Today, most organizations understand the four main areas of technology disruption impacting the automotive industry: electrification, autonomous vehicles, connectivity and shared mobility. But there is a fifth element of disruption, data monetization, which will have an impact on the supplier model.
As major technology shifts in the automotive industry approach, it is becoming increasingly difficult for suppliers to find footholds in the new market. Some have already begun the process of looking for buyers to take over and wind down operations; others are seeking new in-roads and ways to break ground. One of the more popular and fast-growing areas of supplier activity has been software—both its development and management. However, I believe there’s an opportunity for suppliers to take it further. The automotive supplier business model is evolving quickly from just software to data that can be monetized and has the potential to create significant competitive barriers.
The current landscape of supplier software business models contains four major sectors: monetizing hardware, contracted services, software licensing and subscriptions. Aptiv (aptiv.com) is a good example of the hardware supplier model: they’re giving their software away for free, and monetizing on the hardware needed to run it, in their case, on a radar system. Elektrobit (elektrobit.com) and KPIT (kpit.com) are great examples of software contracted services, while Apple’s CarPlay is an example of the software licensing model. Finally, companies like HERE are capitalizing on the increasingly popular subscription model, charging customers an ongoing fee in exchange for HD maps that are consistently updated, which will be critical for autonomous driving.
With the influx of new software and hardware in vehicles, however, comes an influx of data. The cars that are being designed and produced these days are already producing exponentially more data than they were 10 years ago; soon data production will be at 4,000 GB per day. This is information being created, processed, and output by components associated with advanced driver assistance systems (ADAS), like ultrasonic, radar, cameras, GPS, and lidar systems. This is no paltry amount of data, so the question is: what’s being done with it all and what is it worth?
At its most basic level, the data is, of course, used for these advanced safety systems. Cameras and radar use data to identify a vehicle’s location—relative to other objects—in its lane, providing signals to the vehicle if something is an obstacle or at an unsafe distance.
This valuable data is necessary for autonomous driving and is used to determine maneuvers for lane changes or safe road exit features. These sensors can also use this data to monitor real-time driving conditions such as weather, traffic, construction, and more. And this is just the beginning of the use cases for this information. Companies of all types—app developers, insurance companies, city planners, tech companies, automakers, and countless emerging companies—can put this mass amount of data to good use and are willing to pay for it.
Now let me explain how this disrupts the supplier business model. Companies like vision supplier Mobileye (mobileye.com) along with Aptiv and sensor-provider Bosch (bosch.us) are starting to provide deep price discounts to automakers who allow them to capture and sell the sensor data. These organizations then sell this data to HD mapping companies, who then package and sell the data in real time subscriptions to automakers and consumers.
This is why Bosch has established a partnership with TomTom and is an investor in HERE. These organizations don’t only focus on a one-time product sale to the OEM, but now generate additional revenue streams by selling the data to third parties, whether it be for HD maps, fleet monitoring, or to city planners. Therefore, companies who are able to provide and monetize this data have a chance to create their own competitive edge over suppliers who don’t build the infrastructure to do so or leverage these new revenue streams.
In addition to the four existing areas of technology disruption, data monetization is quickly becoming the fifth. With internal combustion engine vehicles continue to fade and electric, autonomous vehicles becoming harbingers of the new future, it will only become more difficult for traditional suppliers to gain and maintain the competitive edge needed to survive the technological shift, so now is the perfect time to take advantage of a new revenue stream.