Consulting Firm Estimates Car Connectivity Revenue Will Reach $200 Billion By 2020

One day, Apple and Google may be building cars that can buy coffee, pay for it and assist the driver in picking it up. A report from Bloomberg indicates that McKinsey & Co. anticipates the inevitable transformation of the car into a full service mobile device will earn enormous revenue. The consulting firm estimates that the data stream and connectivity components alone could become a staggering $200 billion market by 2020.

Although companies like Apple and Google are racing toward this target, automakers are also fighting for a piece of this massive market.

Instead of just producing transport hardware, “we have to get into the service industry in a larger way,” said Tony Douglas, BMW AG’s head of mobility services. “The transportation industry is ripe for disruption. Either we kind of drive that disruption and gain from the new business models that will emerge, or we let someone else do it.”

There’s no question that big changes are on the horizon in the world of automobiles, and it’s therefore no surprise that automakers are making efforts to position themselves to reap the benefits of the evolution of transportation.

Although BMW, Volkswagen AG’s Audi and Daimler AG’s Mercedes-Benz compete on everything from new models to passenger comforts, the threat of an Apple car has made them join together in a bid to acquire Nokia’s HERE digital map business, which may go for as much as $4 billion, according to people familiar with the matter.

To set up new services, such as a coffee-buying car, fine-grained location data is crucial, and this level of data will also eventually be needed to guide automated cars. The ownership of HERE would ensure that the German automakers have an alternative to Google, and the idea is certainly part of their preparations for a digital car age. According to Hitachi Ltd., about 90 percent of new vehicles in western Europe will be connected by 2020, in comparison to only approximately one-third by next year.

“We want to produce good, safe, beautiful cars, and to that end, we need data,” said Christine Hohmann-Dennhardt, a Daimler executive in charge of legal issues.

It’s an exciting time to be involved in the auto industry, and the value of information about consumers’ location and personal preferences is growing exponentially. For example, if a driver gets hungry and McDonald’s can track that and respond, “people would be directed to McDonald’s instead of another fast food restaurant,” said Peter Fuss, a partner at consulting company EY’s German unit. He continued by saying the systems to tap these capabilities could start emerging as soon as in the next two to three years, so there’s clearly a lot to consider in the future of car connectivity.