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Connected vehicles save the environment

“How can we improve Earth environmental conditions?”

Although the historic agreement in Paris Summit tends to decrease greenhouse gases, good solutions to reach such mission remain uncertain. However, idea of self-driving can be a significant help from many points of view.

Firstly, connected vehicles are smaller and much lighter. Furthermore, they benefit from being mostly electrical that promises reducing carbon emissions. They also facilitate ride sharing especially during peak hours and on certain routes. Expanding the idea of connected vehicle to transportation system increases multi-modal travel. Given this, the demand for private cars will decrease which leads greenhouse gases to rocket down.

On the other hand, a recent survey in Columbia University showed that connected vehicles will significantly increase the highway capacity which decreases the need for driving infrastructure and saving more green land, along with efficient riding that decreases greenhouse emission. As a future perspective, we predict that spreading connected vehicles eliminates the need for driving signs and all the facilities needed for them as a consequence of putting them virtually in the vehicle’s control software.

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Safer and cheaper?

“Safety on the roads has always been a main issue”.

Are connected vehicles able to solve this problem? People are eager to solve major issues such as accidents caused by young and inexperienced drivers and to decrease probability of being injured. 

“In recent years, the automotive industry has invested most of its energy into building vehicles that are safer to drive and protect passengers in the event of a crash.”

According to the US Department of Transportation, future developments of technologies related to connected vehicles will certainly contribute to make roads safer. Many of these technical solutions for Vehicle-to-Vehicle (V2V) and Vechicle-to-Infrastructure (V2I) communications for safety are already available. Advanced driver assistance systems (ADAS) are increasingly deployed in high-end vehicles, and it is just a matter of time until these life-saving systems become mainstream. 

The next evolution will focus on preventing crashes from happening in the first place. This can be obtained thanks to the complete shift in driving responsibility from humans to machines and a consequent drastic decrease in accident occurrence probability. 

Safety on the roads opens the discussion regarding Insurance Companies and their business models that are evolving towards so-called Connected Vehicles Insurance. 

“Vehicle connectivity is a strategic asset for the entire car insurance value chain, and the industry is just beginning to explore the full potential.”

Autonomous vehicles bring many benefits to insurance companies. Besides reducing both frequency and magnitude of accidents, they allow to reduce costs of locating and recovering damaged vehicles and discourage fraudulent claims. Furthermore, data collected through black boxes, sensors and viability intelligent systems consent to diminish significantly investigative costs for severe accidents. All these factors has the potential to unlock more than $30 billion in crash-related value for passenger vehicle owners, insurance companies, and society every year. Adopting a unified communications platform offers benefits throughout the entire automotive value chain. Insurance companies and insurance telematics providers that embrace the connected vehicle evolution have the potential reduce their cost of operating PAYD services and, more important, can unlock a total of approximately $380 per connected vehicle per year.

So what is happening to Insurance Companies? A profound change of paradigm is happening in terms of business model and value chain management and new value propositions arise. Drivers behaviour is one of the key factors in crashes.  Connected vehicles, depending on their level of automation, change Insurance Companies value proposition in two different ways. 

“Today, insurance companies that embrace the virtues of connecting vehicles are tracking driver behavior to better calibrate premiums with actual driver risk.”

In first place, models as “pay as you drive” or “pay how you drive” are based on data monitoring and collection, tracking behaviour such as acceleration and speeding to better asses individual driver risk. This is a preliminary change in business model that does not require full automation but only wise used of data.

Instead, full automated vehicles allow to annihilate human factor in driving and this forces insurance companies to move their focus from people to machines.

Obviously, this model raises issues regarding privacy and personal freedom. It is also worth noticing that the trend in accidents reduction badly affects insurance companies’ business model and many disputes regarding responsibility arise, leaving the issue still open.

“Other potential technological changes, such as driverless cars or technologies that facilitate ride or home sharing could disrupt the demand for our products from current customers, create coverage issues or impact the frequency or severity of losses, and we may not be able to respond effectively.”

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“The connected vehicles of tomorrow will feature a range of pathways from short to long range communications, enabling payment for services for things like parking, tolling, and public transit”

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Necessity is the Mother of Invention

“The connected car is a disruptive technology that will upend traditional auto industry structures, usher in new business models, and change the nature of the business.”

Connected vehicles are becoming a new and profitable business branch with great profits forecasts. With this post we want to give a quick overview about the crucial aspects linked to this cutting edge technology.

According to the annual Connected Car 2015 Study conducted by Strategy&, the strategy consulting team at PwC, innovation is accelerating as more manufacturers develop smart driving systems. They predict that by 2030 vehicles could be fully automated after going through various progressive steps.

Both premium and volume auto makers clearly see connected car technologies as essential to their futures. They also realise that overall vehicle prices aren’t rising as rapidly as the prices charged for digital capabilities. This means returns on investments in traditional car components are shrinking. The volume segment of cars made for middle-income purchasers, also sees auto makers adding basic connectivity functions. Here, digital content is on course to reach 2.6 percent of total selling prices by 2021, up from just 0.5 percent in 2015.

PricewaterhouseCoopers, the world’s largest professional services firm, has released an analysis about effect of using autonomous cars. It predicts a reduction of traffic accidents by a factor of 10 and cautions that fleet of vehicles in the United States may collapse from 245 millions to just 2.4 millions by introducing autonomous cars. A group of researchers from Columbia University have shown that autonomous cars could greatly increase highway capacity. The goal of their work was to compare the highway capacity when using sensors alone and when using sensors and vehicle-to-vehicle communication systems. In order to achieve this goal, the rules for using both technologies to prevent collisions are proposed, and highway capacity is estimated based on these rules. We show that both technologies can increase highway capacity. The increase in capacity is a function of the fraction of the vehicles that use a technology. If all of the vehicles use sensors alone, the increase in highway capacity is about 43%, while if all of the vehicles use both sensors and vehicle-to-vehicle communication, the increase is about 273%. Analysis like this has led the car automation industries to take notes about significant changes that will happen in next few years in automotive industry.

What about some figures? We expect connected car technologies to generate €40.3 billion in end-customer spending next year. Safety and autonomous driving are the largest categories, accounting for about 61 percent of the total. In the premium automobile segment, the spending on digital technology is expected to rise to 10% of total vehicle sales by 2021, more than double the current level of 4%.

Also interesting is to explore the two leading trends in vehicles market. On one side we are moving towards owned autonomy, but on the other side there is sharing. From both the trends, experts predict that we will soon arrived to shared autonomy, thus shared connected vehicles. There will still be some privately owned cars but they will represent a much smaller share of the mobility market than today.