In-vehicle connectivity has been accelerating at a rapid rate over the last decade, with embedded, tethered and smartphone solutions becoming increasingly available across all vehicle segments. But how does this availability vary across the industry between OEMs, and what impact does vehicle pricing and categorization have on connected service penetration? 

The Three Technology Types

In-vehicle connectivity can be split up into 3 catagories. This determines how the connectivity is obtained and used by the consumer when they are in the vehicle, the three catagories can be described as Embedded, Tethered and Smartphone.

Embedded connectivity is where the hardware is built into the framework of the vehicle by the OEM, such as built in navigation and internet radio, accessable through the vehicles infotainment system without any extra external connections. This method of providing connectivity is generally preferred by OEMs.

Tethered connectivity is where the vehicle has the same built-in hardware and infrastructure as embedded, but requires external netoworking from another source to use them. This would normally be coming from the user's smartphone.

Smartphone connectivity is where the firmware, infrastructure and network are all coming from the user's smartphone, usually in the form of smartphone duplication services such as Android Auto, or Apple CarPlay. 

To best view how the market treats these 3 connectivity types, a comparison can be made for certain solutions that in-vehicle connectivity offers. This comparison can be seen below; with the overall market saturation being split up into the three connectivity types to show what solution they suit best.

The chart shows that embedded connectivity is by far the most popular solution for OEMs, with almost all services being dominated by embedded connectivity. It can also be seen however that smartphone connectivity dominates in a few instances, more noticably those linked to social interactions or networking. With mirroring solutions such as Android Auto and Apple CarPlay being ever-present, services such as navigation and remote vehicle features are tipping the scales towards smartphone connectivity.

Connected Service Penetration

If we look at the market as a whole, and combine the three technology types, we can begin to see how connectivity is penetrating the automotive industry on a deeper level. In the chart below, model year 2020 vehicles have been analysed based on their OEMs catagorization as either mainstream, or premium. 

From this chart it can be seen that premium vehicles are by far the better equipped when it comes to connectivity, whether that be through standard fitment, or the consumer being willing to pay more for the connectivity. Services such as web browsing, social networking and remote car features are seen to be solely found on premium vehicles, while usage based insurance is more common on mainstream vehicles. This is likely due to the fact that mainstream vehicle owners tend to have less disposable income than premium vehicle owners, and are therefore willing to be monitored to reduce their insurance expenditure.

Embedded Connectivity is Leading the Industry

Embedded connectivity is the most popular method for OEMs to put connectivity within their vehicles; this has been shown in the first chart in this insight, but by how much is the level of embedded connectivity in the industry increasing each year? The below chart showcases by how much each OEM has either increased or decreased their embedded connectivity between 2019 and 2020.

This chart clearly shows the increase that almost every OEM has undertaken in the last year, with the average penetration rate increase coming in at 15%. We can also see how premium vehicles tend to have a 100% penetration rate with embedded connectivity, demonstrating how premium OEMs better equip their vehicles for consumers due to the higher sale price.   

The biggest improvers in the past year can be seen to be Alfa Romeo, Volkswagen and Toyota; all moving from below 50% embedded penetration, to greater than 90% penetration. 

Conclusion

Connectivity is arguably the fastest growing sector within the automotive industry, with OEMs being pressurised to keep up with technological improvements and modern network capabilities. In this insight, we have shown how embedded connectivity is still the preferred method for manufacturers, but with smartphone connectivity gradually closing the gap due to increased use and improvement of duplication services. 

The connectivity side of the automotive industry is certainly going to be interesting to watch over the next few years.