Local partner networks determine connected car success in China, study says
The connected car is one of the hottest topics in automotive markets – and in the wireless telecommunications area as well. Oliver Wyman estimates that by 2018, about 282 million cars around the globe will use some kind of networking services. In the same period, the number of new networked cars sold will climb to 68 million units which makes China the second largest market behind the USA with 82 million units. At the same time, market saturation in China remains relatively low at 58% of new vehicles which leaves significant room to grow. For comparison: The Japanese market for automotive networking will be almost saturated at 89% in 2018, the U.S. with 87% and Europe with 78% will be close to that level.
Vehicle telematics is a relatively new topic in China, writes Oliver Wyman expert Matthias Bentenrieder. At the present time, applications such as navigation and localization dominate the market. But more sophisticated topics such as teleservices, fleet management and infotainment are increasingly in demand.
The conditions to offer such services and infrastructure are good in China, the study finds. For example, the Chinese government is committed to promote the Internet of things, which includes measures to fund R&D aiming at the development of connected vehicles.
However, western and Asian vendors face significant challenges. First, they are themselves struggling to understand the complexity of connected vehicles technologies, applications and associated business models. Second, they have to deal with the specific market environment in China. The market entry in China requires much higher effort than in other geographies, because this market is extremely fragmented an in a complex way regulated, the experts write. Also there are strong regional differences.
For all these reasons, well-established and functioning international partnerships have no chance in China. Accordingly, many strategic partnerships around the connected car in which OEMs such as Audi, BMW, GM, Ford, and Toyota bundle their forces are invalid in China. Instead, such partnerships need to be rebuilt from scratch with local enterprises. While some western and Japanese OEMs including GM with Onstar, Toyota with G-Book and BMW with ConnectedDrive have established some presence in China, these activities won’t suffice to compete against local vendors and their allies in the telecommunications industry.
The study therefore suggests that western OEMs utilize their high reputation to increase their activites. "Establishing a sustainable local partner network must have the highest priority", says Oliver Wyman partner Juergen Reiner. "Only with such a partner network, western carmakers can develop solutions that suit the incredibly complex Chinese market of car networking."
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