Connected infotainment services struggle to gain traction forcing OEMs to explore other revenue generating options
LONDON, Aug. 25, 2021 /PRNewswire/ — Despite disappointing consumer uptake of infotainment-related connected services, the demand for vehicle connectivity remains strong in all regions. Global tech market advisory firm ABI Research finds that 70 million, over 73%, of new vehicles shipped globally in 2027 will have embedded connectivity. However, only 43% of these vehicles will have an active infotainment subscription.
“Embedded vehicle connectivity adoption is increasing consistently and is meant to become ubiquitous among new vehicles in key markets within this decade,” says Maite Bezerra, Smart Mobility & Automotive Research Analyst at ABI Research. “Still, most active connections today are of essential telematics services only. Connected infotainment services struggle to gain traction, with subscription churn rates reaching 90% in mass-market models after the free trial period.”
Cellular connectivity will be featured in 53% of vehicles shipped in 2021. Of that proportion, over 83% of vehicles will feature connected infotainment systems, considered a key selling point. Nevertheless, from the installed base of vehicles with connected infotainment in 2021, only 24% will have an active infotainment connection. Notably, 10% of the active subscriptions will not generate revenues for carmakers because they will be on free trial period.
“The infotainment subscription revenue model fails to yield financial results for carmakers because consumers see little value in embedded infotainment subscriptions due to the widespread smartphone mirroring and underwhelming consumer experience. Consequently, car OEMs are looking to replace the revenue model based on subscriptions with monetizing apps, on-demand vehicle features, or innovative new capabilities such as advertising and in-vehicle payments,” Bezerra explains.
The success of these proposed monetization strategies relies on the consumer adoption of the embedded systems. As such, many OEMs are transitioning to systems based on Android Automotive OS, seen by some as a panacea for all user adoption-related issues. However, the deployment has yet to be perfected. Vehicles equipped with Android Automotive OS have reportedly faced a lower than expected consumer uptake of Google Automotive Services (GAS) – despite three years of free subscription – due to a complex customer onboarding and authentication process.
Regardless of the struggles to increase consumer uptake and monetize from connected services subscriptions, carmakers are compelled to offer embedded connectivity. “It will become an essential car component due to regulation, cloud-based services, and software-defined vehicle architecture that rely on OTA updates. Also, it provides convenience to EV ownership and a long-lasting customer relationship between carmakers and drivers,” Bezerra concludes.
These findings are from ABI Research’s Connected Car market data report. This report is part of the company’s Smart Mobility & Automotive research service, which includes research, data, and ABI Insights. Market Data spreadsheets are composed of deep data, market share analysis, and highly segmented, service-specific forecasts to provide detailed insight where opportunities lie.
About ABI Research
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SOURCE ABI Research