Shaking hands, handing over the keys, the customer drives out of the yard in his new car – and was never seen again. This scenario is the old normal for car manufacturers: one-off sale, then radio silence until the next TÜV inspection.
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“One of the most important growth areas in the automotive industry”: infotainment expert Andreas Nienhaus
Photo: Oliver Wyman
According to Andreas Nienhaus (42), partner at the strategy consultancy Oliver Wyman, the one-off payment model is a thing of the past. Instead, in the future, customers will continue to pay over the lifespan of their car, namely for: navigation, roadside assistance, upgrades or car gaming directly in the cockpit.
“Infotainment offers open up the possibility of a long-term relationship with the customer,” says Nienhaus. With his colleagues, he developed a study that shows: By 2030, the infotainment market will grow from $9 billion to around $14 billion, with an annual increase of 10 percent. His conclusion: “Infotainment is one of the most important growth areas in the automotive industry.”
Whether smart parking, seat heating, payment from the car or direct access to the cloud, the Oliver Wyman study sees a wide range of products that could be marketed as a subscription. According to the study results, there is great interest in this: 42 percent of the more than 2,000 respondents would change their vehicle brand in order to get a better infotainment system. In China (500 study participants), this number is significantly higher at 58 percent than in the USA (500 respondents) with 44 percent. In Germany (1000 respondents), however, it is only 33 percent. The same picture reflects the monthly willingness to pay: the Chinese study participants would pay $47 a month for a good infotainment system, in Germany $43 and in the USA $41.
The younger the customer, the more willing to pay
Chinese car buyers have grown up with subscription models in their digital everyday life and see the car more as a digital product rather than as a pure horsepower object, says Nienhaus. Some German customers, on the other hand, often have the feeling after a 60,000 euro purchase that they have already “invested a lot”. At the same time, people under 30 are willing to pay more than car users who are older than 45: “For young people, the environment is characterized by subscriptions; they are, in a sense, trained to have subscriptions,” says Nienhaus.
But how do manufacturers convince doubters about an infotainment subscription? Ideally, they could borrow from the tech industry and offer trial subscriptions “so that customers realize what they don’t have when the subscription expires.” This can create new needs that the auto industry can use to make money in the long term: Similar to air conditioning or the automated tailgate, which “no one needed before – until the auto industry proactively introduced them.”
The car becomes a “software-defined vehicle”, a digital platform that controls all functions via a central computer – or only selected ones, depending on the subscription. Navigation, entertainment, damage diagnosis, all in one system. An architecture that is intended to reduce complexity and costs and at the same time enable updates and expansions for the customer at any time.
Who benefits from the infotainment market?
According to Nienhaus, the question for car manufacturers is: “What do I give up, where do I retain control?” The more hardware and software merge, the greater the importance of operating systems and apps – fields in which tech companies clearly dominate. Until now, the industry has often had a black-and-white mindset: either a manufacturer took over Apple or Google completely into the car – or kept it completely out.
According to Nienhaus, a change of course is emerging: cooperation instead of total renunciation. Many manufacturers are now integrating their own solutions with CarPlay and Co. without completely submitting to the tech companies.
What is crucial is the link with vehicle data, such as range, charge status or semi-autonomous assistance functions. There is also an opportunity here: Only those who control access to vehicle data can develop attractive services – a power factor compared to Big Tech.
Access to vehicle data is crucial
While functions such as maps are firmly in the hands of the big tech players, according to the study, there are opportunities for start-ups and private equity investors to benefit from the growth market, especially in smaller niches. “In-car gaming is a huge market that is only just being tapped,” says Nienhaus. “In this area the market is much more fragmented, with more attractive or perhaps more accessible investment opportunities.” There are even voices that elevate the car to the best place for gaming: 16 loudspeakers could create an immersive sound, the ventilation system reacts dynamically to gaming situations and the color of the interior lighting could adapt to the gaming experience of the front passenger and back seat.
More on the topic
The potential for manufacturers is great. Especially since services related to semi-autonomous or fully autonomous driving, which can also be monetized digitally in the future, were excluded from the study. “We haven’t looked at all aspects yet – and we’re already at 14 billion,” says Nienhaus.