Connected vehicle shipments to drop 15% due to Covid-19

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The Covid-19 outbreak has caused global new vehicle sales to contract by 19% in the first quarter of 2020 due to supply chain disruption, factory shutdowns, and the automotive vertical’s high dependence on brick and mortar retail sales.

The lower sales are invariably driving down shipments of connected vehicles, and connected car platform subscription growth. According to analyst firm ABI Research, new connected vehicles will drop at least 15% globally in 2020.

Furthermore, lower overall revenues will force OEMs and suppliers to reduce their expenditure on R&D, leading to industry consolidation and rationalization of investment.

“In the short term, a few OEMs may temporarily postpone immediate projects that add additional value to customers to concentrate their efforts on actions to reduce costs of ownership and to make their supply chain resilient and agile. However, investments and adoption of connectivity packages should remain constant due to standard fitment, such as eCall,” explained Maite Bezerra, smart mobility and automotive analyst at ABI Research.

OEMs with less liquidity will have to rationalize R&D investment and give preference to providers offering turnkey, low-cost solutions that fulfill basic regulatory requirements.

On the other hand, larger OEMs with substantial investment in in-house solutions will be more willing to migrate to third party offerings and benefit from lower costs.

Concerning infotainment, off-the-shelf solutions from providers like Google and Amazon are likely to benefit from the distress of OEMs, as they may be willing to lose control over their systems to decrease costs. OEMs will also be looking into leveraging partnerships and collaborative work, which is more cost-effective.

Connected car technologies have managed to enable various track and trace applications. Some OEMs, location service providers, and connected service platform vendors are using car connectivity to support countries fighting the Covid-19 pandemic.

For instance, Here, in partnership with Enel X, is providing free estimation of movement, kilometers traveled, and main points of entry and exit within selected geographical areas in Italy. At the same time, Mojio is tracking the efficacy of social distance measures in the United States and Canada. And, TomTom has been tracing the lockdown efforts by analyzing traffic patterns. All companies use anonymized data from vehicles connected to their platform.

“With the decrease in new vehicle sales, which was already in decline before the Covid-19 outbreak, automakers will have to find strategies to decrease the churn rate of connected services and maximize revenue from registered vehicles. Meanwhile, service providers should increasingly invest in lower-cost turnkey solutions that meet the industry-standard requirements but allow some customization on top and further upgrades,” Bezerra said.

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