Is it time for car-as-a-service? Adding connectivity changes every business model, as car makers are soon to discover.

A few years ago I was focused heavily on mobile broadband and spent some time looking at the relationship between the mobile broadband service and the laptop. One of the conclusions was that the addition of connectivity (in the form of mobile broadband) could fundamentally change the relationship between the user and their laptop. Whereas previously it had been a unit purchase, the addition of bundled connectivity turned it into a term relationship (i.e. paying monthly). That was usually with the mobile network operator, but we've seen a few examples where it's with the laptop manufacturer, e.g. Macheen with Dell. As a result some of things that were previously bought up-front came to be bought on subscription, such as security, software (e.g. MS Office) or storage. Even the price of the laptop itself could be spread over 2-3 years.

Today I'm working on the Machina Research report on M2M in the Automotive sector and I'm examining the ways in which connectivity changes the model for the automotive industry. The analogy is an interesting one particularly because we're very unlikely to see MNOs taking on the cost of the device as they did with laptops. Subsidised cars from Vodafone anyone? Unlikely. So the impact is all on the automotive industry, and a few other associated sectors. How do they exploit the opportunities allowed by connectivity to build ongoing relationships?

The answer is: in many many ways. As I discussed in a previous blogpost insurers and satnav providers will completely change their way of doing business. For TomTom and its ilk the addition of connectivity turns a business model based on shipping boxes into a business model based on servicing subscribers. This requires a radical rethink in the way that the company works.

More interestingly though is that it allows (or maybe forces) the manufacturers themselves shift from just shipping products to managing the whole 'automotive experience' if that doesn't sound too pretentious. It does? Yes, you're probably right. Anyway, what that includes could range from remote diagnostics and servicing scheduling all the way through to CaaS. Yes, "car-as-a-service". OK, maybe that's an overly buzzwordy expression for car leasing/sharing, but actually it could be much more sophisticated with the manufacturer (or third party) handling every aspect of keeping the vehicle running. No up-front payment for a car, or servicing or oil changes or petrol, just a per-mile fee. OK, maybe it's a bit impractical to have someone come and fill your petrol tank every time you need petrol, but once we've shifted to electric vehicles, bundling in the electricity price into a per-mile rate isn't impossible to envisage.

Adding connectivity changes business models. The automobile manufacturer who realises first will steal a march on the competition.