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How Services are Becoming the Fundamental Revenue Drivers for Automakers

Alex Agizim

CTO, Automotive & Embedded Systems at EPAM
Blog
  • Automotive

Transformation is the primary undertaking carmakers currently face. Collecting data and harnessing it will play a key role but ultimately, services will be the driving force that brings in revenue.

Automakers are experiencing the most significant transformation in their history. Until now, manufacturers have invested primarily in technology, design and texture — in other words, the physical elements of a car. But with digitization, customer demands have risen and changed significantly. Today, it is no longer enough to sell an excellent vehicle and customers aren’t always interested in even owning a car. Above all, they want flexible mobility. 

This means that the services provided through third-party providers, along with the data these services generate within vehicles, are the new basis with which automakers will have to generate sales in the future. Chief solution officers (CSOs) will therefore have an even more critical role in the future, as they must plan the transformation process and align the automaker's strategy accordingly. Due to the high pressure to innovate in the industry, continuously providing customers with new offerings already extends far beyond the core business of mobility.

Automakers are competing to come up with the best ideas for tomorrow's mobility, which customers will then endorse in the future with their purchase decision. This also means, for example, that suppliers must respond to the different needs of carmakers and take them into account in their strategy. We often talk about the importance of data here. Ever more critical is what then happens with the data and how carmakers can easily collaborate with third-party services vendors, such as fleet management, car-sharing, insurance, etc.

The Connected Car is the New Standard

The car of the future is connected to other services and devices via a network. Automakers are already responding to this trend. Most manufacturers plan to increase their spending on connected services and data analytics solutions. This is the right way to go. Carmakers today still rely on the sales of their products for almost 100% of their revenue, by 2030 this figure will be significantly lower. A significant portion of the income will then be generated by other services such as data-driven services or car-sharing models

Services Bring in Revenue

This is where the CSO comes into play again. Software utilization and data collection alone are not enough to transform the carmaker's business model. What is needed now is cooperation and interaction with third-party vendors that know how to prepare services in such a way that they can become revenue drivers for automakers and service providers. The focus here is on new business models that can help automakers compensate for impending revenue shortfalls.

An Example of an Integrated Approach

One integrated approach could be an onboard insurance solution that opens the vehicle onboard system to deploy and execute insurance service business logic. Until now, vehicle owners have taken out insurance, but they don't always know whether they will use the full scope of benefits covered. For example, many take out international insurance, but then do not travel abroad at all in the coming year.

In the future, an integrated onboard solution would enable insurance providers to activate this coverage precisely when driver crosses the border into a country. Here, the insurer could use the solution to provide different needs, packages and recommendations for the driver.

The driver has a good customer experience because the services that are used are the ones that are insured, the carmaker earns money from the physical fact of vehicle use and the corresponding service, and the insurance company accordingly enjoys attractive new customer business, for example, because it has relied on the right cooperation.

But how does this model get built into the car?

What Edge Orchestration Platforms Can Do

Implementing new business models around services offered within a vehicle poses several challenges, specifically when it comes to availability, stability, security and so on. AosEdge is an open source platform that enables automakers and third-party providers to interact with each other to accomplish these transformation initiatives. AosEdge helps orchestrate services and manage over-the-air (OTA) updates. 

This is because the vehicle is always connected to the internet, and the onboard computing system can be used as a vehicle edge computing node for the cloud base services. Such an approach helps services to operate even when the connection conditions between the vehicle and the cloud are not always stable. 

Edge orchestration platforms are essential for the next generation of connected vehicles. The essential functions of AosEdge support service availability, ecosystem security both within the vehicle and across third-party providers, simultaneous use (even for multiple providers) as well as the ongoing assurance and further development of in-vehicle services.

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