Driving into a Connected Future – How Data is Changing the Auto Industry
This essay is part of a series of articles relating to the "Internet of Everything" project.
By Catherine McCullough
What if every American had access to a machine that could save people’s lives?
What if this machine could stop a traffic accident, preventing tragedy from ever occurring?
What if that machine could help save the environment, create jobs, bring thousands of new products to the market, and lead the way to a consumer-centric marketplace where buyers become the overwhelming force for change and innovation?
Technology like this hypothetical machine is not a quixotic or imaginary proposal. Most of us will have access to this machine very soon, if we don’t already. It’s called a connected car, and it stands on the precipice of igniting a renaissance in U.S. industry. Some estimate that 75% of the world’s vehicles will be connected to the Internet by 2020. Thanks to the power of wireless connectivity, combined with both new auto and data technology innovations, the connected car has the potential to save lives, fuel, money, time, and the environment.
We have seen the impact that data-driven digital technologies have had on other industries. In the past two decades, technologies that use wireless connectivity and the Internet to share information have made their marks on established businesses–such as media, music, and telecommunications–and fundamentally transformed those industries and the way consumers interact with them. When digital technologies touched these industries, new products and business models were invented. New consumer expectations were created, and hundreds of thousands of new jobs were generated.
While modern cars are indeed individualized mobile platforms–attributes they share with smartphones–they are foremost modes of transportation designed to safely carry individuals and families over long distances.
On a practical level, the fundamental physical aspects of cars include the capabilities to gather more data and more types of data. And because the automobile’s performance is the result of both behavioral and environmental factors, this data is more valuable than that generated by other consumer products. Here are a few ways marrying the attributes of cars with wireless connectivity and data technologies are already bringing changes to industry and providing benefits to both individuals and society.
Connected cars and data put consumers at the center of the value chain
Taking an automobile from the design board to production requires a longer lead time than other consumer products, normally around 5 to 7 years. This is largely due to the complexity of the systems involved and the durability requirements for motor vehicles.
Next to a home, a motor vehicle is typically the largest consumer purchase an individual will make in a lifetime. A new car today typically costs in excess of $30,000 and is expected to last 20 to 30 years. There may be several different owners in the lifespan of a vehicle, and the product itself must be durable throughout that lifespan. The average age of a motor vehicle on the road today is 11 years.
Automakers employ a multi-faceted approach to design and build safe, durable, and secure vehicles. This approach includes: robust process standards for product development, extensive testing and validation, diagnostics, provision of fail-safe mechanisms, controlled network gateways, and controlled fleet tests on public roadways. Each auto maker designs its vehicles and their features to meet customer demands for attributes such as comfort, style, fuel economy, safety, and reliability. All product design and development decisions are also influenced by anticipated product development, manufacturing, warranty costs, and by the need to comply with federal emissions, fuel economy, and safety standards.
However, as auto technology has evolved and consumer demand has changed, more software has been integrated into the design process and greater connectivity is being added to the motor vehicle.
This digitally hastened timeline is one way auto companies are able to invest in safety, security, and clean technologies that meet and exceed consumer demand and expectations.
The increasingly software-based nature of today’s vehicles is also important when it comes to leveraging data. Vehicles that are able to send information back to owners, dealers, and Original Equipment Manufacturers (OEMs) about component performance can help diagnose problems and enable parts to be repaired more quickly. The data feedback loop—which is leveraged to provide both safety improvements and better design and production of vehicle parts—is continually shortening. Combined with a more efficient vehicle design pipeline, consumers will increasingly see their driving experience improve at much faster paces.
In addition, consumers are finding creative ways to benefit from the data generated and collected by their car. The vectors by which data is fed into and out of the car are increasing as consumers bring more devices into vehicles, and these vectors are increasingly controlled by consumers. For example, aftermarket dongles made by insurance companies can be plugged into cars’ on-board diagnostics ports to extract driver performance information and earn drivers discounts on coverage. The decision to plug in an aftermarket device is completely in the hands of the consumer.
Connected cars marry innovative mechanical R&D and innovative digital R&D, producing the opportunity for exponential innovation
Many companies see the vehicle as the ultimate mobile consumer platform—a product that a consumer has invested considerable money into choosing and individualizing and a place where drivers spend a great deal of time. These attributes have attracted new and enthusiastic companies eager to service the vehicle platform.
Today’s marketplace is an expanded ecosystem in which OEMs, traditional auto suppliers, non-traditional auto suppliers (such as app developers and cybersecurity firms) are partnering on some projects and competing on others. Data technologies are driving this innovation by providing important and anonymous feedback to automakers based on consumer actions and needs. Subsequently, consumers are demanding more in-vehicle connectivity.
Consumers aren’t the only ones benefitting from changes OEMs are making. For instance, some automakers are shifting how they deal with their suppliers to give those businesses more input into the design process. The increased flexibility and efficiency created by the shortened pipeline rewards companies for being more responsive to consumers, resulting in better products through a more competitive market.
This “expanded ecosystem” model, with the consumer in the center, was first noticed in the telecommunications industry with the introduction of the smart phone. As consumers saw more of their demands being met, they in turn demanded even more innovative products, and the market responded by creating products that ran on—and delivered—improved data. The market for smartphones took off and spawned an entirely new mobile application economy that created hundreds of thousands of jobs.
As in the telecommunications industry, this expanded ecosystem and hyper-competition has turned the traditional model of product regulation on its head. For instance, as OEMs compete to add more safety features to vehicles to keep up with consumer demand, the need for new government mandates has been surpassed by the auto industry’s rapid development and introduction of new technology to further enhance vehicle safety.
Such innovative safety improvements include driver assist technologies, which use real-time data from sensors to apply the brakes in emergency situations. Many new cars already include this feature. Other crash avoidance technology tells drivers if there is someone in their blind spot. Still other technology helps drivers keep their eyes on the road by offering “heads-up” displays that give vital data to drivers (such as speed) without glancing away from the road.
As cars gain access to more data about their environments from information fed to them via vehicles’ sensors and cameras, the Internet, global positioning satellite systems, and other systems, they will be able to become more autonomous—including the capability to take partial or complete control of the driving task. Automated cars have numerous safety and environmental benefits. The U.S. National Highway Safety Traffic Administration (NHTSA) estimates that around 94% of crashes are caused by driver error. The more autonomous capability hits the road, the more that crash rate is expected to go down.
Automated vehicles have other advantages as well. As NHTSA outlined in its Preliminary Statement of Policy Concerning Automated Vehicles in 2013, “Vehicle control systems that automatically accelerate and brake with the flow of traffic can conserve fuel more efficiently than the average driver. By eliminating a large number of vehicle crashes, highly effective crash avoidance technologies can reduce fuel consumption by also eliminating the traffic congestion that crashes cause every day on our roads. Reductions in fuel consumption, of course, yield corresponding reductions in greenhouse gas emissions.”
Connected cars benefit society as well as individuals
There are so many amazing ways connected car data can help individual drivers. A car that has been in an accident can automatically call for help. A driver can find a lost car in a parking lot. We can choose to share information with our insurers to reduce rates.
Sharing traffic congestion data can help motorists plan ahead to avoid congestion and cut emissions, ultimately reducing our carbon footprint. This extends to other areas that impact safety and congestion, such as the ability to warn other drivers of dangerous road conditions.
Some suggest that future vehicle fleets may include sensors that will feed hyper-accurate local weather data to forecasters, enabling more accurate weather predictions. In addition, once fully implemented, “vehicle-to-vehicle” (V2V) technology will allow cars to share their proximity to one another to avoid crashes by using radio waves and in-vehicle technology. This technology and the use of spectrum will allow cars to talk with other cars, helping to eliminate up to 80% of non-impaired accidents.
There are other ways sharing anonymized data can help society. As previously discussed, feedback on auto parts can help pinpoint products that may not be functioning correctly and allow OEMs and dealerships to identify problems and fix them across product lines. The part that is fixed may help save money for other drivers, reduce emissions over the lifetime of the vehicle, or even save lives.
Most importantly, by fulfilling its purpose as an even safer mode of transportation, leveraging its ability to sense dynamic environmental variables, while using data feeds to inform design and development, the connected car has the potential to spread its benefits to all of society.
Intentional Restraint in Regulation
Automakers and their partners in the connected car ecosystem know that the potential is as real as it is vast. But if consumers find this market to be unsafe, insecure, intrusive, or unaffordable, it will never achieve its potential. Building this trust is up to the producers. However, if consumers are removed from the primary decision-making process, the connected car’s continued development may stall.
In a now-famous speech, the former Chairman of the Federal Communications Commission under President Clinton, William Kennard, said, “The best decision government ever made with respect to the Internet was the decision that the FCC made…not to impose regulation on it. This was not a dodge; it was a decision not to act. It was intentional restraint born of humility.”
Traditional regulation, born in a mechanical (rather than digital) age does not always allow regulators to move quickly enough to keep up with technologies that outpace law, nor does it always encourage innovations that will bring more consumer- and society-friendly technologies to market. The FCC’s decision, and government policies designed to incentivize the private sector to invest the billions of dollars needed, helped to expedite the Internet’s development.
This policy of intentional restraint is even more appropriate for the connected car industry. Just as the government helped to encourage investments in Internet infrastructure through forgoing the instinct to overregulate, it should likewise encourage the consumer-centric connected car economy by choosing to wield caution rather than regulatory sticks.
Fully realized, connected cars have nearly endless capabilities. Ultimately, the potential for improving our society with the connected vehicle market can be achieved through the power of purchase—with the consumer at the wheel.
Catherine McCullough is Executive Director, Intelligent Car Coalition, and is writing on behalf of the Alliance of Automobile Manufacturers.
 Eric Chang, “75% of the World’s Cars Will Be Connected by 2020, Reports TrendForce,” TrendForce, April 8, 2015.
 “Average Age of Automobiles and Trucks in Operation in the United States,” Office of the Assistant Secretary for Research and Technology, Bureau of Transportation Statistics, U.S. Department of Transportation, 2015.
 Joseph Szczesny, “Changes in Auto Tech Attract New Companies,” Oakland Press, Aug. 7, 2015.
 Jonathan Sallet, “The Creation of Value: The Broadband Value Circle and Evolving Market Structures,” April 4, 2011.
 “Testimony of Mitch Bainwol, President and CEO of the Alliance of Automobile Manufacturers before the U.S. House of Representatives Judiciary Committee, Subcommittee on the Courts, Intellectual Property and the Internet,” Internet of Things, July 29, 2015.
 “Traffic Safety Facts: Critical Reasons for Crashes Investigated in the National Motor Vehicle Crash Causation Survey,” National Highway Traffic Safety Administration, U.S. Department of Transportation, February 2015.; “Traffic Safety Facts 2013: A Compilation of Motor Vehicle Crash Data from the Fatality Analysis Reporting System and the General Estimates System,” U.S. Department of Transportation, National Highway Traffic Safety Administration.
 “U.S. Department of Transportation Releases Policy on Automated Vehicle Development,” Press Release, NHTSA, May 30, 2013.
 “Our latest research estimates that V2V has the potential to help drivers avoid or mitigate 70 to 80 percent of vehicle crashes involving unimpaired drivers, and that could help prevent many thousands of deaths and injuries on our roads every year.” See, David Freidman, “V2V: Cars Communicating to Prevent Crashes, Deaths, Injuries,” Fastlane Blog, Feb. 3, 2014.
 William E. Kennard, "The Road Not Taken: Building a Broadband Future for America," Remarks before the National Cable Television Association, June 15, 1999.
 Telecommunications carriers invested $32.1 billion in capital expenditures in 2014 alone. See, “Annual Wireless Industry Survey,” CTIA-The Wireless Association, June 2015. AT&T ranked #1 out of all U.S. companies in capital expenditure investment in 2014, and Verizon ranked #2. See, Diana Carew and Michael Mandel, “U.S. Investment Heroes of 2014: Investing at Home in a Connected World,” Progressive Policy Institute, September 2014. Automakers are also among the biggest investors in technology and innovation. Fortune named two auto companies among the top ten companies investing in research and development, including #1, Volkswagen. See, Michael Casey and Robert Hackett, “The Ten Biggest R&D Spenders Worldwide,” Fortune, Nov. 17, 2014. Together, auto companies spend nearly $100 billion annually on R&D. See, “2014 Innovation Report: How Automakers are Driving Innovation,” Alliance of Automobile Manufacturers, 2015.