Vehicle-as-a-Service: Driving Differentiation in the Connected-Car

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Connected cars offer enormous potential. As noted by a 2017 Foley and Lardner study, 77 percent of auto industry professionals expect the automotive sales market to change substantially as bundled connected services become the norm. According to Gartner , this new market demands a customer-first strategy that hinges on differentiation to capture user interest and create brand loyalty.

But how will manufacturers create custom features as “vehicle infrastructure” continues to be standardized? The onboard diagnostic port, for example, was regulated back in 2000 to streamline car repairs and testing, and new initiatives such as the Mobility Open Blockchain Initiative (MOBI) are looking to do the same for blockchain and mobile technologies.

In the face of increased standardization, car makers must also prepare for the looming self-driving car revolution. As IDG’s Tech World notes, multiple manufacturers plan to roll out Level 5 autonomous vehicles — vehicles that are fully self-driving and require no human interaction — by 2020. To survive, automakers must strike a balance between expected services that deliver standardized automation, safety and connectivity, and creating a unique in-car experience.

The Vehicle as a Service

Enter the vehicle-as-a-service, rather than simply a possession. Much like its software-as-a-service namesake, a service-driven market for vehicles relies on features, not infrastructure, to differentiate value. BMW, Volvo, Lincoln and Porsche are testing subscription-based models, Wards Auto writes. In this setup, consumers pay monthly for vehicle access, maintenance and, in some cases, insurance. Subscribers can also change vehicles should their lifestyle needs evolve.

Taking this a step further is a refinement of the ride-sharing economy into a fleet-based autonomous-car model in which consumers rent the vehicle they need when they need it. Shifting consumer attitudes may help drive this change: As a recent study conducted by the IBM Institute for Business Value notes, UK respondents 35 and older said that they expect a five-fold increase in their use of ride-sharing services and their use of personal vehicles for primary transportation to drop by 16 percent.

For Volvo, differentiation meant leading the way in safety technology, while Ford invested heavily in new engine designs that boosted power without increasing pollution. In connected vehicles, this might mean going all-in on voice recognition or intelligent smartphone integration.

Here, data paves the way for effective specialization: manufacturers use just a fraction of the data they collect and usually lack the in-house IT structure to handle data volumes and velocity, so developing key partnerships will be necessary to unlock value and drive actionable insight.

The connected vehicle experience is evolving, even as automation and infrastructure solutions standardize car design. For automakers, delivering the promise of differentiated experience demands data-driven specialization that embraces the shift to service-driven economies of scale.