Whether we are talking about assisted driving, control software or car-sharing systems, connected vehicles are starting to offer a wide range of opportunities to both original equipment manufacturers and tech startups.

Connected car data calls vehicle ownership into question

Although the city of Detroit is best known as the bailiwick of the US automobile industry, it seems likely that cars of the future will be designed in Silicon Valley. From Mercedes to BMW, Toyota and Honda to Ford et al, all the major vehicle manufacturers now have an R&D laboratory there and that is where the main features of the connected car are being thought out. The self-driving car may not be just around the corner – well, actually, it almost certainly is just around the next corner but one! – but the connected car is already opening up new markets.

Currently among the main areas for attention is the whole question of energy waste. This issue was discussed on 18 February at a conference on ‘The Future of Personalized Vehicles’ hosted by Silicon Valley non-profit SVForum in Menlo Park, California. According to a report from McKinsey, as much as 86% of the fuel used to power a traditional car never gets to drive the wheels, but is wasted due to engine inefficiencies and through friction. This means that only 14% of the petrol you pump in is actually propelling the car. On top of this mechanical wastage there is fuel over-consumption due to poor driving habits which, say the experts, drastically increases the average driver’s petrol bill. To help counter this, two startups – Automatic and ZenDrive – have developed driving assistance apps which help to draw attention to the causes of energy waste, with a view to improving drivers’ habits. Both these two companies are taking the same approach: they sell a box which plugs into the car’s OBD-II port (standard on all models since 1996) and collects driving data, which Automatic and ZenDrive then use to build tailored apps.

From the connected car to the shared car

However, the range of options for the connected car runs much wider than that. Automatic has created a catalogue of services for the general public, available via its ‘Link’ device. For example, there is a tool to remind you where you parked, another to coach a new driver, and one that will call the emergency services automatically should you have an accident. Moreover, using the IFTTT tool (a ‘recipe’ generator which connects different applications, systems and devices), Automatic can even integrate its services into those offered by other firms. For example, a link between Automatic and sensor-based home appliance specialist Nest via IFTTT will arrange for your home heating to be switched on as you approach your house!

Using car data in ways such as this can certainly help to improve people’s quality of life. Vehicle data can of course also provide valuable insights as to how the car is used. The figures are quite illuminating. The McKinsey report reveals that the average US motorist’s car is actually stationary 96% of the time. It is being driven 2.7% of the time, stuck in traffic jams 0.5% of the time, while the remaining 0.8% – not much les than 30% of total road time – is spent looking for a place to park! So, “unless you drive over 8,000 kilometres a year, there’s really no point in having your own car,” Stefan Heck, Consulting Professor at the Precourt Institute for Energy at Stanford University, told the SVForum conference. DriveNow,  BMW’s car-sharing joint venture with fellow-German car rentals firm Sixt, which was launched in San Francisco in 2012, offers a possible solution to this conundrum. In fact, according to Deloitte’s 2014 Global Automotive Consumer Study report, Generation-Yers find the idea of only paying for what you use very appealing. Only 23% of this demographic polled in the United States said they were planning to buy a car during the coming year.

Steady rise in the role of software?

Aside from the value of sourcing data on how vehicles are used, the connected car is moving steadily towards increasingly sophisticated embedded computer systems. In fact Automatic, ZenDrive, DriveNow and others are predicting an imminent radical shift in the way the total value of a modern automobile breaks down. According to Morgan Stanley’s Autonomous car blue paper, in the very near future the software installed in a car will be just as valuable as the hardware.


“Software is eating the world”, wrote venture capitalist Marc Andreesen in a famous article in the Wall Street Journal in 2011.  This trend is certainly not lost on automotive parts suppliers, including Visteon, whose speaker at the Menlo Park conference agreed that there are now immense opportunities, provided that equipment supply firms take steps to seize them rapidly. This is precisely what Bosch, Continental and Delphi – all sub-contractors to Google Car – have already done. In recent years they have made huge investments in electronics and automation R&D. An article in the Financial Times on 18 February pointed out that Bosch’s ‘Mobility’ division employs 34,000 engineers, about a third of whom work on software development. A premium class car from a major manufacturer now contains as many as 100 microprocessors and runs on 100 million lines of software code. So how long will it be before we can describe the car as a ‘mouse’ on four wheels?

By Pierre Pariente
Strategic Analyst chez L'Atelier BNP Paribas