge must for the auto industry,” Gilman says. He compares the innards of today’s car to that of the modern airplane. “The cockpit of an airplane is one of the most advanced electrical systems out there. Airlines collaborated to build it, but you don’t see this in the auto industry.”

Like Hoffman, Gilman agrees that a major challenge for car companies is how to make … Next Page »

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Sarah Schmid Stevenson is the editor of Xconomy Detroit/Ann Arbor. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET_AA

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  • Be-Bound

    The IoT is, without the shadow of a doubt, change completely our lives and the way we do things. Connected cars are a very good example of all that can be done on the subject. However this will all happen if we have a connection continuity in all areas not covered by data network (3G, 4G etc…).

    • Sebastien Latapie

      Completely agree, the scope of opportunity that this is creating is tremendous, and kind of overwhelming to take in at once.

      Getting everyone to collaborate is not going to be easy, but is such a critical first step. I hope they avoid the mistakes made with infotainment systems. Looking at the infotainment systems, they are all garbage compared to what is available in the consumer tech industry. Why can’t I simply sync my phone and use Google maps instead of their proprietary system.

      As for the connectivity issue, it would be neat to have something operate like Fire Chat, enabling cars to communicate with each other even in the absence of 3G/4G.

  • Joel Hoffmann

    I’d say connectivity is important, but look at how many people use tablets without constant connectivity. If cars wait for that, it will NEVER happen. There is no business model that justifies putting cell towers in remote rural location, around mountainous (and stunning) roadways. What IoT means is cooperation and agreement, not to just make standards, but to use them by developing software. That’s how Apple and Google are succeeding.