*** Editor’s Note: Today’s guest contributor is Pandora’s Auto Head of Industry Randall McAdory. You can follow Randall at @rmcadory. ***
Someday in the near future will OEMs make billions by selling in-car data? The answer is probably, yes! At least that’s what many auto companies like Audi believe. Not to be outdone by Silicon Valley, automakers like Audi are striving to mine valuable connected car vehicle data to drive incremental revenue and higher profit margins. In this Bloomberg article, Audi outlines their efforts to boost profits by $1.2 billion from car-data services.
Connected cars are driving a whole new business model opportunity for OEMs – a model centered around creating recurring revenue sources versus revenue only from a single transaction when a car is sold. Connected automobiles give automakers the opportunity to make money off the vehicle for as long as it generates data. These vehicles allow car companies to collect revenue from efforts like package delivery, software updates, route planning, insurance analytics, and a host of other initiatives.
Recently General Motors, Volvo, and Amazon announced a partnership allowing Amazon packages to be delivered via GM and Volvo vehicles (some are calling the service, “Amazon Junk in the Trunk”). Amazon will spend $60B on shipping this year. This partnership, which relies on location and vehicle access capability inherent in a connected car, helps Amazon solve major customer logistic problems associated with package delivery. And of course, GM and Volvo get a cut of revenue every time a package is delivered to one of their connected vehicles.
“Junk in the Trunk” and ideas like this are examples of old economy automakers learning use new economy strategies to drive profits from what is essentially a giant, mobile, connected device – the modern automobile.