Business Innovation Observatory

Internet of Things

Connected cars

Case study 43

Internal Market,
Industry,
Entrepreneurship
and SMEs
The views expressed in this report, as well as the information included in it, do not necessarily reflect the opinion or position of
the European Commission and in no way commit the institution.

Internet of Things
Connected cars

Business Innovation Observatory

Contract No 190/PP/ENT/CIP/12/C/N03C01

Authors: Mark Lengton, Diederik Verzijl & Kristina Dervojeda, PwC Netherlands, and Laurent Probst &
Laurent Frideres, PwC Luxembourg.

Coordination: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs,

Directorate J “- Industrial Property, Innovation & Standards”, Unit J.3 “Innovation Policy for Growth”.

European Union, February 2015.

Table of Contents
1. Executive summary 2

2. Connected Cars 3

2.1. Presentation of the companies examined in the case study 5

3. Socio-Economic Relevance 6

3.1. The market potential of the trend 6

3.2. The social potential of the trend 8

3.3. A common understanding of the connected cars value chain still needs to be developed 9

4. Drivers and obstacles 9

4.1. Megatrends are driving growth for connected cars 9

4.2. Realigning short term milestones with a clear long term vision increases the chance of success 10

4.3. Continuous innovation is needed to stay in the ‘driving seat’ when the full potential of the trend unfolds 11

4.4. Cooperation between different types of actors from different industries drives success 11

4.5. Regulation and legislation is both a driver and an obstacle for success 11

4.6. Privacy and data security are a key concern among customers which dampens market adoption 12

4.7. Embedded (wireless) communication technology is a key driver, but its absence limits the market for connected cars12

4.8. Market adoption of more advanced connected car applications requires large-scale investments in infrastructure 13

5. Policy recommendations 13

5.1. Legislation and regulation require further attention from policymakers 13

5.2. Pilot demonstrations can boost market uptake of the trend 14

5.3. Investments in infrastructure are needed to bring v2i applications to the market and enable autonomous driving 14

5.4. Privacy concerns of end-users require attention from both industry and policymakers 14
6. Appendix 15

6.1. Interviews 15

6.2. Websites 15

6.3. References 15
Internet of Things

1. Executive summary
In the coming decade, society will experience a radical The intelligent systems can also help increase fuel economy,
change in the way mobility is approached. With fast mobile e.g. through avoiding traffic jams.
internet access becoming widely available and countless
wireless connectivity solutions being adopted on the market, The development and uptake of connected cars solutions in
new opportunities emerge for products and services that the coming years is driven by an increase in embedded
enable the connected car to come to full fruition. connectivity in cars. In addition, current megatrends on
connected devices, energy efficiency, security, and health
The connected car is able to digitally connect and interact further drive growth in the segment. Besides this, the uptake
with its surroundings. This not only includes connectivity with can benefit from the realignment of short term milestones
other cars (vehicle-to-vehicle), but also connectivity with with a clear long term vision, from continuous innovation
infrastructure (vehicle-to-infrastructure) and with other efforts, from the cooperation between different types of
devices (vehicle-to-devices). As such, this ability gives way actors coming from different industries, and from large-
to a new suite of applications such as advanced safety scale investments in infrastructure.
features, personalised driving and entertainment
experiences, and even autonomous driving. Key barriers faced on the market relate to the absence of or
lack of clarity on current regulation and legislation.
The new opportunities that the connected car provides Furthermore, there are privacy and data security concerns
translate well into its business potential. Although global among end-users, who fear that the collected data will give
market size is already estimated to be over EUR 31 billion in too much insight into their behaviour or that data may be
2015, it is predicted to nearly quadruple in size by 2020 to compromised and cause damage, for instance through
an impressive EUR 115.26 billion in revenue worldwide. identity theft or insurance fraud.
Growth will be primarily driven in the market segments of
safety features, autonomous driving, and entertainment. Although Europe is well positioned to establish itself as a
leader in this trend, policymakers need to bring clarity to the
Key stakeholders of the trend primarily include businesses in current legislative and regulatory framework. While recent
the telecom, automotive and the ICT industries. With the efforts have allowed a degree of autonomous driving, it still
connected car becoming the standard for new cars in the requires drivers to take full control over the vehicle if
next 10 years, the automotive industry will drive the demand necessary. This effectively prevents initiatives, like the
for chips in the near future.1 Google car from coming to the European market.

From a societal perspective, connected cars can help In addition, market uptake can be boosted through pilot
increase safety, productivity, and energy efficiency. demonstrators and investments in public infrastructure. Pilot
Advanced safety features help drivers anticipate dangers demonstrators can help show end-users the benefits of
and can even prevent collisions. Moreover, with access to connected car solutions. Furthermore, they may bring focus
information on current traffic conditions on the road, to efforts from stakeholders to invest in the required
connected cars can dynamically optimise routes, limiting infrastructure to deploy the technology. Similarly,
traffic congestions and freeing up time to do other things. investments in public infrastructure can drive growth in the
vehicle-to-infrastructure applications.

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Internet of Things

2. Connected Cars
The buzzword in the automotive industry is unmistakably the Regardless of the type of interaction, the key word of this
“connected car”. Also leading companies from other sectors, multi-billion business trend is connectivity3. Albeit simple in
especially the telecom and semiconductor industries, are concept, connectivity gives way to applications both for
jumping on the band-wagon that is hailed to be one of the consumers and businesses previously unheard of. The
biggest drivers of growth for their business for the coming connected car segment is composed of seven distinct
five years. product categories4,5:

To the typical consumer, the connected car appears to be  Mobility management. Applications that focus on
much like the futuristic car - K.I.T.T. - from the 1980s improving traffic flow and that allow drivers to reach
television hit series Knight Rider. This fictional car operated a destination quickly, safely and in a cost-efficient
autonomously thanks to Artificial Intelligence and was manner. Examples include advanced navigation
loaded with computer electronics and sensors that enabled systems, traffic coordination systems, traffic
the car to interact with its surroundings. assistance and parking lot or garage information
systems.
Nearly 25 years later, the reality is still not quite like K.I.T.T.
Nevertheless, the market is rapidly moving towards  Vehicle management. Applications that aid the
electronically highly sophisticated and even autonomously driver in reducing operating costs and improving ease
operating cars. The connected car in its current state is best of use. Examples include dynamic vehicle service
described as a platform that enables the exchange of reminders, vehicle condition information, remote
information between the car and its surroundings, either operation and transfer of usage data for instance for
through local wireless networks or via the internet. The analysis by insurance companies, tax authorities, car
interactions made possible by this connectivity can roughly rental agencies, or by owners interested in analysing
be divided in three categories:2 this data on their home computer or portable device.

 Vehicle-to-vehicle (v2v) interactions, i.e. cars  Entertainment. Applications that are related to
interacting with other cars; entertainment of passengers and drivers. Examples
include embedded WLAN hot spots, music/video
 Vehicle-to-infrastructure (v2i) or infrastructure-to-
streaming, social media integration and a
vehicle (i2v) interactions, i.e. cars interacting with
smartphone interface.
(roadside) infrastructure and vice versa;
 Safety. Applications that protect driver, passenger
 Vehicle-to-device (v2x) interactions, i.e. wireless
and road user safety. These applications can be split
communication to any device.
up in hard safety applications that aim to avoid
imminent crashes and/or minimise damage when
Figure 1: Networked vehicles will interact with their
they cannot be avoided, and soft safety applications,
environment, which means communication, data
transmission, and shared computational efforts which respond to safety concerns that do not require
between vehicles, between vehicles and immediate reaction. Examples of hard safety
infrastructure, and between vehicles and any other applications include blind spot warning systems and
device. forward collision warning systems. Examples of soft
safety systems include warning systems for icy roads
up ahead, traffic jams, or adverse weather
conditions.

 Autonomous driving. Functionality involving

partially or fully automatic driving. Examples of
applications include operational assistance or
autopilot in heavy traffic, keep-your-lane systems,
automated parking systems and advanced (i.e.
adaptive) cruise control systems.

Source: Kapsch (2012)

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Internet of Things

 Well-being. Applications that impact a driver’s Applications which enable connectivity in vehicles that may
comfort, ability and fitness to drive. Examples include be considered less revolutionary by today’s standards are in
fatigue detection systems and alert calls for medical fact still part of the trend, with integrated Bluetooth car kits
assistance. being a prime example.

 Home integration. An emerging application area In addition, more revolutionary connected cars services, such
that integrates vehicle systems with those at home. as keyless car sharing applications and cloud connected fleet
This allows drivers or passengers to enable management, are already commercially available. This case
functionality within their house, such as changing the study therefore focuses on the current applications in the
thermostat or turning off the burglar alarm when the connected care market whilst providing an outlook for what
car gets close to home. is to come in the near future.

Although the full potential of the business trend is expected The company cases included in this case study have been
to materialise over the next five years, it should be noted selected to reflect various market segments of the
that the technology underlying the connected cars concept is connected car trend. The European companies have all
not all new. Connected car services first emerged in the mid- developed solutions that are already on the market, but are
1990s when a number of leading automotive industry also well positioned to benefit from the market potential we
players began to employ telematics in their vehicles. 6 foresee towards 2020. The companies are shortly introduced
in Table 1 below.

Table 1: Overview of the company cases referred to in this case study

Company Location Business innovation Signals of success

NXP NL NXP’s solution brings car-to-x - NXP is driving the technology required for
Semiconductors communications, telematics, in- realising the full potential of this business
vehicle networking and wireless trend.
technologies into the car. The - With EUR 4.16 billion in revenue in 2013, 55+
solutions NXP offers work towards years of experience in the industry, 8,900
improved vehicle access, Near Field patents and 3,300 employees working on R&D,
Communication (NFC), and multi- the company is a leading stakeholder in the
standard digital broadcast reception. semiconductor industry.
NXP is also working to deliver - Almost all new cars in the world contain NXP
advanced technologies such as car chips.
radars. - #1 position in Car Infotainment, In Vehicle
Networks, and Car Access & Immobilisation.
Keyzee BE Keyzee developed a car sharing - #1 Fleet Innovation Award 2013 for Fleet
solution that is fully integrated on a Suppliers.
smartphone. This virtual key solution - Mobility Innovation Award 2014.
from which the company derived its
name provides employees with
instant access to the keys to every
car in a company's fleet.
Veniam PT Veniam developed networking - Veniam has built and deployed the largest
technologies which can turn vehicles network of connected vehicles in the world,
into mobile hotspots for Internet with more than 600 connected vehicles and
access, which can bring car data to 60,000 unique monthly users.
the cloud, and which can form a - First place at the 3rd Edition of Building Global
vehicle mesh network that can be Innovators.
used for business, leisure and safety
applications, as well as Machine-to-
machine data delivery.
Cloud Your Car PL Cloud Your Car developed a fleet - This Polish start-up company has already
management system that is targeted offices in San Francisco, Cork and Wroclaw.
at small businesses. The application - 1st prize on the Bitspiration, Krakow (2013).
can collect data from vehicles, - Secured seed funding worth 300 million USD.
including start-up, shutdown, - Hailed as one of the 10 Europe-born
location, speed and fuel economy. automotive technology start-ups to watch by
The data can be used to e.g. tech.eu.
minimise operating expenses.

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Innovative solution 2 – Keyzee’s integrated smartphone

2.1. Presentation of the companies solution eliminates the need for a physical car key.
examined in the case study
Keyzee developed a car sharing solution that is fully
This section describes four companies that have developed integrated in a smartphone. This virtual key solution, from
connected cars solutions in response to a clear market need. which the company derived its name, provide employees
For each company, the innovation is described as well as the with instant access to the keys to every car in a company's
problem it is meant to solve. fleet.

Keyzee estimated that approximately 90% of the time a car

Problem 1 − To function and deliver their potential benefits, is sitting idle. Even on daily commute, this can hardly be
connected cars require extensive communication, telematics, considered as resource efficient, especially for companies
and wireless technologies. that need to manage large fleets of vehicles. Traditional car
sharing is not efficient enough, as car keys would need to
Innovative solution 1 – NXP’s proprietary technology be physically (re-)distributed in order for another user to
provides solutions that can readily be adopted by the take that car. As a result, many more cars are taking up
automotive industry to integrate communication technology space every day than from a macro standpoint would be
in cars. necessary.

NXP brings car-to-x communications, telematics, and in- The solution commercialised by Keyzee allows users to book
vehicle networking into the car, as well as secure wireless and unlock cars through their smartphone.. Moreover, the
technologies for vehicle access, Near Field Communication system provides a real-time insight in the cars that are in
and multi-standard digital broadcast reception. NXP is also use. This allows fleet agents to further optimise their fleet,
driving innovation in advanced technologies such as car based on actual use of the cars.
radar. Keyzee is the first integrated car-sharing solution for
smartphones that can open, close and start-up cars with
Furthermore, NXP is at the forefront of developing integrated
your smartphone instead of keys.
hardware and software solutions that tackle cyber-security
concerns in the connected car market. Owing to their stake in
Cohda Wireless, a leading party in the field of security
software, the two companies developed the integrated
security solution RoadLINKTM. This solution combines
hardware security components developed by NXP with
advanced firmware developed by Cohda, resulting in a
module that protects end-users against illegal hacking and
cyber-attacks.
Source: Keyzee
NXP connects the car by providing integrated hardware
solutions that enable connectivity and security in and Problem 3 – Connected cars require secure, stable, and
around the car. widespread mobile network and internet connectivity, as they
rely for a great deal on cloud computing. Mobile internet is
not always as available as required for connected cars to
function properly.

Innovative solution 3 – Based on proprietary technology,

Veriam’s products can transform cars into wireless hotspots.

Veniam developed networking technologies that can turn

vehicles into mobile hotspots for Internet access, bring car
data to the cloud and form a vehicle mesh network that can
Source: NXP be used for business, leisure and safety applications, as well
as Machine-to-Machine data delivery.
Problem 2 – Sharing a fleet of company cars implies Veniam’s proprietary solution has various advantages over
sophisticated management, distribution, and logistics of car traditional solutions. With their technology, cars can connect
keys and registrations. This can be time consuming and it is to both each other and to communications networks,
often not very efficient. whether they are cellular or WIFI networks. The result is that
their transmission radius is up to ten times higher than with
traditional WIFI connectivity. As cars are not solely
connected through cellular networks, mobile data traffic is

Connected cars 5
Internet of Things

also greatly reduced. This relieves the network from Innovative solution 4 – Cloud Your Car has developed an
capacity constraints and has the added benefit for integrated hardware and software solution that provides
consumers that less mobile data has to be paid for. fleet agents real-time information from cars in use.

Thanks to Veniam’s connectivity solutions, more efficient Cloud Your Car is a multi-purpose platform developed to
data connections are made possible between cars and their provide real-time insight in a companies’ fleet. It consists of
environment. This enables a more cost and resource a piece of hardware that enables the features in the car
effective way of sharing data, providing opportunities for (called “Car Beacon”) and an easy-to-use cloud-based
e.g. more advanced road-safety and entertainment features application. Among other things, the solution can tell you
in cars. how fast a car is traveling, which routes drivers are taking,
and whether the engine is turned on or off. The cloud-based
Veniam developed products that enable vehicular
software transforms all of the collected data for various
networking in a more cost-effective way with a transmission
reporting uses, which include driver profiles, live maps, and
radius that is up to ten times higher than traditional WIFI
overall performance overview of the fleet as a whole.
connectivity.
Apart from the innovative features, Cloud Your Car is also
easily integrated in current fleets and its solutions do not
necessarily require embedded connectivity in cars.
Moreover, it is a rather cost-efficient solution, costing only
460 PLN (approx. 106 EUR), including a 12-month
subscription plan.

Cloud Your Car offers an advanced fleet management

solution that can be easily implemented with the help of a
device connected through the cigarette lighter. The system
sends data real-time to the cloud.

Source: http://postscapes.com/internet-of-things-
award/2014/connected-transportation

Problem 4 – Further optimisation in fleet management

requires fleet agents to have insight in and control over
more information from car users in their fleet, e.g. to be able
to increase fuel efficiency.
Source: Cloud Your Car

3. Socio-Economic Relevance
The market for connected cars is booming and it is expected This staggering increase is mostly driven by growth in the
to grow explosively between now and 2020, underlying the application areas of safety and autonomous driving.
staggering growth rates in its various segments. The market Particularly safety technologies are expected to remain the
potential of the trend is explored in more detail below. biggest market for connected car products as consumers
highly value safety features in their cars. Market solutions
3.1. The market potential of the trend will most likely include new safety packages from Original
Equipment Manufacturers (OEMs) that deploy early warning
With wireless technology and high speed internet access systems for dangers ahead or even autonomous braking
rapidly gaining ground, the connected car trend is on the features through the use of sensor technology. This market
verge of a breakthrough. Indeed, the global market size for segment is expected to quadruple from EUR 12.18 billion in
connected car components is estimated to equal EUR 31.88 2015 to EUR 47.34 billion in 2020. Demand is expected to
billion in 2015 and it is expected to roughly quadruple in size be the strongest in the United States, with China and
to EUR 115.26 billion by 2020.7 Western Europe to follow behind.8

Connected cars 6
Internet of Things

Figure 2: Total market size and potential of the vehicle management systems and mobility management
connected car trend (2015-2020), in EUR billions. systems are projected to see sales climb from respectively
EUR 3.01 billion and EUR 2.12 billion in 2015 to respectively
EUR 5.22 billion and EUR 6.67 billion in 2020.10

The relatively new application area of home integration is

expected to remain the smallest connected car market
segment, with global sales increasing from EUR 20 million in
2015 to EUR 60 million in 2020.11

The connectivity technology that is expected to be embedded

in new cars is also expected to significantly increase.
Whereas in 2014 only 5% of all new cars sold worldwide
contained embedded connectivity, and 15% of these
contained mobile-device tethered connectivity, in 2019
already 57% and 60% of new cars sold are expected to
contain embedded and mobile-device tethered connectivity
respectively. By 2024, 89% of new cars sold are projected to
include both embedded and mobile device tethered
Source: Strategy& (2014). Racing ahead – The Connected C@r 2014
study. connectivity, which translates into 48% of passenger
vehicles in the world that will have embedded connectivity
In the autonomous-driving market segment, rapid by 2024.12 Although particularly the United States have seen
technological advances will drive growth exponentially in the growth in embedded connectivity, Europe is expected to
coming five years. New applications, paired with a strong become the largest market for it, with 11.5 million vehicles
consumer demand will push a five-fold surge in global sales shipped annually by 2018.13 This will clearly result in a
from EUR 7.49 billion in 2015 to EUR 35.66 billion in 2020.9 significantly larger potential user base of connected car
applications.
Other segments of the connected car market are also
projected to experience significant growth. Entertainment Finally, developments in the connected car market will drive
systems are expected to remain popular in the coming five growth in the chip industry. Indeed, demand forecasts show
years, with sales in the connected car market more than that the automotive industry will be the most important
doubling from EUR 4.93 billion in 2015 to EUR 13.18 billion driver of demand for chips, with an average annual growth
in 2020. Furthermore, in-car well-being applications are of 10.4% between 2013 and 2018. The connected car trend
projected to see sales surge threefold from EUR 2.13 billion evidently also impacts other segments of the economy.14
to EUR 7.13 billion, driven by an ageing society. Moreover,

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Internet of Things

Figure 3: Market size and potential of the connected car trend (2015-2020), per market segment.

Source: Strategy& (2014). Racing ahead – The Connected C@r 2014 study

3.2. The social potential of the trend The trend also supports job creation. Although estimates for
Europe are not yet available, market research shows that in
Connecting vehicles to the Internet gives rise to many new the United States the connected vehicle industry is expected
possibilities and applications, both from a business to create a total of 400,000 new jobs. 15 With many
perspective and from a consumer perspective as well as initiatives in Europe that relate to connected cars, the trend
from a public-safety perspective. For one, connecting cars shows great potential for Europe in terms of job creation in
can make driving safer and reduce traffic congestion, as cars the continent.
can recognise and anticipate risk and dynamically calculate
optimal routes. Connected cars can also drive more energy The connected car trend will also provide work for the high-
efficiency by incorporating weather predictions, information skilled labour force, even in the short-term. In the current
on traffic congestions, and specific infrastructural locations market, indeed, many technical challenges still need to be
in routing and driving behaviour. In addition, connected cars addressed, and this requires in particular high-skilled
can contribute significantly to road safety by incorporating engineers and software developers.
safety features, such as the European eCall (emergency call)
As there are many different industries and actors involved in
system that automatically alerts the nearest emergency
the trend, it will also bring about substantial indirect effects.
centre in case of an accident.
The European automotive industry, which provides 13 million
Increased road safety and reduced traffic congestion can jobs in Europe, is considered to be one of the key
have strong macro-economic benefits that are related to beneficiaries of the trend. New connected cars standards
public health expenditure and productivity. With a reduced introduced by the European Commission help to position the
number of road accidents, also the related public health European car industry advantageously for the development
costs will fall. Moreover, with less time being spent in traffic of the next generation of cars.16
jams and with car connectivity allowing better solutions for
Other sectors which are expected to benefit from the market
working on-the-go, productivity within society is expected to
uptake of the trend include the telecom industry, which will
increase.
take advantage of the explosive growth in mobile data that
is expected with the trend.

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Internet of Things

3.3. A common understanding of the On top of the industry partners involved, it needs to be
understood that actors from the academic and public sector
connected cars value chain still are also largely concerned. Moreover, service industries, such
needs to be developed as consultancy or marketing fields, are increasingly more
involved in the industry. In addition, effects are likely to
The connected car value chain is part of the value chain of trickle down to the construction industry, as infrastructure
the Internet of Things17, considered as extremely complex in will need to be updated over time to allow for v2i-
the literature18. It is also linked with that of the automotive interactions.
sector, which in turn is also of rather complex nature.
Moreover, the ecosystem of connected cars is growing Also taking the perspective of customers (i.e. end-users), the
rapidly, making it more difficult to fully establish the value value chain is not easily described. Being it spread out over
chain.19 It is thus hardly surprising that the connected car so many actors and industries, end-users can range from
value chain is still not widely understood, which has resulted automotive manufacturers to semiconductor companies, app
in a call for action in the recent literature to develop a designers and even consumers.
shared understanding of it.20
The complexity of the value chain is also made evident by
What can be certainly said about the value chain for the companies in this case study. NXP Semiconductors, for
connected cars, however, is that a number of key actors and instance, supplies the automotive industry with chips for
industries are interlinked. These predominantly consist of embedded communication technology. The automotive
companies in the automotive, telecom and ICT industries. industry itself sells these cars, through dealerships, to
The automotive sector is for obvious reasons involved in consumers. Together with the chips supplied by NXP,
integrating solutions for connected cars in their new vehicles. automotive companies also provide a platform for app-
The telecom providers enable high speed and high designers to create applications for connected cars (e.g.
bandwidth mobile connectivity, inside and outside the car. Keyzee, Cloud Your Car). Using these applications is made
ICT companies can be further disaggregated to companies possible with the help of broadband mobile data services,
that provide software (i.e. “apps”) that enable connected car which are provided by telecom operators. However, the data
features, and companies that develop and manufacture the services provided by telecom companies allow the trend to
hardware (e.g. chips). take off in the first place, which showcases the numerous
interlinkages between the various industry partners in the
value chain

4. Drivers and obstacles

The development and uptake of connected cars solutions megatrends that are particularly significant in driving growth
may benefit from current megatrends, from realignment of for connected cars:
short term milestones with a clear long term vision, from
continuous innovation efforts aimed at staying in the ‘driving  Energy efficiency. One of the key societal
seat’ when the full potential of the trend unfolds, from benefits of the connected car is its potential to
cooperation between different types of actors from different bring fuel economy to a new, higher level.
industries, from embedded (wireless) communication Applications already on the market, such as Cloud
technology, and from large-scale investments in Your Car’s advanced Fleet Management Solution,
infrastructure. Regulation and legislation are both a driver give more insight into the fuel consumption of
and an obstacle for success. Embedded (wireless) drivers. This allows the user to better manage the
communication technology is a key driver, but its absence fuel economy of the fleet by e.g. setting targets or
limits the market for connected cars. These drivers and providing bonuses for a high level of fuel economy.
obstacles are discussed in more detail below. Moreover, both assisted and autonomous driving
can further drive down fuel consumption through
(nearly) perfect driving. In addition to this,
4.1. Megatrends are driving growth for
advanced traffic control systems made possible
connected cars with connected car technology will reduce traffic
jams and subsequently fuel
The market for connected cars is driven by megatrends that
consumption.Connected devices. A surging
apply not only to this specific market segment, but to the
growth in the number of internet and smartphone
economy as a whole. NXP identified the following four
users has already provided a customer base, which

Connected cars 9
Internet of Things

will continue to increase in size in the coming  Younger generation. Considered as one of the
years. Likewise, not only is the adoption of wireless key external growth drivers, the younger
communication technology a growth driver, so is generation of drivers puts more emphasis on social
the adoption of related devices and solutions, such media, connectivity, productivity, practicality and
as smartphones, speech recognition software, and fun while being in a car. Connected cars can
third-party apps. The increasing integration provide this integration seamlessly.
between devices and between applications will fuel
growth in the connected cars market by allowing
companies to take advantage of new application
4.2. Realigning short term milestones
possibilities and of a much larger end-user base. with a clear long term vision
increases the chance of success
 Security. Although a lack of security greatly
impedes market uptake, the bigger trend of a Although the connected car trend already creates
demand for security features provides growth opportunities for companies in various industries, its market
potential for connected cars solutions. Advanced potential shows that many more opportunities are yet to
security features, such as real-time tracking of a come. In order for companies to capitalise on the trend, it is
car in case it is stolen, will become increasingly of high importance that they have a clear long-term vision
more in demand over the next few years. while setting and (re-)adjusting short-term goals along the
way.
 Health. Strongly related to an aspect of safety,
the megatrend for health drives a demand for Many of the companies that are currently successful in this
safety features all across the board. Connected trend can be considered early-movers. In a market where
cars integrate successfully into this trend as they technology has not fully matured yet and where the uptake
are able to provide drivers with unprecedented is still relatively small compared to its potential, business
safety features on the road. On top of that, models often need to be re-invented along the way. Hence, it
connected car applications in the near future may takes a clear long-term vision with realistic short term goals
be able to provide personalised health features, aligned with it to be successful as the market is still rapidly
such as the identification of personal health changing.
conditions while on the road and anti-fatigue
systems. However, aligning the short-term goals with their long-term
vision sometimes requires companies to rethink their
Apart from the four megatrends identified by NXP, other business strategy.
“We had a big vision and long
overarching trends drive growth for the connected car
A good example in our case term plans, but we planned it
market. These trends include:21
study sample can be found in all step by step. We verify, go
Cloud Your Car. The founders of over every element again and
 Pervasive access. Customers are more and more
the company thoroughly again, write more hypotheses.”
willing to trade personal information for free
analysed the market for Fleet – Cloud Your Car
content, and they expect a seamless on-the-go
experience ‒ both of which the connected car can Management Solutions,
provide. carefully considering what their potential client base would
want out of a new Fleet Management Solution. It became
 Safety. Connected car technology allows for much apparent that a new solution needed to be developed, which
more sophisticated safety features, such as early would take months.
warning systems, blind spot detection and
To ensure that they would stay on the right track, they
automated or assisted braking. The integration of
carefully planned every step along the way. A strong vision
such advanced safety features in new vehicles is
for the long-term was paired with milestones on the short-
predicted to rise from 10.2% in 2012 to 49% in
term, which turned out to be key to achieving their success.
2017.
While executing their business plan, the founders would
 Personalised experience. In today’s society, continuously go over every element again and again, and re-
adjust if necessary. This has allowed the company to be
increasing emphasis is put on personalisation,
flexible enough in a rapidly developing market while staying
customisation and user-friendliness. The connected
on-track towards their long-term goal.
car can adapt to the driver by bringing personalised
dashboards, information, media and, in the future,
advertorials.

Connected cars 10
 Internet of Things

4.3. Continuous innovation is needed to automotive industry in turn partners with software
developers to create content for their integrated car
stay in the ‘driving seat’ when the solutions. Veniam also showcases the tendency to team-up
full potential of the trend unfolds with other organisations, in particular with eleven partners
that range from leading universities and institutions to public
Technology is driving the trend of connected cars. In the agencies. Moreover, Veniam successfully tested their
coming years, the market adoption of vastly improved new technology on more than 450 taxis from the fleet of
technology will help unlock the full potential of the business RadiTaxis in the city of Porto.22
trend. With this, new or more sophisticated solutions will be
made possible, meaning that companies will need to keep Keyzee also provides an example of how cooperation
innovating along the way to stay on top of their market. between different actors can result in an innovative solution.
As they were testing out innovative ways of car sharing, they
If companies fail to improve on their products over the next recognised that they needed external expertise to further
five years, it is likely that (new) competitors will gain solve some of the technical constraints of their solution.
significant market share with products that are based on Specifically, an early prototype required cars to be always
newer technology. This newer technology will allow for new connected to a network to receive bookings via GPRS.
features to be incorporated, making current solutions in However, in cities most cars are parked underground, where
many cases outdated or even obsolete. no GPRS coverage is available. In cooperation with another
company, Productize, they were able to overcome this
Companies that keep innovating are well positioned to reap problem by re-designing and further refining their technical
the benefits of their efforts in the near future. With solution. This ultimately resulted in the Keyzee box that is
developments in e.g. v2x-communications, integrated available on the market.23
solutions between household devices and cars will bring new
opportunities across the board. By rapidly taking advantage
of these new developments, companies like Keyzee and 4.5. Regulation and legislation is both
Cloud Your Car have demonstrated this already, while others a driver and an obstacle for
such as NXP and Veniam show that by developing such success
solutions companies ensure that they stay ahead of their
competitors Regulation can be both a serious barrier and a driver for the
uptake of innovative technologies. This is no different for the
4.4. Cooperation between different connected car business trend..

types of actors from different On the one hand, regulation in Europe is helping to pave the
industries drives success way for more innovative solutions. For instance, Europe’s
eCall system, an integrated telecommunication solution
The complexity of the connected car value chain helping in case of serious accidents, will be mandatory for
demonstrates the notion that many different types of actors new cars from October 2015. In case a serious accident with
from different industries are involved in this business trend. a vehicle occurs, the system will automatically transmit an
Unsurprisingly, the cooperation between such different alert to the nearest emergency centre. Market research has
actors is a strong pre-requisite for companies to unlock the suggested that the eCall regulations will significantly drive
full potential of this trend. growth y in this sector between 2015 and 2020.24

With different market segments and niches involved, it is On the other hand, a lack of clear regulation and legislation
unlikely that a single party is able to drive and control the is without a doubt a barrier to growth, especially with respect
complete value chain. Just to name to liability and to the applicability of telecom laws to
“Connection to universities
a few examples, semiconductor providers of electronic communication devices. With the
and research groups is key
companies are needed to develop technology for assisted or autonomous driving developing
to success” – Veniam
and manufacture the necessary rapidly, uncertainty on liability is a growing concern.
technology for e.g. connectivity, automotive companies are
needed to develop and manufacture the vehicles, telecom If connected cars may ever cause a road accident, the key
operators are needed to provide the mobile network question is who should be held accountable. If it is a
infrastructure and software developers are needed to create software malfunction, it needs to be clear whether the app
content for the connected car. developer should be held accountable. The same applies to a
hardware component supplier in case of hardware failure, or
In order to successfully bring connected car applications to to the car manufacturer to which the hardware component
the market, a tendency to partner can be observed across was provided. Without clarity, insurance companies will not
the entire trend. NXP works closely together with both the know where they can rightfully claim the damages and
telecom industry and the automotive industry. The companies will not be able to assess their liability.

Connected cars 11
 Internet of Things

Even if liability can be established, current legislation can That is why companies on the market are working hard to try
still become troublesome. For instance, even if telecom and resolve the issues of cyber-security and privacy. In
companies were to be held liable for accidents caused by order to take on the challenge, NXP recently announced a
network interruptions, German law states that they can be follow-on investment in Cohda Wireless, a leading software
held liable for a maximum of EUR 12,500 of damages per specialist for automotive safety applications.30 In 2013 they
damaged party. Drivers or insurance companies may end up acquired a stake in the company – together with Cisco – to
with high bills to pay in case they are considered liable for jointly develop an integrated security solution, named
accidents where a connected car is involved.25 RoadLINKTM, which integrates NXP’s hardware security
modules with Cohda Wireless’s advanced firmware. The
Moreover, integrated communication solutions raise module protects consumers and industry against illegal
questions on whether the automotive and semiconductor hacking and cyber-attacks and can be integrated in cars.
companies delivering these solutions need to comply with
telecom laws.26 This could mean that e.g. car manufacturers With respect to the privacy concerns, Cloud Your Car
and OEMs will require licensing or general authorisation from deliberately opted for a visible solution in the car. The
telecom authorities. As especially these companies operate presence of the required dongle clearly signals to the user
in multiple countries, they could in theory be subject to all that some information is collected and adds to a sense of
sorts of telecom regulation. If this is indeed the case, then transparency about this. An extra benefit of the dongle is
current legislation may seriously impede growth in this that it does not tap into the car’s systems, minimising the
segment over time.27 safety risks of cybercrime on users.

4.6. Privacy and data security are a key 4.7. Embedded (wireless)
concern among customers which communication technology is a
dampens market adoption key driver, but its absence limits
With increasing connectivity and digitalisation comes another
the market for connected cars
key challenge: data security. The more unsafe connecting a
Market uptake in this trend is clearly driven by the
car is perceived to be, the fewer end-users will want to use
development and adoption of wireless communication
it, effectively preventing a strong market uptake.
technology. On the one hand we observe an increase in
embedded communication technology in cars, which allows
Connected cars are potentially very vulnerable to
companies on the market to develop new integrated
cybercrime. In fact, researchers have already shown that
solutions that communicate with a car. On the other hand,
malicious input can be delivered through compromised MP3s,
the substantial improvements in high speed mobile internet
infecting a whole network of cars in a near instant.28 This
access allow data to be shared in a much larger ecosystem.
can cause both financial damages and safety hazards to the
This gives way to numerous new applications and business
users of connected cars, e.g. by turning off vital
opportunities, ranging from advanced safety and early
functionalities of the car that jeopardise the safety of drivers
warning features up to real-time remote fleet management.
or by compromising credit card information stored by
connected car services. However, embedding wireless technology in cars is a rather
recent trend. While exponential growth is expected in the
Privacy is another challenge that needs to be tackled in the
number of new cars with embedded connectivity, it will take
near future to ensure a strong market uptake. With cars up till 2024 before approximately 48% of passenger
collecting data on almost every step vehicles globally on the road will feature it.31 The good news
“NXP’s follow-on investment
along the way, it is theoretically is that the end-user base will increase in size exponentially in
in Cohda Wireless represents
possible to have complete insight the coming decade, providing more and more business
another significant step in
into what a driver has been doing. potential. Nevertheless, growth is currently limited to the
our quest to make the secure
While some applications use this relatively small market penetration of embedded
connected car a reality.” –
feature of connected cars to provide connectivity in cars.
NXP
new services, such as Cloud Your
Car’s fleet management solution, it may backfire if Moreover, stakeholders of the trend need to find a way to
consumers feel that their privacy is in jeopardy. In fact, a both transmit and analyse the enormous amount of data
recent study shows that 51% of new-car buyers in Germany that will follow from connecting cars. Wireless connectivity
are reluctant to use car-related connected services because will surely improve in the near future, with more wireless
they want to protect their privacy.29 Therefore, in order to hotspots becoming available and mobile network operators
establish a large end-user market, solutions need to be expanding capacity and increasing bandwidth of their
developed that maintain privacy of end-users. networks. However, the vast amount of data that will
potentially be transmitted may be very costly given the
current rates for mobile data.

Connected cars 12
Internet of Things

In response to the challenge, Veniam developed a technology range from advanced safety and traffic control features up
that transforms cars in wireless hotspots. By connecting cars to localised weather warning systems, stop sign violation
through a chain of wireless hotspots, data may be shared at warning systems or electronic road-toll systems, such as Toll
higher speeds and lower costs. Collect in Germany and Liber-T in France.32

Solutions may also be developed that aggregate data points From a technology perspective, companies like NXP and
and transmit the required data from wireless hotspots to Veniam are developing cutting-edge solutions to enable
cloud connected services through local infrastructure, such connectivity in cars. NXP is at the forefront of the
as internet access points. This could both push down the development of all sorts of connectivity solutions, such as
costs of the data and increase the computing power through car-to-x communications, telematics, in-vehicle networking,
cloud computing. and Near Field Communication. With Veniam’s technology,
vehicles can be turned into WIFI hotspots, enabling further
4.8. Market adoption of more advanced connectivity.

connected car applications However, for interaction with infrastructure, both companies
requires large-scale investments are dependent on the ability of infrastructure to
communicate with the (integrated) solutions in the cars.
in infrastructure Moreover, other companies that could e.g. develop software
or content that is based on v2i solutions also require that the
While the market is advancing relatively well on v2v (vehicle-
infrastructure is able to provide them a platform for this. The
to-vehicle) and v2x (vehicle-to-device) solutions, v2i (vehicle-
automotive industry is even reported to be reluctant to add
to-infrastructure) solutions require significant upgrades to
such new features to cars as long as the necessary
infrastructure before companies can tap into their potential.
infrastructure is not being built by public authorities.33 The
Connectivity with infrastructure allows numerous new absence of investments in advanced infrastructure therefore
applications for the connected car market. These applications impedes further growth in this segment.

5. Policy recommendations
Although Europe is well positioned to take a leading role in was amended to read that a driver needs to be able to take
this trend, policymakers need to address concerns on current control of the car at all times, instead of operating it at all
legislation and regulation, and concerns related to privacy. In times.34
addition, market uptake can be boosted with the help of pilot
demonstrators and investments in public infrastructure. The Although representing a significant step forward, this also
policy recommendations are discussed in more detail in this implies that fully autonomous cars that do not contain a
section. steering wheel, such as the Google car currently under
development, are not allowed on the road in Europe. Paired
with the requirements for driver competence in case a
5.1. Legislation and regulation require vehicle needs to be controlled (i.e. drivers licences), this
further attention from potentially impairs the market uptake of connected cars.
policymakers Also, the absence of EU-wide rules for self-driving
functionality will complicate the introduction of semi-
One of the key barriers that companies are facing – and will autonomous (level 3) and fully autonomous (level 4) vehicles
be facing in the coming years – is the absence of or the lack in Europe.35
of clarity on legislation and regulation that applies to the
connected car market. One the one hand legislation needs to Despite these concerns, Europe is well positioned to establish
be implemented that legalises road use of autonomous itself as a leader in this trend. Various countries (e.g.
vehicles, whilst on the other hand clarity needs to be Sweden, The Netherlands, the UK, Germany, Spain) already
provided on which regulations apply to companies in the allow road tests and many are in the process of developing
connected car industry. legislation that will allow road use of (nearly) autonomous
vehicles. By quickly developing a harmonised European legal
Until recently, a significant hurdle that needed to be taken framework that addresses concerns on liability and self-
was amending the UN Convention on Road Traffic, which driving functionality, especially for semi-autonomous and
stipulated that a human driver must be in control of a fully autonomous vehicles, Europe can gain a competitive
vehicle at all times. In April 2014, however, the convention

Connected cars 13
Internet of Things

edge over other regions where such a framework is not yet A key challenge with respect to infrastructure is that these
in place (e.g. the US). investments are unlikely to come from industry. As the
majority of the public infrastructure is not under the
5.2. Pilot demonstrations can boost responsibility of industrial actors, public authorities need to
step up in order to encourage the connected car to reach its
market uptake of the trend full potential. It is essential for some of the more advanced
upcoming features that cars are able to communicate with
With the connected car, the market for vehicles will shift to a
the infrastructure. Public actors can accelerate the process
whole new paradigm. As discussed in this case study, the
by investing in connected infrastructure features, such as
connected car will show digital interaction with other
integrating red light violation warning systems at busy
vehicles, with infrastructure, and with devices in a manner
intersections and curve speed warning systems at dangerous
unlike anything consumers have seen before. This requires
roads.
the necessary functionality and infrastructure to be available
as well as awareness among end-users of the capabilities of The recently announced Investment Plan for Europe, a joint
connected cars. initiative from the European Commission and the European
Investment Bank, could enable some of these investments. A
Pilot demonstrations are an effective policy tool to address
Task Force has been set up to look into potential barriers and
these points. By setting up pilot locations that demonstrate
to screen potential projects that will be financed within the
the capabilities of connected cars, end-users can experience
EUR 21 billion initiative.38 Specific attention could be devoted
for themselves what advantages the new technology brings
to a number of projects that will bring the infrastructure for
to them. Pilot demonstrations can also stimulate different
connected cars to a new level.
stakeholders to dedicate the necessary investments in a
coordinated way, as the projects are typically of small scale Furthermore, through the Horizon2020 framework, financial
and have a clear focus. support may be provided for pilot demonstrations that
specifically focus on the development and deployment of v2i
There are already a number of good initiatives under way in
applications. This will both showcase the possibilities to end-
Europe that could be further explored. One example is the
users as well as set an example for other regions to dedicate
European Innovation Partnership on Smart Cities and
investments in infrastructure that enable v2i-communication.
Communities (EIP-SCC).36 The EIP-SCC is an open platform
that aims to improve urban life through more sustainable
integrated solutions, which includes better transport 5.4. Privacy concerns of end-users
solutions. Although the EIP-SCC is not a funding instrument, require attention from both
commitment could be sought among members to develop
pilot demonstrations on specific locations that e.g. integrate
industry and policymakers
infrastructure and vehicle communications in an innovative Maintaining privacy is of key importance for the market to
way. take off exponentially in the coming years. Although part of
the responsibility to come up with a solution lies with
In addition to the commitments established through the EIP-
industry, public authorities can play a role in addressing
SCC, Calls for Proposals within Horizon2020, the EU
privacy concerns.
Framework Programme for Research and Innovation 37 ,
should facilitate the further development and deployment of One way to address privacy concerns is to further explore a
connected car technology. With respect to pilot need for harmonised European regulatory action. By setting
demonstrations, Calls for Proposals could be drafted that clear regulation on minimum requirements for privacy
focus on connected car technology. provisions in connected cars (or connected devices as a
whole), the market would be forced to come up with
5.3. Investments in infrastructure are solutions that are to the benefit of the end-users. As a
needed to bring v2i applications to starting point it could be considered whether the current
ePrivacy Directive (Directive 2002/58/EC) is sufficient for
the market and enable ensuring the privacy of end-users of connected cars.
autonomous driving
Nevertheless, even if current regulation is considered
In order to take advantage of the trend and position Europe sufficient, the perception of end-users would still need to be
as a leader in the market, investments in infrastructure are addressed. Policy makers at all levels should seek
required. These investments are particularly needed to allow discussions with industry to exchange views on how to best
for vehicle-to-infrastructure (v2i) communication, which in address the privacy concerns of end users, and organise
turn allows for the deployment of radical new features such initiatives to take away as much of the public concern as
as cars responding to road signs, traffic lights and car parks. possible, e.g. through campaigns, workshops or public
demonstrations.

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Internet of Things

6. Appendix
6.1. Interviews
Company Interviewee Position

NXP Semiconductors Mark Hamersma General Manager and SVP Emerging Businesses
Keyzee Thibaut Cardinael General Manager
Veniam João Barros Founder
Cloud Your Car Patrick Szymczak CEO

6.2. Websites
NXP Semiconductors www.nxp.com
Keyzee www.keyzee.eu
Veniam www.veniam.com
Cloud Your Car www.cloudyourcar.com

6.3. References
1
Hammerschmidt, C. (2014). Automotive Industry Drives Chip Demand. EE Times Europe, 20 November 2014.
2
Delgrossi, L. (2013). The Future of the Automobile. Presentation for module ME302, Stanford University. Available at:
http://web.stanford.edu/class/me302/PreviousTerms/2013-04-01%20VSC%20Lecture%2001.pdf
3
KPMG (2011). Connected Cars: Cruising on the information highway. AutomotiveNow, Issue 2.
4
Strategy& (2014). In the fast lane: The bright future of connected cars.
5
Delgrossi, L. (2013). The Future of the Automobile. Presentation for module ME302, Stanford University. Available at:
http://web.stanford.edu/class/me302/PreviousTerms/2013-04-01%20VSC%20Lecture%2001.pdf
6
GSMA (2012). Connected Cars: Business Model Innovation. GSMA Connected Living Programme: mAutomotive.
7
Strategy& (2014). Racing ahead – The Connected C@r 2014 study.
8
Ibid.
9
Ibid.
10
Ibid.
11
Ibid.
12
Analysys Mason (2014). Connected cars: worldwide trends, forecasts, and strategies 2014-2024.
13
SBD (2013). Connected Cars: A €40 Billion Industry by 2018.
14
Hammerschmidt, C. (2014). Automotive Industry Drives Chip Demand. EE Times Europe, 20 November 2014.
15
Mai, A. and D. Schlesinger (2011). Connected Vehicles and Government: A Catalyst To Unlock the Societal Benefits of
Transportation. Cisco Internet Business Solutions Group (IBSG).
16
European Commission (2014). New connected car standards put Europe into top gear. Press release, 12 February 2014,
Brussels. Available at: http://europa.eu/rapid/press-release_IP-14-141_en.htm
17
The Internet of Things (IoT) refers to the concept of everyday physical objects that are connected to the Internet and that
are able to communicate and interact digitally with other physical objects.
18
Oracle, (2014). Oracle’s Internet of Things Platform: Solutions for a Connected World.
19
Kirk, P. (2011). Connected Vehicles: An Executive Overview of the Status and Trends. Globis Consulting Inc.

Connected cars 15
Internet of Things

20
MBtech Consulting GmbH, (2014). Trend Analysis: Connected Car 2015 - The most important trends and challenges in
vehicle telematics.
21
Cognizant (2012). Exploring the Connected Car. Cognizant 20-20 Insights, November 2012.
22
http://www.cmuportugal.org/tiercontent.aspx?id=4534
23
http://www.productize.be/case-study-keyzee-dieteren/
24
Allied Market Research (2014). Global Connected Cars Market (Technology, Connectivity Solutions, Application, Products &
Services and Geography) -Size, Share, Global Trends, Company Profiles, Demand, Insights, Analysis, Research, Report,
Opportunities, Segmentation and Forecast, 2013 – 2020.
25
Out-law.com (2014). 'Connected cars' phenomenon raises data ownership and liability issues, says expert. Article published
on out-law.com, available at: http://www.out-law.com/articles/2014/february/connected-cars-phenomenon-raises-data-
ownership-and-liability-issues-says-expert/
26
Corragio, G. (2014). Connected Cars – legal issues and hurdles! Available at: http://blogs.dlapiper.com/iptitaly/connected-
cars-legal-issues-and-hudles/
27
Corragio, G. (2014). Connected Cars – legal issues and hurdles! Available at: http://blogs.dlapiper.com/iptitaly/connected-
cars-legal-issues-and-hudles/
28
Reger, L. (2014). Addressing the security of the connected car. NXP blog, available at: http://blog.nxp.com/addressing-the-
security-of-the-connected-car/
29
McKinsey&Company, (2014). What’s driving the connected car. McKinsey Insights, available at:
http://www.mckinsey.com/insights/manufacturing/whats_driving_the_connected_car
30
NXP, (2015). NXP Investment in Software Strengthens Leadership Position in Secure Connected Car. Press release, available
at: http://www.nxp.com/news/press-releases/2015/01/nxp-investment-in-software-strengthens-leadership-position-in-
secure-connected-car.html
31
Analysys Mason (2014). Connected cars: worldwide trends, forecasts, and strategies 2014-2024.
32
Battelle Memorial Institute, (2013). Vehicle-to-Infrastructure (V2I) Safety Applications: Concept of Operations Document.
Study conducted for the U.S. Department of Transportation Federal Highway Administration.
33
The Economist, (2009). The connected car. Available at: http://www.economist.com/node/13725743
34
Kim, M.K., Y. Heled, I. Asher and M. Thompson, (2014). Comparative analysis of laws on autonomous vehicles in the U.S. and
Europe.
35
Swedish Transport Agency, (2014). Autonomous driving: Short version/Summary. Ref. no. TSG 2014-1316.
36
The European Commission, (2015). The European Innovation Partnership on Smart Cities and Communities, Available at:
http://ec.europa.eu/eip/smartcities/
37
http://ec.europa.eu/programmes/horizon2020/en
38
http://www.eib.org/about/invest-eu/index.htm

Connected cars 16