eCall is cost burden for car manufacturers
- 13 May 2015
- Posted by: Simon Wait
- Category: News
Technological features of telematics devices in connected cars are evolving intelligently to capture long-term opportunities during the vehicle’s lifecycle.
Integrating multiple services, such as diagnostics and effective vehicle relationship management on a single telematics platform will provide cars with the functionality of a digital wallet through an ecosystem of consumer-centric services and applications. This integration is inevitable as all European OEMs have been mandated to implement eCall—an emergency alert system supported by the European Parliament. Original Equipment Manufacturers (OEMs) will have to integrate this feature regardless of whether they believe it to create larger business opportunities.
According to the European Parliament all newly approved car and light-van models will have to be equipped with eCall boxes as standard fitment from 31 March 2018. eCall boxes are emergency call devices enabling rescue services to respond with faster road assistance based on knowledge of the exact location of the accident. The 2014 ban on telephone roaming charges across Europe will establish a favourable scenario for an interoperable eCall or telematics solution. However, while the European Commission stated that the installation of these devices will increase the cost of the vehicle by €100, it remains to be seen whether European OEMs will be able to incur this cost and profit.
While eCall has to be available free of cost for users, OEMS will have to convince consumers to pay more for a connected vehicle to absorb additional costs. According to Frost & Sullivan estimates, this can only be rolled out by offering connected services that will continue to operate on a subscription basis after the initial free period. ‘OEMs will have to understand the potential revenue in installing such devices across vehicle lines,’ said Frost & Sullivan automotive & transportation program manager, Niranjan Manohar. ‘Using a subscription-based business model will take harnessing vehicle data into the next generation of advanced services and tap into revenue potential of approximately €12bn. This will enable OEMs to lengthen customer relationships to over three years and tap into the potential of long-term maintenance and service business opportunities post vehicle sales.’
Even though safety is the most important driver for new vehicle purchases in Europe and the United States, the question of whether pre or post-crash assistance is necessary however, remains an issue. While consumers would like the implementation to come as a standard, adding to the overall perception of vehicle safety, the willingness to pay for it remains low.
As OEMs are most likely to bear the costs for implementing eCall in vehicles, they will focus on specific benefits and features that can secure some profit. Assessing possible opportunities within telematics ecosystems, service opportunities, and service value will be one of the ways forward. Cooperation among stakeholders could be another key to success for the integration of eCall.
While extremely popular in the US, the concept of subscription is not a favourable in Europe. Most OEMs with branded telematics services seek to profit by comparing subscription revenues to long-term customer retention opportunities as a result of the free trial period. European OEMs are not enthusiastic about the success of this model.
‘It is essential however, that European OEMs modify their perspectives about eCall, as it will soon be a standard feature of vehicles,’ warned Niranjan. ‘Making eCall available as a key feature of a larger telematics service for instance, that focuses on Customer Relationship Management (CRM) services and prognostics (such as GM’s OnStar) is a possible solution for OEMs to adopt eCall. BMW is already offering free assistance and telematics services (diagnostics) for ten years with every vehicle purchased in the United States.’