The Connected Car Makes Waves

GlobetouchNews

Much like the video tsunami foreseen by telecom operators, the connected car will create huge swells of data for IoT.

By Ric Vicari, Globetouch VP, IoT & Connect Cars

The physical and digital universes have something in common: sheer size with respective reach and volume that are so large they require special measurement units. Once one gets used to these new dimensions, concepts like “large” and “small” take on new meaning.

Let’s wander around the digital universe and all of its 180,000,000,000,000,000,000,000 bytes, or 180 ZettaBytes (ZB). This measurement is the amount of global data expected to be generated, stored and shared by 2025.

What makes this figure even most impressive is the growth rate increase expected between 2020 and 2025.

IDC’s analysis quoted by Forbes suggests the following growth in total data volumes worldwide:

  • 7 ZB/yr between 2015 and 2020.             2020 total = 44 ZB
  • 16 ZB/yr between 2020 and 2022.            2022 total = 80 ZB
  • 33 ZB/yr between 2023 and 2025.            2025 total = 180 ZB

As generally accepted, a huge amount of data is not necessarily good news. Only a portion of this data will be useful to improve operational or business efficiency. The larger the volume of data, the more effort will be required to single out relevant and actionable data sets. As suggested by the IDC report, in this data ocean, “only” 20 ZB (11% of total) will be IoT actionable data.

Hence, looking at this 4.5X increase in data volumes between 2020 and 2025, one immediate conclusion is that both advanced data analytics and machine learning/artificial intelligence capabilities will no longer be merely a nice-to-have to gain competitive advantage.

The adoption of advanced data analytics and machine learning/AI capabilities will be a must, to keep up with the sheer volume of data that needs to be analysed and actioned upon. PwC suggests a path to get there, a continuum in terms of technological advancement from Assisted Intelligence, to Augmented Intelligence to Autonomous Intelligence.

What is the source of this surge in data growth?

The same IDC report mentioned above cites that the number of devices connected to the internet is expected to grow from seven billion in 2015 to 80 billion in 2025.

A recent study by BI Intelligence projects that there will be 381 million connected cars on the road by 2020. (Interestingly an old IHS Automotive report from 2012 forecasts an ‘impressive’ 152 million by 2020!).

On the same lines, McKinsey predicts that by 2020, 22% of the total 1.32bn cars on the road will be connected.

Based on the data above we can conclude that in 2025, i.e. seven years from now, 1.3% of all connected devices will be a connected vehicle. 1.3% may not seem a significant proportion, nonetheless, it is the staggering volume of data generated by this “niche” segment that demands more attention.

IHS Automotive estimated that each connected vehicle will generate 30TB of data PER DAY. A more recent and conservative estimate suggests that cars are expected to send at least a third (about 10TB/car/day) to the cloud. This means a total of just under 1.7 ZB in 2020 and 22 ZB in 2025.

It will be interesting to see what technical architectural decisions are going to be made for autonomous vehicles. As most autonomous decisions cannot tolerate variable network latency, let alone downtime, edge computing will most probably take over from the current cloud computing framework.

Imagine for instance a near-accident scenario in a road in the UK, where the self-driving vehicle has to steer away from a deer suddenly crossing the road. With an edge computing framework, the split-second decision and consequent action will be made by software which is resident in the vehicle, whereas in a cloud architecture the decision will be outsourced to a ‘digital brain’ running in a data centre – say – in Iceland.

One might expect an increase in data generated and processed going from simply connected cars to autonomous vehicles, however, should the pendulum swing back to an architecture where intelligent decisions are made at the edge, rather than in the cloud, in the edge scenario only a portion of that data will be shared across networks.

It can be estimated that data generated by connected vehicles and transmitted through mobile data networks will amount to between 3.7% to 11% of total data in 2020, and between 12% to 36% in 2025. Though not all analysis converges on this range, it provides an order of magnitude to appreciate the key role that connected vehicles will play in the near future. Bottom line: 1.3% of all connected devices are expected to generate at least 12% of total data!

Also, Statista‘s analysis reported by Forbes suggests that Automotive will be the second largest IoT market segment by size in 2020 (just under $0.2TN out of $1.335TN), with consumer electronics first.

With the advent of infotainment in self-driving cars, PwC defines the car as the “fifth screen” in everybody’s life, after cinema, TV, PC and smartphone.

A key trend accompanying this increasing growth of connected vehicles is the shift from “pay-for-ownership” to “pay-for-use”.

McKinsey study shows that in the years up to 2030, total car sales will increase by only 2% per annum, vs 3.6% in the past five years. The 90% revenue growth over 15 years (from 2015 to 2030) in the automotive market will be determined mainly by a growth in the aftermarket and software and services segments.

An additional PwC Strategy& study speaks to the percentage change between 2015 and 2030 in both revenue and profits for all the value chain elements in the automotive industry; vehicle sales, financing, insurance, aftermarket, traditional hardware and innovative elements. The first observation is that revenue percentage for vehicle sales is expected to decreases from 49% to 44% during the 15 years under observation. More importantly, profits from vehicle sales are expected to drop much more sharply, from 41% in 2015 down to 29% in 2030.

The PWC study finds that in 2030, up to 36% of total automotive industry profit will be gained by the following categories that were not present in 2015:

  • 20% – shared mobility service providers
  • 5% – digital service providers
  • 11% – new technology/software suppliers

This is an aggregate 36% profit stake that in 2015 was shared among the traditional automotive value-chain players; car manufacturers, traditional hardware, insurance, financing and aftermarket.

IoT Actionable Data will play a key role in this profit transitionas it will give a huge advantage to those industry players who will learn to leverage it, while leaving the ones who don’t, far behind.

OEMs and other automotive industry players can benefit from the adoption of a globally centralized IoT connectivity management platform, which will provide a competitive advantage not only in terms of managing subscriptions and provisioning services more efficiently, but also in collecting and analyzing precious telematics and B2C services usage data.

Actionable data insights can be employed to increase operational efficiency, to differentiate products and services, to generate new revenue streams from data monetisation and —more strategically—to assist in the expansion into different segments of the automotive value chain, in order to capture future profit opportunities. In some cases, taking these actions will be the key to survival.

Due to the massive increase in data volumes, the regulatory framework, especially in emerging markets, is aligning for both B2C and B2B/telematics services, in terms of roaming, data protection and other connectivity and data-related aspects. For example, roaming services that were previously tolerated due to the negligible volumes, are now heavily regulated in many countries. Some local mobile network operators apply a surcharge specifically to connected-car data traffic.

True abstraction deriving from the installation of MNO-independent eSIMs, which can be configured with local MNO profiles at the end of the distribution process, give OEMs a strong negotiation power with data traffic providers. The ability to manage eSIMs or CloudSIMs is a key requirement also to ensure a smooth supply-chain management.

OEMs and other automotive industry players with either global presence or global ambitions need to take both technology and regulatory changes into account, in order to budget for and rollout future-proof global connectivity solutions.

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