Global connected car revenues to grow five-fold by 2025: Counterpoint Research

By Xite - June 27, 2019
With the rise of smartphones, the digital features in cars today are expensive and complex, OEMs are collaborating and even investing in software companies to offer enhanced customer experience.

Revenues from connected cars globally are projected to grow five-fold by 2025, reaching over $24 billion, said a research report by Counterpoint’s Smart Automotive Service shows.

For this study, Counterpoint Research defines a connected car as a passenger car with an embedded SIM card for internet connection and proprietary Telematics Control Unit (TCU) hardware for managing data exchanges. The study further categorises potential OEM revenues by services offered and the originally installed hardware equipment. Connected services include advanced navigation and infotainment (music, social media, news, etc.) to which a customer subscribes, as well as emergency assistance and diagnostics alerts as value added, or in some cases, mandated services.

‘Deep technology applications, especially smartphones and notepads, in daily life has created expectations for seamless “on-the-go” technology accessibility in cars, especially amongst emerging millennial car buyers. Connected cars are gaining preference and going mainstream, with the rising awareness of their enhanced overall comfort, safety and convenience while driving,’ said Aman Madhok, Senior Analyst for Smart Automotive at Counterpoint Research.

The report further reveals that over 286 million connected passenger cars will be added globally during the 2019 – 2025 period. US and Europe together accounted for the most connected car shipments in 2018. However, during the forecast period, China is expected to account for more than 35 per cent of connected car shipments.

OEMs find connected services an important area for generating additional revenues and increasing profit margins. In partnership with telecom operators, OEMs offer car owners optional connectivity plans ranging from daily, monthly and annual subscriptions. For example, in the US, AT&T offers monthly plans ranging between $10 to $20 on its network for backhaul. The Average Revenue Per User (ARPU) for connected services is the highest for developed countries where data plans are expensive, for instance, in the US, it was $180 annually in 2018. For emerging economies like China, the ARPU is considerably lower.

While OEMs continue to prefer embedded onboard infotainment to diversify their revenues, it is clear that the smartphone’s dominance on personal connectivity is overwhelming. There continues to be considerable debate over how connectivity will develop within the vehicle, i.e., whether it will the built-in connectivity or brought-in mobile systems.

‘OEMs failing to innovate, and bring costs down through scale, will lose the race, leaving behind significant revenue on the table,’ the report added.


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