As automakers and aftermarket suppliers continue to invest in new vehicle technology, consumers are still hesitant to pay more for the telematics and other systems that are top of mind in the industry.
According to the 2017 Automotive Connected Services and Apps Consumer Analysis from IHS Markit, consumers around the globe want advanced technology in their cars, but willingness to pay for it varies significantly by market.
The company surveyed 5,000 vehicles owners that intend to purchase a new vehicle within 36 months in five automotive markets (U.S., Canada, China, Germany and the U.K.) It included questions on 31 technologies.
Consumers were most willing to pay for what IHS characterizes as “creature comforts.” Drivers in four regions were most interested in investing in sunroof-moonroof systems; German consumers were willing to spend an additional $642 (U.S.) for such technology, while Chinese respondents were willing to pay $440.
In the U.S., consumers were most likely to pay for rear-seat entertainment systems at a threshold of $640. These entertainment systems ranked second in the U.K. and China (at a price point of $388).
Chinese respondents (who were on the whole much younger than in other regions) showed the most openness to new technology. “China is an emerging market with a fast growing, nascent, middle class,” says Colin Bird, automotive technology analyst for IHS Markit and co-author of the report. “However, cars in China are still mainly used for leisure (shared by family members), and as a status symbol, thus skewing the market heavily toward young families that own their own homes.
Gap in telematics interest
According to the company’s forecast, by 2022 the majority of new vehicles shipped in each market will be equipped with telematics – 87 percent U.S.; 91 percent German; 92 percent U.K.; 89 percent Canadian; and 54 percent of Chinese vehicles. Further, by that time more than half of the global fleet will be connected.
Consumers remain somewhat unresponsive, however. According to IHS, just 32 percent of respondents said that telematics was a feature they were willing to pay for in their next vehicle; in-car Wi-Fi was only selected by 29 percent of consumers.
U.S. drivers were willing to pay the most for telematics ($484), while price points varied in the other regions: $402 in Germany, $386 in the U.K., $294 in China, and $168 in Canada.
More than half of all respondents said they already have at least one vehicle that featured an infotainment or navigation system that offered features such as roadside assistance, stolen vehicle assistance, crash notification or turn-by-turn navigation. Thirty-two percent of respondents globally indicated roadside assistance as the most important telematics feature in a new vehicle, with stolen vehicle assistance coming in second at 28 percent.
Automatic crash notification and turn-by-turn navigation were both preferred by 25 percent of respondents, while 51 percent were interested in real-time traffic information. Dynamic routing and wirelessly updating maps based on current conditions were preferred by 41 percent and 36 percent of respondents, respectively.
In China, remote vehicle control from a smartphone was the most popular feature, cited by 39 percent of respondents as being most important.
The gap between the level of deployment automakers would like to see and the interest of consumers persists, but Bird says that those differences will gradually fade.
“I think for automakers it makes sense to bring universality to their telematics offerings because it's an opportunity down-the-line for reoccurring revenue that can flatten out the cyclical nature of new car sales,” Bird says. Consumers may see less benefit overall because many telematics features are now available on smartphones.
“Of course, road-side assistance, stolen vehicle assistance and automatic crash notification/response are among the top features for those who find telematics desirable, and these features aren't as easily duplicated by the smartphone,” Bird continues. “It's also important to note that telematics was among the top three attributes we surveyed in the connected services and apps report among consumers willing to pay extra (from the standard MSRP) to have, noting that there is a sizeable subset of consumers who see value in the service and hence why automakers keep including it.”
Roughly half of respondents said that navigation apps were the leading use of smartphones in the vehicle, followed by weather (40 percent) and music (36 percent). Mirroring those smartphone apps in the vehicle presents a significant opportunity, according to IHS.
Consumers were also highly interested in blind spot detection and autonomous emergency braking, according to Bird.
“Consumers expect a lot from their next vehicle,” Bird said. “Their expectations are constantly evolving as well, as consumers expect development and implementation of these technologies in vehicles to be introduced as quickly as consumer electronics such as smartphones and tablets. It’s up to OEMs and suppliers to determine how to best address these challenges and ramp up business plans accordingly.”
Bird predicts that the connected car will help expand telematics acceptance, since those features are often packaged with Wi-Fi connectivity. Over-the-air (OTA) software/firmware updates will also help improve acceptance, as consumers surveyed were willing to pay for the technology if it would help bring new functionality and services to the car in the future.
“OTA updates and cybersecurity will give automakers even more of an incentive to increase attach rates for telematics from a B2B and B2C perspective, and our forecasts show these attached rates [will] continue to increase to near universality among new car sales, particularly in North America and Europe, within the next seven years,” Bird says.
This also could help close the gap between the very long vehicle product development cycles and the much faster technology product cycles. Bird says OEMs will amp up their technology specifications to future proof in-car systems with software updates and enhancements.
“That will bring more modernity to in-car technology over the lifetime of the product similarly to what you see in smartphones and smart TVs,” Bird says. “Of course, a typical car lasts for 15 years on average and it will still be challenging to keep in-car technology up-to-date over that long of duration, considering the iPhone is just over 10 years old and smartphones have been around for less than 20 years for instance.”
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