Infotainment specialist Harman won the contract to supply technology for the iNext's 5G connectivity. Harman says it is building on technology from its parent company, Samsung, to position itself as the go-to company for automakers looking to deliver features wirelessly.
"The revenue model is shifting from a one-time sale to continuous revenue post-sale," said Vishnu Sundaram, head of telematics at Harman. "Having seamless connectivity will be pivotal for those revenue streams."
Harman says that a series of deals will make it the leading company in 5G telematics by 2022. It also offers cloud-based services via its Ignite online platform that automakers can incorporate in new models. Among the offerings is a post-sale software upgrade that will unlock existing capabilities within a car's speaker system.
Will drivers pay?
Still, it's unclear which connected options customers will actually buy -- and if they do, if they will continue to do so year after year.
A big red flag for the post-sale revenue model came last year when BMW said customers with its latest OS7 operating system would be charged for Apple CarPlay, which lets drivers with Apple phones migrate apps and features into the dashboard screen, after a one-year trial period. CarPlay, like Android Auto, is usually offered as a free feature.
But after a backlash from customers in the United States and UK, BMW relented and made it free again.
That seems to indicate that some operations of the dash screen are off-limits, including add-ons such as Car Play and Amazon's Alexa voice assistant, said Luca of Toyota. "I think the functionality itself is going to be a commodity, it's very difficult to [charge for it]," he said.
The ability to get customers to pay to unlock an embedded feature at a later date could be manufacturer dependent, experts said. "I'm very skeptical you can charge extra to unlock features in the car. Maybe Tesla can do it, but I'm not sure others can," said Ted Cannis, Ford's global director of electrification.
Volvo CEO Hakan Samuelsson goes even further, saying that the whole business model of selling upgrades after the sale is flawed. "You should not do that to try to capture revenue directly. You should do it to offer an even better customer experience," he said. "Then, the car will be more attractive, and a bit later you will make money from that."
Automakers should not believe that 5G is a magic key to unlock subscription models, especially given its extra cost, analysts said. "Selling 5G for the sake of 5G will not work, because the customer will not pay more," said Pedro Pacheco, senior research director at Gartner. "You need the functionalities on board."
Automakers, however, may need to charge simply to pay for the increased spending on connectivity, said Poliak of Panasonic. But an innovative revenue-sharing model is emerging that could defray some of those costs.
Harman is working with a major European automaker to supply 5G-ready modules across a range of models that can be activated by the customer the moment 5G networks become widespread, estimated to be around 2023 in Europe. Harman offers the module at a discount in return for revenue-sharing with the automaker when an owner decides that a new application is worth upgrading to 5G.
"Even if only 30 percent of your existing customers activate it, it's still paying off," Mike Peters, head of connected car at Harman, said.
The model is also being explored by the chipmaker Qualcomm. "We reduce the cost of the chip, then if across the life of the chip the owner is downloading multiple applications, then we're getting a piece of that pie every time," said Jeff Dumrauf, Qualcomm director of engineering. He cited facial recognition to improve car security and access to the car's cameras for real-time video monitoring as two 5G-dependent upgrades that customers could pay extra for.