Connectivity will be available in over half of new vehicles sold in 2022 and over 70% in 2028 according to new research from global technology intelligence firm ABI Research, but connected services adoption is low.
Carmakers are committed to connectivity because of its benefits, including fleet management, reduction of warranty costs, convenient Electric Vehicle (EV) ownership, and Over the Air (OTA) updates.
However, they still have not found an effective strategy to recoup the connectivity and airtime costs. The rate of drivers signing up for connected services is low, especially among lower-tier vehicles, and the increase in free trial periods means that the ratio of paid subscriptions will contract by 20% between 2021 and 2028.
“Due to the prevalence of high traffic phone data plans, end consumers have little motivation to pay for connectivity and rarely renew subscriptions after the free trial period, which carmakers are constantly extending,” says Maite Bezerra, Smart Mobility and Automotive research analyst at ABI Research.
“This is especially true for infotainment services that compete with free phone mirroring. This reality signals that it will be challenging for carmakers such as Stellantis, Ford and GM to achieve their recently announced goals to generate US$20 billion in software and services revenues annually by 2030, at least 13 times what they generate today.”
Nearly all carmakers are committed to deploying software-defined vehicle platforms and are betting on revenues from delivering software-enabled services and features OTA.
“However, most subscription revenues presently derive from essential telematics and remote services rather than infotainment,” says Bezerra.
Connected services subscriptions are being extended to drive higher customer engagement. The average free trial period in the US is increasing from three to six months, in Europe from one to three years (eg Polestar), and in China, many carmakers offer free for life connectivity (eg NIO, SAIC-GM). ABI Research expects over 70% of active infotainment subscriptions to be on a free trial or free-for-life arrangement in 2022.
These findings are from ABI Research’s Connected Car market data report, part of the company’s Smart Mobility and Automotive research service, which includes research, data, and ABI Insights.