Connected cars in the fast lane

Booz & Co assesses the potential of the automotive M2M industry

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Connected cars in the fast lane
By  Booz & Co Published  December 24, 2013

By 2020, the connection of a car with its environment will be significantly strengthened and thus become an important feature for differentiation in the competition of automobile manufacturers (OEMs).

The truth is, connected devices are possible because of machine-to-machine (M2M) communications - which use wireless data networks, sensors, software to conduct remote monitoring, measurement and condition recording, in-field data collection, and other sophisticated processes. This eliminates manual, time-consuming work and minimises human intervention.

Within the automotive industry, M2M's potential is considerable; after all, in this day and age, safety and assistance systems are increasingly becoming standard in every vehicle. Indeed, thanks to mobile internet connections, automobiles can now inform drivers in real-time about dangerous spots and accident sites. And, in the future, this technology will further assist the driver in reaching his destination in a safe manner. In fact, according to a Connected Car 2013 study conducted by engineers at management consulting firm Booz & Company - in collaboration with the Center of Automotive Management - by 2015, car manufacturers worldwide would have generated 19 billion euros thanks to connected safety features and safe driving components.

Growth potential

The connection of passenger cars to the Internet is the next digital wave and so, unsurprisingly, the M2M market is expanding rapidly. In the Middle East and North Africa (MENA) region, it is estimated to reach over $2 billion by 2016, representing 6.1% of the global M2M market, driven mainly by the demand of new vertical services. Automotive M2M services are expected to have a large share of this new revenue by 2016, with 12 million automotive M2M connections, up from just three million in 2012.

Such rapid growth presents companies with a unique opportunity. "To successfully enter the market, however, they must develop the right business model, and partnerships to provide the end-to-end innovative services that consumers and businesses expect," said Bahjat El-Darwiche, a partner with Booz & Company. "In particular, telecom companies will need to determine their growth strategy based on their core capabilities and their positioning in the overall M2M ecosystem."

He added: "They will have to develop right-to-win capabilities including vertical innovation, solutions development and management, end-to-end horizontal platforms, and commercialisation. Some of these capabilities can be achieved through internal development, while others may require acquisitions or creating collaborative business partnerships of a kind that are very different to the contractual relationships that currently exist."

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