Automotive News Europe - March 2020 - 8

AUTOMOTIVE NEWS EUROPE

COVER STORY

Mercedes AMG owners can
buy the Track Pace system for
297 euros. This lets them
see racing and track data.

experts said. "I'm very skeptical you
can charge extra to unlock features in
the car. Maybe Tesla can do it, but I'm
not sure others can," said Ted Cannis,
Ford's global director of electrification.
Volvo CEO Hakan Samuelsson goes
even further, saying that the whole business model of selling upgrades after
the sale is flawed. "You should not do
that to try to capture revenue directly.
You should do it to offer an even better
customer experience," he said. "Then,
the car will be more attractive, and a bit
later you will make money from that."
Automakers should not believe that
5G is a magic key to unlock subscription models, especially given its extra
cost, analysts said. "Selling 5G for the
sake of 5G will not work, because the
customer will not pay more," said Pedro
Pacheco, senior research director at
Gartner. "You need the functionalities
on board."

Sharing costs
Automakers, however, may need to
charge simply to pay for the increased
spending on connectivity, said Poliak of
Panasonic. But an innovative revenuesharing model is emerging that could
defray some of those costs.
Harman is working with a major European automaker to supply 5G-ready
modules across a range of models

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Photo illustration: iStock

The Toyota C-HR's multimedia
system includes eCall functionality,
which the automaker says opens
the door to "many opportunities."

The EU's requirement that all cars have the ability to make automatic
emergency calls (eCall) has pushed automakers toward connectivity.
that can be activated by the customer
the moment 5G networks become
widespread, estimated to be around
2023 in Europe. Harman offers the
module at a discount in return for
revenue-sharing with the automaker
when an owner decides that a new
application is worth upgrading to 5G.
"Even if only 30 percent of your existing
customers activate it, it's still paying
off," Mike Peters, head of connected
car at Harman, said.
The model is also being explored by the
chipmaker Qualcomm. "We reduce the
cost of the chip, then if across the life
of the chip the owner is downloading
multiple applications, then we're getting a piece of that pie every time," said
Jeff Dumrauf, Qualcomm director of engineering. He cited facial recognition to
improve car security and access to the
car's cameras for real-time video monitoring as two 5G-dependent upgrades
that customers could pay extra for.
But the "killer app" of over-the-air upgrades is expected to be autonomous
or semi-autonomous functions, such as
Tesla's Smart Summon feature that lets
owners use an app to have the car drive
itself to their location. A new BMW upgrade improves adaptive cruise control
to accelerate "more dynamically" once
a traffic jam has cleared.
In some cases, the technology is ahead
of legislation, which has led automak-

ers to bake in features that can be unlocked later. That includes Tesla's Full
Self-Driving Capability, Audi's Level 3
features in the A8 and Lexus's first automated-capable car, launched this autumn, which will need to be activated at
a later date via an over-the-air update.
Automakers need to be cautious, said
Pete Kelly, managing director of LMC
Automotive, because if such driver assistance systems are activated without
regulations and approvals fully in place
"It could be a legal quagmire."
Tesla may hold an advantage in this
area, because its most high-profile (and
lucrative) updates are largely in the
U.S., where automakers can self-certify
many safety features. It also doesn't
have to worry about sharing revenue
with dealers, because it doesn't have
any. (Volkswagen has said it would give
dealers a bonus "if they advised" on upgrades or services ordered on its new
We Connect platform).
Even so, Tesla remains the automaker
all others want to emulate on leveraging
connectivity. "Tesla is able to incorporate the entire learnings of the vehicle
fleet, so its cars get better as they age,"
Kelly said. "There is a very compelling
case for everybody to do this. In fact,
not doing it would put them at a significant disadvantage." ANE

MARCH 2020

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Automotive News Europe - March 2020

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