Since at least 2014, the connected vehicle has been touted as one of the top three disruptive forces in the automotive industry. In 2016 McKinsey and Company published their influential ‘Monetizing car data’ report which predicted that the connected vehicle data market would be worth $750B by 2030. By 2021 connected car data companies like Otonomo and Wejo were going public with billion dollar valuations.
Things have changed recently. In 2023, Otonomo is no more, and in McKinsey’s latest report on the topic from August 2023 it is clear players in this space are still looking for answers about how to make money from connected vehicle initiatives. At Viaduct, interacting with many of the leaders of these initiatives across OEMs, Tier 1 suppliers, and fleet ecosystem players, we observe the same challenges. Generally speaking, they are all struggling to turn the vision into money-making realities. Data collection is complicated and costly, adoption and monetization of connected services is elusive, and return on investment (ROI) always seems just a few years away.
While connected services leaders are under constant pressure to deliver ROI via new revenue streams, McKinsey points out that some of the most successful programs come from start-up automotive companies and spin-outs of large OEMs. So what are connected services leaders at large, established OEMs supposed to do?
We at Viaduct are firm believers in the value of connected vehicle data, and we believe billions of value from connected vehicle data are ripe for the taking today.
There is a pot of gold sitting in all that connected vehicle data you’ve collected over the last few years, it’s just not where you think it is. Today’s main value pool does not lie in selling aggregated data to third parties or even in selling vague “predictive maintenance” bundles to your drivers for $5/VIN-month. The reality is that the data you are collecting today is likely just not good enough to enable high-precision predictive maintenance offerings, and regardless, vehicle operators are hesitant to pay extra for such services.
Instead, today’s opportunity to generate billions of dollars in value lies in leveraging connected vehicle data to lower your cost of quality. How about teaming up with your head of quality to spearhead an initiative to wring out warranty cost and improve effectiveness of field quality operations (pre and post-production quality) to the tune of $100M+ per year? It might not be a new direct revenue stream, but this kind of immediate ROI can fund your connected vehicle data platform while you are looking for that magical new business model on the other side of the rainbow.
How does it work? Take all the sensor data being collected, (GPS, voltages, currents, pressures, and even trusty-old fault codes), process them with cutting-edge AI to make them easier to understand and to find the proverbial needle in the haystack. Then put the insights into the hands of your field quality engineers and problem solvers. These are the people currently combing through lagging indicators such as warranty claims looking for trends and patterns that suggest supplier or plant problems that cause recalls and excessive warranty spend. If you give them AI-enriched insights from telematics data instead of asking them to find patterns in warranty data, they will find issues weeks to months earlier, contain those problems weeks to months earlier, avoid millions of defects finding their way to customers and save your company hundreds of millions of dollars. (We know because we’ve done it.)
Why aren't all OEMs and Tier 1’s already doing this? Many are trying, or are at least thinking about trying. But it’s hard. Just ingesting, storing and organizing terabytes of arcane fault codes, sensor readings, and freeze frame data is a challenge. Even if you manage to do so, how are your experts supposed to comb through petabytes of data to find emerging issues? That’s where the AI comes into play, and we aren’t aware of anyone (other than Viaduct) with the purpose-built algorithms or the quality solution built around AI that is required to unleash your quality investigators with these insights.
If you are a Connectivity leader at a vehicle manufacturer or component supplier, looking for winning projects to unlock the value in the connected vehicle data you’ve been working so hard to collect, don’t give up on looking for ways to distribute content or sell advertising. Don’t give up on predictive maintenance, either. If you can tell a customer, with high confidence, that their battery is about to fail before it fails, or that their tires are wearing unevenly and need to be rotated, then they are less likely to experience an on-the-road failure and more likely to use your dealer network for service. We agree, and we’d love to help you with this problem… We are really good at AI for vehicle failure prediction too! The problem is that the majority of the time we engage with connected vehicle data, the data is not good enough (or at least not the right data) to predict individual vehicle failures with high enough precision to make a great business case.
Just know that if you are under the gun to prove value now, or you need a business case to go get that better data, starting in Quality is a no-brainer. We have successfully proven this value at scale, and can confidently say there are hundreds of millions (or billions) of annual cost of quality savings available to most vehicle and component manufacturers we engage with. We can help you take your unsung fault codes, unreliable sensor data, and incomprehensible warranty claim feeds, and turn them into a pot of gold. Give us a call.