An article by Francois Fleutiaux, Director of T-Systems’ IT Division.
Today’s cars are already data centers on wheels. They can have up to 100 in-built sensors permanently monitoring speed, engine temperature and braking processes, and collecting a variety of other data. Modern vehicles generate around 25 gigabytes of data every hour! Autonomous cars will generate even more – up to 3,600 gigabytes of data per hour, according to expert forecasts.
Vehicle data isn’t just generated on the road. It originates along the entire value chain, from design and development, through production, sales and use, to maintenance and repairs – all by itself. There is general consensus among experts that companies with the capability to collect, intelligently link and evaluate this data will be among the winners of the digital revolution because they’ll be able to improve the efficiency of countless processes and open up new revenue streams with innovative new services.
Here are three concrete examples:
- Predictive maintenance in automotive production: According to the International Federation of Robotics, 2.6 million industrial robots will be in use by the year 2019. They’re already an integral part of the automotive manufacturing process, where hundreds of thousands of robots are in operation 24/7, performing body welding and other production-related tasks. A standard mid-range car has around 6,000 weld points. Just one single welding robot with unplanned downtime – perhaps because of overheating due to wear and tear on the welding caps – can bring the entire production line to a standstill, resulting in five to six digit financial losses for the car manufacturer. T-Systems evaluates existing measurement and power consumption data to forecast robot downtime a whole six days in advance. That’s predictive maintenance at its best! It allows maintenance work to be scheduled, maximizes efficiency and prevents production stoppages. We’re already using this system very successfully at a major German automotive manufacturer.
- Pay-as-you-drive car insurance: Quite a few vehicle insurers are already using telematics technology to monitor driver behavior, and rewarding safe driving habits with lower insurance premiums. A special telematics box or smartphone app are used to record data on speed, acceleration, braking and cornering, which are then transferred to the insurance company. When the automatic emergency call system "eCall" becomes mandatory for new EU cars at the end of March, additional monitoring equipment in these vehicles is theoretically obsolete. The car already records the necessary driving data. With the help of the permanently installed SIM card, the data could be transferred without any problems, provided that the legal aspects have been clarified. Insurers and car manufacturers are already working to establish a legal framework in which manufacturers can provide insurers with relevant data.
- Smart traffic lights that recognize emergency vehicles: Many traffic lights are already equipped with traffic monitoring cameras so that the red/green phases at intersections can be adapted to optimize traffic flows. The UK city of Milton Keynes, around 45 miles north-west of London, has gone one step further in the battle to ease congestion. It is retrofitting 2,500 of its traffic lights with AI cameras that are able to recognize ambulances and change the light phase to prioritize them, and it is investing some three million pounds in this future technology project.
Data business enablers are connectivity, storage capacity and intelligent software
What do we actually need to leverage the vast quantities of vehicle data that are available on our roads? Connectivity, storage capacity and intelligent software. Gartner forecasts that one in five vehicles on the road will have some form of wireless network connection by 2020. That’s a quarter of a billion connected cars worldwide. This development is being driven by the mandatory installation of the eCall emergency call system after March 31st 2018. All new cars rolling off EU assembly lines after this date will have a built-in SIM card. 5G mobile communications technology is ready to take over from LTE and will be deployed by 2020 at the latest. 5G provides the high bandwidth and low latency that are necessary for the fast exchange of data between connected cars.
Another technology called NarrowBand IoT is predestined for smart parking management and many other applications. It’s a low-power wide-area network that not only extends the life of battery-operated sensors but also effectively penetrates buildings such as parking garages or underground car parks to signalize free parking spaces for car drivers.
It requires both connectivity and a large amount of data storage capacity at the lowest possible cost. The costs of storage space are continuously declining. All it takes is the touch of a button to move any conceivable volume of data to the cloud. In fact, storage space has become so cheap that the first so-called data lakes are appearing. What are data lakes? A data lake is a storage repository that holds a vast amount of raw data in its native format for no specific task. The data is then subsequently used by intelligent software to obtain actionable insights.
Software is also becoming increasingly advanced, and some software programs even have self-learning capabilities. According to McKinsey, AI solutions will increase the automotive industry’s ROI by up to nine percent by 2025, with the highest potential for ROI growth in the areas of production and purchasing.
Data business is three times as lucrative as automotive production
Creativity is the most important resource because it allows enterprises to develop new services, business models and revenue sources from vehicle data. In fact, it could be the beginning of a modern-day gold rush. So, what I’m saying is that it will be possible to make more money from vehicle data than from car production in the future! And the following figures support my assumption: Car manufacturers’ profit margins are generally less than ten percent. By their own account, data processing companies – like one Swiss sports statistics provider – have a 30 percent margin.
The question is: who will profit from the data trove? There is already fierce competition over the commercial use of vehicle data. Manufacturers, suppliers and startups are already considering the opportunities that new business models present. And they face new competition from players in other industries such as Apple and Google, because these internet giants have already discovered the automotive sector as a potentially lucrative market, and they have the know-how and financial muscle to shake it up. Internet companies have topped the global ranking of the world’s most valuable companies for years, while the highest-ranked automotive group is down at eighth place on the current Forbes list. The fight for the right to automotive data is on.