The Connected Car: Remaking the transportation and mobility experience

The Connected Car: Remaking the transportation and mobility experience

This is part two in the MaRS Smart Transportation Market Insights, part of the Connected World Market Insights series.


A connected car analyzes, learns and predicts. It gathers information from its surroundings and improves its performance while enhancing the driver’s safety and comfort. Prominent examples of these enhancements include being able to download software updates, providing passengers with Wi-Fi access and offering online media content. However, as Enrique Nuñez, MASc, PEng, Quality Engineering at Toyota Motor Manufacturing Canada, observes, “This is only the beginning.” An essential feature of a connected car is an Internet connection that enables a network of cars to send and receive data; this could make things very interesting in the coming years. “[Connectivity] allows the vehicle to communicate to the world. It’s not just about the driver getting all the information that he or she needs [to improve the driving experience]. It’s about the vehicle itself communicating to its surroundings and to the world. [It could include] location, speed, acceleration, obstacles or traffic conditions,” adds Nuñez. This adds another layer of sensory data to the Internet of Things movement and will have profound implications for the Connected World.

Historically, the auto industry has been able to integrate new technology into vehicles and evolve on its own terms (with government regulations being a major exception). McKinsey says that auto manufacturers [inlinetweet](OEMs) are now learning to think like electronics companies[/inlinetweet]. Perhaps it is not a coincidence that GM’s current chief infotainment officer, Phil Abram, worked at companies such as Sonos, Sony, Sharp and Kodak.

Auto manufacturers are trying to meet consumer demand by integrating new technologies into their vehicles to broadly improve four major needs:

  • Productivity/entertainment
  • Safety
  • Security
  • Efficiency

Shifting from primarily focusing on mechanical hardware to integrating computer chips, electronics and software, OEMs are collaborating with high-tech firms such as Intel and NVIDIA to produce an end product that we now call the connected car.

History lessons and the birth of the connected car

General Motors (GM) was an early innovator in the connected car space with the development of OnStar. With more than one billion user interactions, OnStar is by far the most widely used car-connectivity platform. The telematics services platform has evolved from an emergency response call button to an automatic collision notification system. OnStar catalyzed the movement of other OEMs to experiment with connectivity in the car. As competition heated up, OEMs began introducing calling capabilities into cars and developed large LCD screen displays. The displays evolved into touchscreen systems that controlled navigation and music, and that could connect to smartphones through Bluetooth technology. When Tesla Motors introduced its Model S electric sedan in 2011, it came with a 17-inch touchscreen centre console – the largest display ever included in a car.

We are now transitioning into the period that Deloitte has declared the vehicle-to-everything (V2X) communication era, the new mobility era and the connected car.

Demand for connectivity in cars will change the world

As established in the first blog of our Future of Transportation in the Connected World series, consumer demand for mobile connectivity is high. If the industry wants to continue growing, then it must respond with solutions at a price point that consumers are willing to pay. At the 2015 Connected Plus Show’s Connected Car panel, Dr. Allaa Hilal of Canadian automotive technology company Intelligent Mechatronic System Inc. reasoned that the connected car movement is all about consumer lifestyle. This is quite a shift from the last few years. “Before it was just a car that would, for example, recognize when the driver was in the driver’s seat and it would adjust the seat, the radio settings, the suspension setting, engine power mode, etc. But now it’s a very different environment, so now you are talking about infotainment, telematics and integration with your smartphone,” says Nuñez.

PWC has ranked automobile features based on importance to the customer and their willingness to pay, with mobility information and infotainment being the most important. The results can be seen in Figure 1 below.

Figure 1: Demand for connected-car services among volume car customers

Figure 1: Demand for connected-car services among volume car customers
Source: PricewaterhouseCoopers (PWC), Connected Car Study 2015: Racing ahead with autonomous cars and digital innovation, 2015

Consumers want and are beginning to expect their cars to come equipped with these features. In another survey, 28% of new car buyers are placing connectivity features as the number one need over the once preferred engine power and fuel efficiency.

However, the benefits will go beyond adding value directly to drivers while the connected car begins to communicate to the world. Nuñez states, “As the driver is getting entertainment and information, the vehicle is broadcasting to the world all of its environmental conditions. That will help other [connected] vehicles make decisions, and that’s what’s coming in the future.” Could these decisions help to improve traffic flow on dense city highways? The possibility is very real.

As technology improves and societal norms evolve, this network of highly connected cars will almost certainly become a reality. Software companies, such as Apple and Google, also want a piece of the connected car market. Apple has made a step toward this notion by introducing its infotainment offering, CarPlay. Google is not too far behind with its infotainment platform Android Auto, which can be an add-on feature in almost any new car sold by automakers within the Open Automotive Alliance.

Drivers who do not want to purchase a new car could adopt a Canadian connected car platform solution like Mojio, which has raised $8 million in Series A funding.

Indeed, the arrival of the connected car and new entrants could be the beginning of the smart transportation revolution.

Key players

Key players in the development of the connected car fall into two general categories: auto manufacturers and suppliers (OEMs), and technology innovators. However, OEMs often work very closely with technology innovators on joint projects; some companies, such as Tesla, arguably fall into both categories. While this is not an exhaustive list of key players, these companies are leading the charge.

Figure 2: Key players in the connected car space*

Figure 2: Key players in the connected car space Auto Manufacturers and Suppliers Nissan Magna Fiat Delphi Toyota BMW Ford GM Honda Tesla Autotech Startups TrustPoint Innovation Technologies Navdy DRVEN IMS Telecommunications AT&T Rogers Telus Bell Technology Apple Google Intel NVIDIA QNX Microsoft Qualcomm
Source: MaRS Discovery District, The Connected Car, 2015
*Note: This is not an exhaustive list. Combines market players active in Ontario or major market players globally.

It’s connectivity, performance and mobility

Envision a car that becomes a friend, a digital companion. A car that knows where the driver is going, what music will be played, what climate control settings are needed when the car is started. This is what the vast majority of our cars will be able to do in the future.

That said, while the majority of today’s drivers lean toward purchasing cars based on advanced car technology, 33% of drivers still lean toward purchasing their cars based on their performance, according to Accenture’s Global Connected Vehicle Survey.

Figure 3: What drives a customer’s car purchase?

Figure 3: What drives a customer’s car purchase? On a scale from 1 to 10 10 meaning that in-car technology has the greatest influence over the car purchase decision and 1 meaning that the car's driving performance has the greatest impact on the car purchase decision what score would you assign for your view? 1 3% 2 4% 3 7% 4 7% 5 12% 6 12% 7 15% 8 20% 9 12% 10 7%
Source: Accenture, Global Connected Vehicle Survey, 2014

Certainly, not everyone is a car buyer. According to Réal (Ray) Tanguay, recently retired chairman of Toyota Motor Manufacturing Canada Inc. and current chair of a subcommittee of the Canadian Automotive Partnership Council, there are three broad demographic segments with vastly different transportation needs and utility, and they will shape the future of mobility. “First of all, you have people that just want to drive… They want the car to be a representation of their personality. The second category is, ‘I need the vehicle.’ It could be commercial, or I live in the suburbs, and I have a family. Then you have another segment that is people who want mobility, but they don’t like to drive or they can’t drive.”

The first segment has always existed; it is one reason why there is a demand for high-performance and luxury vehicles. With new improvements in technology and the move toward connectivity, we can see how innovators are looking to cater to all types of transportation needs. For example, Tesla Model S’s “insane mode” and Ludicrous Speed could appeal to those who love driving. The 2015 Corvette Stingray came with a Performance Data Recorder feature that provides drivers with a quantified car video game experience. (Mazda’s new “Driving Matters” marketing campaign is certainly targeting the same demographics.) Upcoming autonomous vehicle features, as promised by automakers and Silicon Valley tech giants, could appeal to those who just need a car to get from point A to point B. Ridesharing services (such as Uber), public transit and alternative transportation modes can serve the needs of those who either don’t like to or can’t drive.

Productivity and entertainment in cars just like smartphones?

In Canada, 74% of commuters drive a vehicle to work. It takes them an average of 24 minutes to get there and in metropolitan areas, like Toronto, this average is up to 33 minutes. The majority of this time is spent in stop-and-go traffic, which causes many drivers to be distracted by their smartphones as they attempt various productivity tasks, such as replying to emails, while on the road. In Accenture’s recent Global Connected Vehicle Survey, 63% of respondents said they were interested in operating a smartphone by using controls on the steering wheel while driving.

Auto manufacturers are making significant investment in infotainment and integrating smartphone capabilities into the car. Tesla is considered a technology leader in developing infotainment; this is due to its partnership with NVIDIA. NVIDIA’s large touchscreen infotainment system is leading the charge with making the drive an easier, more comfortable and productive experience. Frost & Sullivan predicts that cars sold with a touchscreen will jump from 13.3 million in 2015 to 29 million in 2021.

Some argue that these solutions are not where they need to be in terms of performance and effectiveness to provide the necessary convenience (e.g., user interface is hard to control) and safety (e.g., increases driver distraction) for use on the road. However, one advanced technology, also popularized by smartphones, could solve some issues: voice recognition.

As seen in today’s personal digital assistants, such as Apple’s Siri, Google’s Google Now and Microsoft’s Cortana, voice recognition in advanced infotainment systems could allow the car to read emails to the driver and enable the driver to respond without taking their eyes off the road. In Accenture’s survey, 56% of respondents would like their car to read and dictate their emails while driving. Frost & Sullivan predicts that 29 million cars in 2021 will be equipped with voice recognition capabilities, up from 19.6 million in 2015. As voice recognition improves and advances in the industry, a driver will be able to talk to the car and the car would respond accurately. Drivers will be able to play specific songs using voice command.

Another interesting area of advancement in infotainment is personalization. Using the example above, if the driver doesn’t like the song, the car could learn their music preference and avoid playing similar songs in the future. The connected car, together with connected media services, is capable of learning and predicting the user’s wants, needs and entertainment preferences. Paul Barter, technology strategy professor at York University’s Schulich School of Business, believes that certain personalization features are long overdue. The connected car’s infotainment system should be able to recognize the driver’s sports preference, just as the system should be able to “add a song” to the driver’s music playlist when they hear a “great song on the radio.” Perhaps beyond providing compatibility with Android Auto and Apple CarPlay, an app developer strategy is required.

Connected car will lead to enhanced safety

Capgemeni’s 2015 consumer connected car survey revealed that consumers of all ages considered safety as the number one feature in a connected car. Before examining how the automotive industry uses connectivity, sensors and information technology to address this important customer demand, it might be useful to look at the driving force behind safety concerns – auto accident causes.

smart transportation connected car city

The US Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) conducted a significant study on auto accident causes. According to its National Motor Vehicle Crash Causation Survey, which examined 5470 crashes, 94% were estimated to be attributable to drivers. In essence, people drive, therefore traffic accidents happen.

A major cause of crashes is distracted driving. Drivers are 23 times more likely to get in an accident while texting and distracted driving now accounts for more accidents than DUIs. In fact, distracted driving has surpassed drunk driving as the number one cause of car accidents in Ontario.

Going beyond speed, fuel consumption, navigation system and radio, the increasing amount of information a driver could access due to connectivity might also cause more distractions. Would Tesla’s giant “iPad”-like central console distract drivers and cause more harm than good? What if it were possible to access all this information without the driver taking their eyes off the road? Once limited to science fiction and the cockpits of military jets, heads-up display systems could increase in prominence in the automotive arena. While more OEMs are exploring ways to include this technology as part of their vehicles’ hardware, companies like Navdy are exploring after-market options that can connect to a smartphone and display text messages and navigation directly onto the windshield. If this were to be deployed with the aforementioned voice recognition, the driver would never have to take their eyes off the road when replying to messages, asking for directions or making a call.

From a problem-solution perspective, if drivers are the reasons why accidents happen, removing human error from the crash equation will drastically reduce auto accidents and enhance safety. “Safety will become a much bigger factor than we’ve seen in the last hundred years. Before we looked at passive safety, now we’re going to look at active safety. That comes from the connected vehicles and all the technology that’s available,” states Tanguay.

What does active safety look like? As it turns out, NHTSA documented three distinct but related streams of technological innovations that target traffic accident reduction: 1) in-vehicle crash avoidance systems, 2) V2V (vehicle-to-vehicle) communications, and 3) self-driving/autonomous vehicles.

In-vehicle crash avoidance systems

According to Nuñez, within the next five years, most new vehicles on the market will be equipped with “radar sensors, collision avoidance sensors, lane departure sensors, auto cruise control, panoramic view cameras and blind spot monitors.” They will make up the enhanced safety systems found in the cars of today and tomorrow. When building out these systems, OEMs could collaborate and work with Blackberry’s QNX. QNX develops automotive software systems that span the spectrum from entertainment system to potentially life-saving safety features, such as autonomous emergency braking. QNX offers an extensive list of Advanced Driver Assistance System features.

V2V communications

There have been remarkable technological advancements in improving driving safety through vehicle-to-vehicle communications (V2V). Vehicles can use sensors, computer processors and the cloud to exchange data about their position and speed to prevent accidents. Currently, V2V communications are envisioned to alert the driver in advance of a dangerous situation or potential accident. For instance, drivers could be warned by an audible signal, or their seat or steering wheel could vibrate to signal danger, so that they can take the necessary evasive action.

Many government organizations see great value in this capability. In fact, NHSTA is looking to mandate V2V in the future, predicting that it could prevent 592,000 crashes per year. There are high expectations for accident prevention from this technology; BCC Research estimates that 78% of crashes could be avoided in vehicles equipped with V2V communication.

Some OEMs like Toyota are beginning to think beyond V2V and are exploring the value of V2X, which includes developing technology that will allow cars to communicate with pedestrians’ smartphones. This could ensure the safety of hard-to-see pedestrians in blind spots or at night.

Self-driving/autonomous vehicles

Chris Urmson, head of Google’s self-driving car project, famously said at a Vancouver TED conference that one goal of the project is to prevent his 11-year-old son from getting a driver’s license, and evolving driver-assist technologies to self-driving was the wrong approach. Many people in the auto industry, including those involved in GM’s driverless car project, disagree with his views. Without debating the merits of each camp, it might be sufficient to say that, from a hardware perspective, all of the fundamental, necessary technologies have been invented. “Basically, that means that all new vehicles will be equipped with all the sensors they need for autonomous driving. The only thing that will be missing is the software to actually make that happen. That’s going to happen in the next three to five years, even on entry-level vehicles. They all will be equipped with the necessary sensors,” states Nuñez. In other words, the aforementioned enhanced safety systems and connectivity will form the foundation of autonomous vehicles.

Therefore, it is no surprise that today’s cars are capable of semi-autonomous driving and some form of auto piloting. Two examples of automakers’ autopilot feature are Tesla’s Autosteer and Cadillac’s upcoming Super Cruise. These connected cars could eliminate the need for drivers to be alert because the cars will be able to take the necessary action. Processing a huge amount of data (big data!) is the backbone of what makes autonomous vehicles possible. For Tesla, NVIDIA’s super processors are able to analyze large amounts of data that are collected by the car’s sensors. These high-performance chipsets use artificial intelligence to learn and create algorithms to enhance the Autosteer autopilot feature and the car’s overall connectivity. The car analyzes this data and uses it to issue controls/commands that allow it to stay in the lane, brake on its own, maintain a safe distance from the car in front and even change lanes. While these features don’t imply that it is now safe to play Clash of Clans behind the wheel (yet), this capability greatly improves the driving experience and safety for those who wish to use their smartphones while on the road. According to John Capp, GM’s Director of Safety, in a recent Bloomberg Business cover story, GM’s consumer research showed that drivers quickly became comfortable with self-driving cars.

Connected car brings more security and privacy concerns

While there are plenty of positives to take away from the rise of connected and autonomous cars, recent stories of hackers taking control of a Jeep and Google’s controversial data collection practice showed potential dark sides. Indeed, more controversies and consumer backlash might be lurking in the background as security flaws are exposed and privacy concerns are voiced.

Securing your car and personal data

As implied in the previous section, further development of connected and autonomous vehicles requires exchange and analysis of a considerable amount of information. This includes technical data, such as speed, position and status of car systems, but some of it is more personal, including the driver’s current position, where they live and work, and their biometrics, such as heart rate and alertness. All this data would need to be stored and broadcasted, which could pose a security threat as connectivity widens the attack surface for hackers. A car would need to know if the incoming data is from a legitimate source and not from a hacker. One Waterloo-based startup has developed a security system to address these concerns as the connected car market grows. We spoke with TrustPoint Innovation Technologies, an Ontario-based startup aiming to protect the highways of tomorrow. TrustPoint provides security solutions for Machine to Machine (M2M) communications. They specialize in enabling secure authentication of products and services within the M2M ecosystem, including devices, NFC tags and V2V infrastructures. Read the full profile here.

Trading privacy and security for money and technology

Insurance companies have traditionally offered discounted rates for good accident records. However, where are the boundaries? Insurance companies have now started to collect information on driver habits and driving style. For example, DesJardins has implemented the voluntary use of technology that tracks drivers. Users who install the smartphone app can lower their insurance premiums by up to 25%. However, these types of apps lead to significant concerns about respecting security and privacy. The Ajusto app not only allows the insurance company to know the customer’s driving habits, such as tendency to speed or smartphone use while driving, but it also collects data on the driver’s location, whether they are driving or not. This raises important questions such as: Who has access to this data? Who owns the data – can it be shared or sold? How secure is it? How easily could hackers access your personal data? This is a broad concern for new car buyers in Germany and the US, according to McKinsey’s survey.

Figure 4: Consumer’s opinion on privacy

Figure 4: Consumer’s opinion on privacy new-car buyers are broadly concerned about data privacy and the possibility of hacking when it comes to car connectivity
Source: McKinsey, What’s driving the connected car, 2014

In parallel, the 2015 CAA In-Car Data survey found that 50% of Canadians believe that new automotive technologies put their privacy at risk and offer little benefit, while 82% think that consumers should have exclusive rights to control access to data generated from the connected car.

Survey data show that security and privacy concerns are real. However, having been involved with commercializing TrustPoint’s V2V security solutions, president and CEO Sherry Shannon-Vanstone believes that OEMs get it. “In general, for the connected car as we move forward, the OEMs are going to have to address this issue. You notice that almost all the advertisements for automobiles today are about safety. Now you’re going to see them also talk about security,” says Shannon-Vanstone.

A more efficient transportation network through connectivity

Most improvements in energy efficiency will likely come from a widespread adoption of alternative powertrains. However, better use of technology and data, better design, better use of a network of connected cars (with or without an internal combustion engine), and over-the-air software updates could help to improve energy use and the general efficiency of our transportation network.

Connected cars may have F1’s efficiency DNA

When one thinks about the world’s fastest, most advanced and most innovative cars, motorsport often comes to mind. Since 1950, various OEMs have participated in Formula 1 (F1). Ferrari, Mercedes, Honda, BMW, Jaguar, Renault, McLaren and Toyota invest billions of dollars each year into research and development to improve car safety, fuel efficiency and performance, and to bring new technologies to the table. Research and development for Formula 1 has produced technologies such as traction control, aerodynamic improvements, semi-automatic gearboxes and, more recently, KERS (kinetic energy recovery systems) to modern-day road cars.

A controversial topic within motorsport is whether these cars are too connected and reliant on electronics. Ironically, this notion that modern-day grand prix cars are easier to drive due to the multitude of electronic features is welcomed with open arms among road car drivers. Engineers are now able to monitor virtually every aspect of a grand prix car through data collection, which is vastly more complex than a road car in many respects.

Mercedes AMG F1
Mercedes AMG PETRONAS Formula 1 team

This demand for constant monitoring of large amounts of data has led to partnerships with high tech companies such as Qualcomm. Qualcomm has partnered with the Mercedes AMG PETRONAS team to integrate 5G Wi-Fi communications to seamlessly send the large amounts of data from hundreds of sensors back to the garage. This relatively new innovation has allowed engineers to track aerodynamics, tire temperatures and suspension load, all while the car is on the track. These advancements have implications for road cars as high-speed connection could unlock future potential for Dedicated Short Range Communication (DSRC) and V2X communications while new data could lead to improved car designs.

Connecting cars to road infrastructure

Another exciting opportunity for efficiency improvement lies in the ability for vehicles to communicate with infrastructure. Stopping for a red light while there are no cars going through the green might be a thing of the past. With V2I (vehicle-to-infrastructure) communications, the connected car could communicate with the traffic light and let it know to change. Additionally, drivers could be made aware of road closures or construction before getting there and route adjustments can be made (by the car itself or the driver).
There is a significant opportunity for connectivity to improve traffic flow. Vehicles travelling to similar locations could communicate with each other and their immediate surroundings. Computer-derived algorithms could determine what speed, what route and what lane commuters should be in and instruct them or their cars accordingly. Improved traffic flow would not only affect travel times, but it would also reduce fuel consumption and have a substantial impact on the environment with lower emissions from reduced idling times and frequent stops and starts. (Yes, idling a car equipped with an internal combustion engine does waste fuel.)

Tesla: downloadable updates overcome designed obsolescence

Tesla has cars that can actually improve over time with the practice of over-the-air updates. Typically, cars lose value as soon as you drive them off the lot, and continue to depreciate over time due to wear and tear, and continuing advancements in technology that make older car systems obsolete. However, Tesla has been able to lead the way in overcoming vehicular obsolescence by implementing over-the-air updates. “That’s really different than the existing cars that are in that space. You’re buying a product up front and a direct service of relationship with the company,” observes Barter. By equipping its electric cars with more hardware, such as 360-degree radar and an impressive array of sensors, than required for day-to-day normal operation, Tesla is able to update the cars that are already on the road. Other more traditional OEMs are trying to catch up. IHS predicts that over-the-air software updates will actually save automakers $2.7 billion this year, and $35 billion by 2022. For the average driver, taking the car to a dealership for some maintenance tasks could be a thing of the past.

Auto industry and connected car market landscape

Traditionally, OEMs focused mainly on hardware integration (e.g., electromechanical parts). However, due to the demands of connectivity and digital features, the industry now has to grapple with the integration of software platforms to bring all aforementioned benefits to market. Simply put, connectivity and what it helps to enable could be a key feature that drives the future car sales/replacement cycle.

Globally, McKinsey estimates that [inlinetweet]connected car market revenues will grow to US$192 billion by 2020[/inlinetweet], while IBISWorld estimates that global automobile manufacturing revenue will rise to US$2.7 trillion by 2020. Roughly, that means that OEMs could capture an additional 7% of revenues if they were to completely dominate the connected car market. However, this depends on a few critical factors. From the OEM’s perspective, the ideal scenario is for integration of connectivity and digital features to bring new opportunities for revenue and profit. Moreover, OEMs are hoping that connectivity will significantly improve the user experience so that it will become a differentiating factor for OEMs, allowing for an incremental increase in price. As mentioned in the first blog, buyers are willing to a premium for autonomous features, and these features will work better with a network of connected cars.

Given the current landscape, it might not transpire this way. Startups and technology giants, such as Apple and Google, could gain control of the connected car experience and divert new revenue opportunities away from OEMs. If this happened, there could be further disruption in the auto industry overall beyond high competition and price wars. Without a doubt, Apple and Google are not planning to build cars for charity. However, Ray Tanguay sees this as healthy competition for the auto industry. “It’s good to motivate and to activate the industry to act more quickly in deploying some [new] technologies,” says Tanguay.

Connected car and the opportunities beyond

Figure 5: The OEM value chain

Figure 5: The OEM value chain Design Suppliers OEM 3rd Party Logistics Retail Customer Servicing
Source: MaRS Discovery District, The Connected Car, 2015

The core value chain of today’s automotive manufacturing industry includes design, suppliers, assembly, retail and servicing. With the emergence of the connected car, new entrants might disrupt and rearrange this value chain.

Design includes hardware design and software development. Some software initiatives that are expected to emerge include positioning and collision avoidance, infotainment, security and privacy, and convenience (such as mobile apps that allow the car to be started remotely).

OEMs are essentially car assemblers. Component manufacturers, such as Magna (a Tier-1 auto supplier), build most of the vehicle, and have established mutually beneficial relationships with the OEMs. Traditionally, a major barrier to entry into the OEM supplier chain has been the significant capital investment required to set up manufacturing facilities. However, new opportunities might open up for suppliers to provide software and electronic components to the car industry, and some opportunities might require a much lower upfront capital cost.

OEMs are still in control of assembly due to the high investment in assembly plants; however, they will now need to introduce ways to allow more customer interaction through customization at the point of assembly. While this touches upon something outside of the connected car movement, OEMs will need to address the trend toward mass customization. The development of 3D printing technology will definitely have an impact. “As we move to flexible and personalized manufacturing, we can make products that fit well. We don’t need to make one size fit all products if we’re building this thing off a design. Our car manufacturers are not going to make a million of something now. They’re going to make a million shells with a million car engines, and many of the other things will be standardized, but much of the interior run software will be personalized for me, not just software but hardware,” argues Barter.

Retail has traditionally entailed third-party-owned car dealerships. Some players have started to have corporate-owned dealerships, such as Mercedes, which has eight corporate-owned dealerships in the Greater Toronto Area (GTA).

Tesla has also become a big disruptor with their “showroom” strategy to selling cars in high foot-traffic locations, with no inventory (e.g., Yorkdale Mall in Toronto). To make a purchase, customers go online and order the car. This also eliminates the customer’s ability to negotiate on price, which has typically been a large part of car buying through dealers.

A logical evolution is for car manufacturers to sell their vehicles directly online. Why bother having physical locations? (Of course, local laws and regulations could prevent that from happening in the near future.) A study by Capgemini revealed that the pattern of global consumers wanting to purchase a car online has been established (see Figure 6 below).

Figure 6: Likelihood to purchase a vehicle online

Figure 6: Likelihood to purchase a vehicle online All Markets 35% UK 20% USA 21% France 27% Germany 27% Brazil 31% China 60% India 57%
Source: Capgemini, Cars Online 2015, 2015

Traditionally, servicing has been offered by dealerships and auto body shops after sale. With the emergence of better quality sensors and more data collection, drivers can know exactly what is wrong with their vehicle, without the need to get an expert to do an assessment. Additionally, with over-the-air software updates, many issues typically handled at physical service locations could be remotely corrected.

Servicing a connected car as a new opportunity

There are more than 200 million cars on the road without connectivity built in. By the end of 2015, only 25% of US light vehicles in operation will have a connectivity solution. This provides a large customer base for after-market connectivity solutions and technologies to enter the space. Every car manufactured after 1996 in the US must have an onboard diagnostics (OBD) port. This port was initially envisioned to manage emissions, but it has great potential to provide additional connectivity to vehicles, especially in the servicing space.

DRVEN has created a platform that plugs into the car’s OBD port and is capable of running diagnostics on the car and relaying this information to the driver, often eliminating the need to go to the dealership. However, this technology can provide much more than just diagnostics. We spoke with David Alleyne-Martin, Co-founder and CEO of DRVEN, to learn more about their device. Read the profile here.

Is your car going to be connected?

Connectivity, combined with other technological advancements/changes such as alternative powertrains and autonomous driving, will change the automobile industry. Coupled with the emerging changes and innovations in car after-market and mobility services, such as ridesharing, there will likely be new opportunities for technology startups to create value for drivers and commuters. Traditional barriers to entry could break down further as new technologies such as 3D printing continue to emerge across the automotive value chain. The impact could go well beyond the traditional auto sector. For example, the oil and gas industry might find itself on the wrong side of the trend with the connected car movement alone. Regulators and lawmakers will seek to create an intelligent transportation system, continue to demand a higher level of safety, find ways to decrease congestion on roads and decrease greenhouse gas emissions. Who knew that connecting your car could bring so much change?

The companies that could come out on top in this technological revolution will be those that design, develop and produce valuable, innovative technologies. They will be able to demonstrate an ability to forge partnerships with OEMs, auto suppliers, infrastructure developers, telecommunications providers and city planners. The key areas of opportunity lie where consumers and society as a whole express a desire or concern for change, and the values will be found in enhancing productivity, the entertainment experience, safety, privacy and security, and efficiency.

Smart transportation venture profiles

We spoke to two companies about their technologies and go-to-market plans. Read the profiles:

DRVEN logo

Tell us about DRVEN.

We are a Toronto-based start up in the automotive and telematics industry. Our product/platform is called The DRVEN Kē and it is essentially a Fitbit for your car. It is connected to your car’s health and the services that your car needs to make it last longer and save you money.

David Alleyne-Martin, Co-Founder CEO
David Alleyne-Martin, Co-Founder CEO

We partner with best-in-class service providers that take care of things like roadside assistance, mechanical repair, collision repair, insurance and so on, to keep you safe and secure and protect your investment.

The average car on the road in Canada is 11 years old, and they’re getting older. Most people have a car with technology that has been around for 10 or 15 years. Imagine being forced to use a computer and operating system from 15 years ago to do the things you want to do today. Our platform can enable you to use the latest technology and fastest processors on your smartphone to add additional features to your car. You can get the features that are in the newest cars today without upgrading your car.

What is your market? Who are your customers?

Cars that can use our technology have what’s called an OBD-II port and are usually more than four years old. There are 300 million cars in North America that fit in that category. Our customers are people who have vehicles and want to preserve the value and all the services that contains.

What challenges does the Kē solve for customers?

I have a few examples. One, people generally don’t have a great understanding of what it means when that light comes up on the dashboard. It’s an analog light. It’s either on or off. It usually doesn’t say any more especially if you have an older car. Then you have to take it in (or not).

the DRVEN Kē
“The DRVEN Kē is essentially a Fitbit for your car.”

Our platform does that first diagnostic step and and lets people know “Okay, here’s what’s probably wrong.” Then, if you need to get your car serviced or want a reminder to get it serviced you can just tap one button and we coordinate all that. We coordinate the booking; we can coordinate sending you a reminder in 30 days; whatever you want.

The second thing is that most people who have a used or second hand car that they didn’t get from a dealership don’t have any relationship with the car manufacturer. If there is a recall on that car it is really hard for the consumer to know.

Our platform can tie into the industry databases and send you a message to say, “Hey, your car has a recall. If you take it to a dealer it will get fixed for free.” It puts more autonomy back on the customer so that they don’t have to worry about trusting the dealership or finding the information because we can push that information to them.

We also look at how fuel-efficient your vehicle is just by itself and then based upon how you drive. We can share that information with you and tell you how much your trip cost in dollars and how much it cost the environment in carbon. We can show you how to change your driving behaviour so this gets fixed, and we can give you a button to purchase carbon offsets. We can also say based upon how old your car is, here is the value of your car because we have partners who will do evaluations. We can then facilitate your purchase of a new car, that will save you “this much” on gas a year. Just like a Fitbit, we show you the data you are generating and then you can make a decision based on that data.

How are you distributing Kē to drivers?

We use our distribution partners who are the service providers so that when you bring your car in, your service professional can say, “Here you go. We are going to give you this. It’s sort of a partner driver, and here are all the features and services that it has. It will automatically book your appointments with us. We will give you a discount on your next oil change (or whatever it is). Also, you get free roadside assistance at a touch of a button, through your phone. And if you get in a collision you can notify your loved ones, and call a tow truck – all at the same time, at the touch of a button.”

It’s a value-add to a customer who is already in some kind of transactional relationship and we think that’s a really good way to get in your car. Better distribution through a trusted partner is one of the main ways we differentiate on the consumer side.

How do you differentiate from your competition?

Most of our competition has features that simply just read. It’s like a USB port. You plug it in and it reads something. We have additional functionality that you can purchase in app that enables new features so that it goes the other way. An example: wouldn’t you like it if on the coldest day of the year and you don’t have an automatic car starter, we send you little things like, “Would you like to get a starter for $49.99?” If you tap yes, it automatically upgrades your app and you can remotely start your car from your phone.

How much room is there for innovation in the industry?

I think there is a lot of room for innovation on the user interface side. The electronics are the big one. Not necessarily just the electronics that run the vehicle, but also the parts that interact with people. It can be more than offering Wi-Fi in the car, which I don’t get – who cares? You have a phone. Great, you have connectivity in your car. Everyone has a music-streaming app on their phone. I think there is a lot more that can be done there. It’s kind of up to the carmakers to provide an open platform, as opposed to guys like us who circumvent the systems.

So the short answer, I think that the innovation is on the side of garage technology hackers that find out cool new things to do with vehicles and still keep them safe.

TrustPoint Innovation Technologies logo

Tell us about TrustPoint Innovation Technologies.

First of all, TrustPoint cares about security. Our team is comprised of experts in information security and cryptography. We have years of experience in implementing security for worldwide global deployments for companies such as Blackberry, General Motors, Motorola, Texas Instruments and many others. We develop innovative products and solutions to address the security needs for the internet of things (IoT) and machine to machine (M2M) communications markets including connected car, near field communication (NFC) devices and critical infrastructure applications.

Sherry Shannon-Vanstone, President and Chief Executive Officer
Sherry Shannon-Vanstone, President and Chief Executive Officer

For the connected car, the technology we standardized and commercialized (Elliptic Curve Cryptography) is being used to secure communications between vehicles to assist in avoiding collisions. This system is called Vehicle-to-Vehicle (V2V) and it allows vehicles to communicate to each other and to the infrastructure using authenticated basic safety messages. Sometimes you will hear the term V2X, which means vehicle-to-everything and encompasses V2V along with V2I (vehicle-to-infrastructure) and V2P (vehicle-to-people). TrustPoint provides security solutions for all of V2X.

What is your market? Who are your customers?

Our security software tools and solutions can be used for many IoT verticals including medical devices, critical infrastructure and financial applications. However, our primary market is the connected car. For the connected car security platform, our customers are the automobile manufacturers (OEMs) and the Tier-1 suppliers.

What challenges does TrustPoint’s security platform solve for customers?

We remove the complexity of implementing security for the OEMs and the Tier-1 suppliers so they don’t have to understand or worry about it. We provide the software toolkits for both on board equipment (OBE) and for the backend and also security consulting to assist in deployment.

How do you differentiate from your competition?

Our differentiation is that it’s our technology that’s being deployed for V2X and we know more about this technology than anyone else does. This is what we’re trying to tell our customers: When you’re designing, don’t worry about security. Just come to people like us, companies like TrustPoint. We will take care of that because security should be built it from the beginning and not bolted on later.

Furthermore, a huge majority of our team was with a company called Certicom. Certicom was a spinoff from the University of Waterloo and Certicom provided the security for the BlackBerry. Almost every smartphone today uses thes security technology that we invented at Certicom.

How much room is there for innovation in the industry?

A lot. But it is also our biggest challenge. What we’re seeing is that people are not doing anything in securing their Internet of Things (IoT) platforms. They’re deploying their systems, and then they’re realizing that they forgot to put security in the systems. We call it the bolt-on security. Why was BlackBerry so successful in sectors where security absolutely matters? They built in security from the beginning. They didn’t bolt it on.

Security’s always an afterthought because everyone’s focused on the application. They think they have it covered, but there’s still many aspects where they don’t know what they don’t know. That is why they need TrustPoint.

What are your next steps?

We’re getting a lot of questions and requests to speak about security and the connected car, because of several recent car hackings (e.g., read the Jeep hacking story that went viral on Wired). Car hacking has become a high profile story, and people are now realizing that security matters. The drivers are concerned. They’re now starting to ask questions about security. So on that side, we need to keep educating everyone on how important security is and that we can provide the solutions.

This series is a collaborative effort from members of MaRS Market Intelligence: Joe Lee, Emily Nicoll, Lynda O’Malley and Jovana Stranatic.