Connected cars are generating a growing number of headlines within the broader machine-to-machine (M2M) and Internet of Things (IoT) sectors.
There are a host of ways to make money from connected cars. The revenue streams will be generated by services including infotainment, navigation, fleet management, remote diagnostics, automatic crash notification, safety enhancements, usage based insurance (UBI), traffic management and -- ultimately -- autonomous driving.
Despite that prediction, the term "connected car" remains something of a catch-all, making it hard to determine which companies are actually making money from the market in Europe today, or indeed what exactly a "connected" car actually is.
Industry definitions of 'connected car'
SNS Research analyst Tim Howard told FierceWireless:Europe that a connected car is a car "capable of connecting to an external communications network, regardless of the connectivity medium, which could either be an embedded device, an aftermarket module or an accompanying consumer device such as a smartphone."
For IHS Automotive manager Anna Buettner, a connected car incorporates telematics functions, referring to "the solutions and applications built on top of information content flowing via wireless communication to and/or from the auto."
Buettner explained that IHS Automotive defines a connected car as the sum of three telematics segments:
- Embedded modules that are either integrated into the system or are standalone units, including aftermarket telematics control units (TCU) and devices used for pay-as-you-drive services.
- Consumer electronic systems, which feature a two-way data connection and associated services and are typically accessed via a smartphone, USB dongle or Wi-Fi hotspot.
- Hybrid systems that mix and match the first two segments.
Buettner said that hybrid systems would typically "use the embedded TCU for emergency calling and the user's device for infotainment functions."
Operators move to cash in on the segment
SNS Research and IHS Automotive identified Orange Business Services, Vodafone and Deutsche Telekom as the main European carriers active in today's connected car market.
Perhaps predictably, none of the operators offered precise details of the revenues they are generating from the connected car market today.
However, Howard said that in Europe "mobile operators and specialist telematics service providers generate nearly $3 billion annually from connected car services" today, and tipped the figure to grow "threefold as the number of connected cars proliferates."
Matt Key, Vodafone M2M's commercial director, said that the operator's overall M2M business unit "is seeing 25 per cent to 30 per cent revenue growth per annum" and that the automotive element "is the largest sector in the M2M business."
Key said Vodafone's involvement goes beyond pure connectivity.
"Vodafone now manufactures the hardware that is fitted into the cars, develops the software that the devices need to operate, provides the network that connects everything and delivers a managed service to customers," he said.
The operator supplies "electronic systems, telematics products or connectivity to approximately 80 per cent of car manufacturers," including BMW, Audi, Porsche and Fiat, Key said.
Joerg Sasse, head of sales at the digital division of Deutsche Telekom's T-Systems' Connected Car business unit, told a similar story.
He said that the business has expanded since its foundation in 2010 to now provide automotive customers with "connectivity, cloud infrastructure and telematics services from Deutsche Telekom as their single source."
The company serves "over a million connected vehicles worldwide in the car segment alone," Sasse continued.
Orange Business Services, meanwhile, is taking a slightly different tack. Stéphane Petti, head of business development for M2M, said the operator is "focused on the infrastructure part of the connected car ecosystem, incorporating IT and mobile."
The company has relationships with around 80 auto manufacturers, many of which "are the tier one OEMs" such as Renault, for which Orange "supplies all the SIM M2M cards installed in Renault vehicles equipped with the R-Link system, an integrated tactile and connected tablet" developed by the car maker, Petti explained.
Connected cars are also opening fresh opportunities for traditional in-car sensor and telematics equipment providers.
"Some of the big hardware players are Peiker, Novero, Harman, Bosch, LG Electronics, Continental [and] Magneti Marelli," IHS Automotive's Buettner said, adding that more players will likely enter the market when European Union's
emergency calling service eCall becomes a mandatory feature on new vehicles in the region from 2018 onward.
Different business models
Buettner said carriers and car makers have adopted several revenue-generating approaches. "OEMs and TSPs [telematics service providers] have already attempted to make direct revenue by asking the content end-users -- the consumers -- to pay for the costs of data," she said, explaining that users "can enjoy the services and apps by subscription, pay per use, one-time pay, or freemium" models.
In Buettner's view, though, "the success of the connected car business should not rely completely on consumers paying the bill." She noted that use of connected car services is generating "an incredible amount of data that is useful in many aspects to many different players," including wireless carriers, insurance and traffic information providers, advertisers and third-party companies.
"Due to the intrinsic value of the data consumers provide, consumers therefore might not necessarily need to pay for the services and apps," she said, noting that third-party companies could subsidise the connectivity and content by using that data to offer highly targeted advertising to drivers and passengers. Sponsored content is another potential revenue model, Buettner noted.
Hardware companies are monetising by selling their gear. Bosch spokesman Stephan Kraus said the company supplies infotainment systems to "a high number of car makers worldwide," and that those auto manufacturers are increasingly incorporating connectivity functionality.
How are cars being connected?
Petti said Orange Business Services is today using most major wireless technologies, including LTE Wi-Fi and even Near Field Communications for its connected car infrastructure.
Vodafone is utilising "cellular, Wi-Fi and Bluetooth technologies in its products," said Key, while T-Systems' Sasse said Deutsche Telekom uses cellular connections and embedded SIMs for vehicle-centric services, and smartphone tethering for driver-centric applications.
IHS Automotive offered a breakdown of the main technologies being used to provide connected car services and their evolution over the past 15 years (see figure 1).
Source: IHS Automotive
SNS Research agrees with IHS Automotive that dedicated short range communication (DSRC) technologies are gaining traction in the connected car market.
Howard said that while "a majority of vehicles are connected through wide area cellular networks" today, use of DSRC technologies based on Wi-Fi standards is growing. "However, in-car Wi-Fi hotspot functionality is increasingly being integrated as a feature with cellular connectivity services," he noted.
Bosch spokesman Stephan Kraus said the company's equipment works on cellular connections "so 3G, 4G, plus future standards."
Kraus predicted that 5G will play an important role in future car connectivity, a view backed up by Vodafone's Key, who said 5G will be an essential component in the push towards autonomous vehicles, where low-latency will be needed to enable real-time data flows.
Peiker is also heavily focussed on cellular connections. "In our opinion a connected car should offer the same technology and data speed as you are used [to] from your home. On one side, the car should be connected with the 'outside world' with at least 3G or 4G standard," spokesman Falk Issmer said.
The company recently launched its Advanced Telematics Module (
see image, right) , which premiered on BMW's latest 7-Series and uses LTE networks to connect cars at data rates of up to 100 Mbps. The module is also compatible with 2G and 3G networks, and can be used to establish an in-car Wi-Fi hotspot.
Issmer said such units can be used by car makers to offer connectivity services with no user intervention in terms of which network operator provides the actual connection. Peiker also provides retrofit equipment that can be used to connect older vehicles, and is preparing a retrofit solutions that will tap the "ERA GLONASS satellite system in Russia," he explained.
Analysts at SNS Research in July said the connected car segment is one of the fastest growing areas of the IoT, predicting the sector could generate 
