Connected Car Data Is the New Oil
In three years, automakers could make more money from connected vehicle data than car sales.
Last November, Intel CEO Brian Krzanich stood on stage at the LA Auto Show and proclaimed, "data is the new oil." This is not a news, of course. For years, tech companies from Google to Facebook have drilled for data shared by connected devices and tapped into geysers of cash.
Now that cars are becoming connected, automakers and others want in on the data-for-dollars boom. It's estimated that more than 380 million connected cars will be on the road by 2021 globally, more than double the number now. The data they generate will be red meat to marketers since they'll be able to log people's location, driving habits, in-car entertainment choices, and more, while automakers and others will be able to better predict maintenance issues and provide other services to keep customers happy and loyal.
The automotive industry is still in the very early stages of figuring out how to cash in on connected car data. Through several partnerships and acquisitions focused on advancing vehicle connectivity and refining data analytics, automotive mega supplier Delphi's recent moves give a glimpse of what the future of driving data collection could look like -- and how automakers could turn massive amounts of car data into big bucks.
Delphi recently acquired a minority stake in two Israeli companies. One, Valens, develops chips that can move data up to six times faster within vehicles than current technology. The other, Otonomo, has designed an agnostic data collection platform that can serve as a broker between automakers and third parties.
These latest investments in connected car big data solutions are part of a larger and long-term strategy by Delphi. In 2015, the company purchased data-analytics startup Control-Tec, while earlier this year it acquired Movimento, which provides over-the-air software update capabilities for automotive applications.
If you put together the pieces of Delphi's acquisition strategy, it's easy to get a larger picture of where the company -- and the auto industry -- is headed with connected car data.
Concrete example of leveraging car data
The Otonomo investment, which was part of a recent $25 million funding round for the startup, perhaps provides the most concrete example of how automakers could leverage vehicle data and what it means for car owners. Car & Driver noted in an article this week that "what makes [Otonomo's] services attractive to automakers is the ability to aggregate data from multiple companies and provide a more comprehensive data set to interested parties."
While automakers such as Ford with its Ford Pass platform and GM with its OnStar AtYourService feature are currently supplying data to third parties in order to offer discounts and perks to drivers, an industrywide data-collecting platform could supercharge the commercial potential of connected cars. Companies ranging from auto insurance companies to roadside retailers would, of course, be eager to buy such connected car data.
But car owners may not be so keen to have automakers harvest driving data, and consumer advocacy groups such as AAA as well as politicians have asked automakers for details on how they extract, process, and use driver data. As part of legislation sponsored by Sen. Ed Markey (D-Mass.), the federal government would establish standards that not only safeguard driver privacy, but also force the auto industry to be more transparent about how it is used.
Delphi noted to Car & Driver that data harvested by Otonomo is anonymized and drivers can opt out of receiving connected services, although the magazine added that this "doesn't mean that drivers who do use those services would have any say in what automakers do with the data those services collect." It also pointed out that since a Republican-led Congress recently voted to roll back FCC restrictions on how ISPs can sell data collected from their customers, Markey's legislation likely has the same possibility of passing as the proverbial snowball's chance in hell.
You can bet that Delphi and Otonomo will be followed by other prospectors looking to strike it rich by mining vehicle data. And it's also not too farfetched that, as Otonomo CEO Ben Volkow predicted in a CNN article earlier this year, by 2020 automakers may make more money selling vehicle data than cars themselves.