Automotive brands have become some of the most recognisable companies in the world, with their business models and reputations reliant on delivering high-quality vehicles.
For a long time, original equipment manufacturers (OEMs) could rely on being hardware-focused, tying their brand and revenue to the physical vehicle. From Mercedes-Benz’s revolutionary anti-lock braking system to BMW’s rear-wheel drive dynamics or Ferrari’s iconic engine sound from its naturally aspirated V12s, physical differentiators shaped the market.
Today, things are changing. While customers still expect high-quality vehicles that deliver on aesthetics and performance, they also seek a connected experience. Almost half of customers say they would no longer buy a car without Apple CarPlay or Android Automotive.
So, what does this mean for automakers? With a shift towards connectivity, the market of the future will be shaped not only by the physicality of the car but also by the software layer and in-vehicle experience.
This unlocks a host of new revenue opportunities for automotive brands, offering ways to generate income based on the technology within a vehicle. Here, we’ll explore what the future of revenue in automotive looks like and how automotive brands can lead the way.
The shift towards new revenue models
In a world of smartphones and digitally-enabled homes, buyers expect connectivity everywhere – and cars are no different. There’s a growing demand for personalised vehicle settings to provide a tailored experience and a preference for convenient solutions and seamless over-the-air updates.
Coupled with the rapid advancement of key technology, including the availability of 5G and improved cloud infrastructure, the industry is moving towards the software-defined vehicle. In an SDV, a car’s features can be added, updated or monetised long after the initial sale, extending value throughout the vehicle’s lifecycle.
The result? The global connected car market is expected to grow to $501.8 billion by 2033, opening the door for automakers to benefit from subscriptions, features-on-demand and monetisation of data collected in the car. But brands have not yet capitalised on this shift and revenue from connected services is still relatively low. In 2023, automakers made only $6 billion from this source.
So, which opportunities should they consider?
Emerging revenue streams from data monetisation
In this new world of connected automotive, OEMs can monetise data both directly (through sale or sharing of data with insurers, advertisers or other parties), or indirectly (by enhancing services or improving design to increase retention and boost sales).
Across the two methods, automakers can benefit from several revenue stream opportunities:
- Connected services
These services include navigation, infotainment, remote diagnostics and vehicle health checks. OEMs can now offer these services from within the vehicle via subscription or one-off payment models. As the market stands, this revenue stream presents a low-hanging fruit, yet currently missed opportunity – most drivers are not subscribed to their OEM’s connected services, with 64% not even being aware of them.
- Usage-based services
Based on how much or how often a service is used, these services include insurance models that leverage telematics to alter the user’s insurance premium depending on driving behaviour.
- In-vehicle commerce
With payments built into the in-vehicle screens, drivers and passengers can make purchases through the car’s interface. OEMs can earn transaction fees or partner revenue generated during payment.
- Advertising and partnerships
Personalised, data-driven ads and third-party service integrations offer brands new ways to generate revenue and enhance the driver experience.
- Software features and OTA upgrades
While the standard user interface and connected experience may be enough for some drivers, automotive brands can offer the chance to upgrade features for enhanced performance. This offers the chance to generate continuous post-sale revenue, without the driver needing to visit a dealership.
Time to accelerate monetisation
There’s a clear shift towards the software-defined vehicle, with connected services no longer a future trend but a customer expectation. With the technology and data available, automakers who fail to take advantage of these new revenue streams risk falling behind in a changing market.
However, those who invest now in the right infrastructure, partnerships and strategies will not only unlock new revenue streams but also establish a competitive edge in this new era of automotive.
To learn more about innovation in automotive, visit our industry page.