The global connected car market size was estimated at over USD 24 billion in 2014 and is expected to grow at a CAGR of approximately 28% over the forecast period. Technological proliferation and an increase in disposable incomes across regions are expected to drive the global market for the next seven years. There have been significant advances in telecommunication technology over the past few years. These advances have offered the population a new level of connectedness. With the development of connected car concepts, vehicle telematics and infotainment technology have progressed to offer HD touch screens, navigation tools, varied applications, and high-speed internet on the go.
North America connected car market by application, 2012 - 2022, (USD Billion)
The industry is expected to get a major push from governments across the nations. The U.S. Department of Transportation in association with the National Highway Traffic Safety Administration has announced plans for a regulatory proposal that would make it mandatory for auto manufacturers the installation of vehicle-to-vehicle communication devices in every automobile they produce in the coming years.
Issues pertaining to safety and security such as unauthorized access to multiple automobile applications or breaking into the in-vehicle connectivity system can restrain the connected car market. Moreover, the unavailability of seamless internet connectivity across regions may pose a challenge to the connected car industry growth.
Connected cars provide performance, comfort, safety, security, and connectivity. Various online platforms enable drivers and passengers to communicate in real time on the go with advanced technology. In the coming years, consumer demands, the constant need for connectivity, an increased dependency on technology, and the growth of tech-savvy people will likely fuel industry growth. In addition, telematics mandates (existing and anticipated) from various governments are also critical drivers of the globally connected car market.
Network service providers such as Verizon and AT&T provide connectivity technology and utilities to end users and automobile manufacturers. These connectivity devices and technologies transform an ordinary car into a connected car. Application service providing companies such as Microsoft, TomTom, Intel, and most recently Google and Apple, provide applications, software and platforms required to run connected car services.
The connected car market shows a promising picture for the future growth of in car-embedded technology. This user-friendly technology has increasingly become popular amidst the end-users. Technological advancements leveraged by automakers enable customers in remotely connecting to their cars. In addition to car manufacturers, OEMs also contribute in market expansion. Automobile manufacturers use the services and products provided by the OEMs, which include sensors, processors, fleet managers, wireless, cellular models, and aftermarket services.
Connected car systems can be a potential solution for these problems, which will further help in enhancing the driving experience. Drivers are seeking smarter forms of transportation that can provide them with real time data on weather conditions, traffic jams, road blocks, and vacant parking spaces. Connected car systems can be a potential solution for these problems which will further help in enhancing the driving experience. Based on its advantages the impact of this factor is expected to increase in the future.
Driver assistance includes a number of advanced technologies that help improve the vehicle's actual performance. Systems such as parking assist and cruise control autonomously steer the vehicle are increasingly being introduced across all car segments thus ensuring driver comfort and convenience.
Mobility management comprises of systems that enable drivers to reach their destination in the least possible time, safely, at a reasonable cost, and with optimal fuel consumption. Safety technologies include external danger warnings for drivers regarding severe weather and road conditions along with the vehicle’s own internal autonomous collision protection and emergency functions. The safety systems segment accounted for over 35% of the revenue share in 2014 and is projected for growth owing to increasing government and transport authority mandates across the globe in recent times.
Entertainment has been a basic need in virtually every vehicle since its introduction. Auto manufacturers are increasingly installing features such as smartphone interfaces, Wi-Fi hot spots, internet, and social media access, along with advanced mobile office platforms.
Vehicle management systems perform a variety of functions that enable automobile owners to reduce running costs and increase ease of use and maintenance, such as keyless unlocking and ignition, onboard information about vehicle conditions, and service scheduling and updates.
The presence of major automobile manufacturers and technology providers has led North America to dominate the industry. In order for automobile manufacturers to compete with technological giants such as Apple Inc. and Google Inc., they must develop innovative capabilities and cultural shifts.
Asia Pacific connected car market accounted for over 23% of the global share in 2014 and is projected to grow at a CAGR close to 29% from 2015 to 2022. Increasing smartphone penetration, deployment of high-speed internet services and declining average selling price in the region are expected to push the sales of such smart vehicles.
Increasing government regulations across the globe are expected to positively impact the connected automobile industry worldwide. Mandates such as the eCall System in the European Union, GLONASS in Russia, and the Stolen Vehicle Tracker (SVT) in Brazil require the installation of advanced telematics systems for safety purposes in all new vehicles in the European Union from 2015 and in other countries from 2016.
The European Commission is committed to establishing a fully functional eCall service for all new models of cars and light commercial vehicles in the European Union by 2015. This involves the installation of devices that automatically report traffic accidents and their location to the European emergency hotline, enabling rapid first response rescue operations, thus reducing the number of road casualties and severe injuries. The proposed regulatory initiative is expected to make it mandatory for every new car to come equipped with 3G/4G connectivity and GPS systems, which can also serve as the basis for the car’s phone and navigation systems. This requirement will likely reduce the added costs for more comprehensive connected car equipment, and the potential difference is considerable.
Rising consumer disposable income is expected to propel market demand. Middle-class households and rising income levels have increased aggregate disposable income in developing regions. This has led to a rise in spending on advanced high-end and luxury cars, which may catapult demand over the coming years. These factors are expected to benefit the connected cars industry as manufacturers have started to target the middle class, young and high-income group residing in urban areas by introducing such advanced connectivity technologies in budget and small cars segments. Strong economic growth, especially in countries such as China, India, and Brazil, is expected to contribute to the increasing usage of such advanced technology.
Major industry participants include Alcatel Lucent, Apple Inc., AT&T Inc., Audi AG, BMW, Delphi Automotive, Ford Motor, General Motors Company, Google Inc., and NXP Semiconductors N.V. The industry is highly competitive and is driven by technological and product innovations.
Recent advances in driver assistance systems include BMW’s autonomous parking valet that automatically parks the car even after the passengers' exit, and Volkswagen’s Emergency Assist, which stops the vehicle in case of an emergency are expected to provide these manufacturers a competitive advantage over other industry players.
Backward integration and technology licensing are expected to be commonly adopted strategies by industry participants. With high production capabilities, it becomes easier and more profitable for automobile manufacturers to perform backward integration and produce their own connected vehicle devices and applications. Manufacturers resort to mergers, acquisitions, and strategic alliances with technology providers as their key growth strategy to make their presence felt in the industry.
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The automotive & transportation industry is amongst the most exposed verticals to the ongoing COVID-19 outbreak and is currently amidst unprecedented uncertainty. COVID-19 is expected to have a significant impact on the supply chain and product demand in the automotive sector. The industry's concern has moved on from being centered on supply chain disruption from China to the overall slump in demand for automotive products. The demand for commercial vehicles is expected to plummet with the shutdown of all non-essential services. Furthermore, changes in consumer buying behavior owing to uncertainty surrounding the pandemic may have serious implications on the near future growth of the industry. Meanwhile, liquidity shortfall and cash crunch have already impacted the sales of fleet operators, which is further expected to widen over the next few months. We are continuously monitoring the COVID-19 pandemic, and assessing its impact on the growth of the automotive & transportation industry. The report will account for Covid19 as a key market contributor.
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