BriefCASE: Fault lines in the connected-car data landscape

You may be enjoying your connected vehicle features, but are you
fully aware of what data you're sharing and how it's being used?
Not all customers are, which is why US policymakers plan to bolster
regulation in this area.

As the mobility industry scrambles to monetize connected vehicle
data opportunities, mainly driven by the expansion of
software-as-a-service and mobility-as-a-service business models,
customer data privacy and protection are being put on the line.
Automakers are increasingly accused of resorting to deceptive or
unethical workarounds to obtain vehicle data and of ignoring
consumers' best interests.

In July, two US senators asked the Federal Trade Commission
(FTC) to investigate automakers for sharing customer
data, saying they did so without explicit permission in an
“outrageous manipulation” of consumers and a “flagrant abuse” of
privacy. The senators said that General Motors, Honda and Hyundai
may have unlawfully shared consumer data with data broker Verisk by
either obscuring customer participation in data sharing or
obtaining consent by misleading means. Verisk then allegedly sold
reports on driver behavior to insurance companies, which raised
premiums accordingly.

More recently, Texas' attorney general
sued General Motors, alleging it illegally collected
and sold drivers' data without their consent or knowledge to
insurance companies. In car models from 2015 and later, the
automaker allegedly used technology to “collect, record, analyze,
and transmit highly detailed driving data.”

The data monetization bubble

A typical connected vehicle can generate nearly 25 GB of data
per hour and collect information from more than 100 data points,
thanks to embedded features such as geolocation and navigation,
companion apps, biometrics, voice recognition, on-board diagnostics
and driver assistance. There is money to be made from infotainment
and advanced driver assistance systems packages, feature upgrades
and enhancements, service unlocks, advanced safety or navigation
features, and various other means.

That said, the industry is slowly waking up to the fact that the
monetization potential of connected vehicle data has been overhyped
and that a massive portion of this potential is derivative or
indirect. According to S&P Global Mobility, the annual revenue
generated by connected services and paid updates amounts to about
$6 billion, while projections put revenue at about $200 billion for
software, services and data in 2030.

The recent collapse of big data aggregators such as Wejo and
Otonomo was a reality check for the industry and sobered the lofty
monetization projections issued just half a decade ago. The
industry is learning the hard way that it's not only difficult to
extract value from car data, but it may also be illegal and have
lingering ramifications if done without proper consumer
consent.

In the US, legislation such as the American Data Privacy and
Protection Act ensures organizations obtain clear user consent for
data processing for services offered through “non-traditional
devices such as cars.” However, as AI capabilities grow,
regulations may need to be updated to address new challenges, such
as the use of synthetic data or the potential for AI to infer
sensitive or personally identifiable information from seemingly
innocuous data points.

In this regard, new draft bipartisan legislation the American Privacy Rights
Act was unveiled to establish a national data privacy
and security standard that gives people the right to control where
their personal information goes and who can sell it.

Tread with caution!

By 2030, automakers plan to generate billions of dollars through
software services and subscription models. With tightening
regulations, this revenue projection depends heavily on strict
implementation of data privacy and protection standards at
automakers. One of the primary challenges is ensuring transparency
in data collection and usage. Although most automakers provide
options to opt out of unnecessary data sharing, these settings are
often buried within complex menus.

Empowering customers needs to be a core strategy in automakers'
data monetization plans. S&P Global Mobility's 2024 Connected Car Consumer
Survey revealed that 8% of the nearly 8,000
respondents were not interested in sharing vehicle data, even for
free services. A majority of these respondents (nearly 70%) said
issues around data security and misuse were the two most important
reasons why they were not comfortable sharing data.

The accusations against General Motors, Honda and Hyundai come
at a time when insurance costs in the US are soaring, with car
coverage jumping 19% in July compared with a year earlier. With US
legislators getting more collaborative on data security and
privacy, automakers that demonstrate robust data protection
measures are likely to gain a competitive advantage. As in any
business endeavor, building and maintaining consumer trust is
fundamental.

Authored by: Vivek Beriwal, Senior Research Analyst,
Supply Chain & Technology, S&P Global Mobility

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