KEY POINTS

  • The connected-car market is growing at a five-year compound annual growth rate of 45% — 10 times as fast as the overall car market. We expect that 75% (or 69 million) of the estimated 92 million cars shipped globally in 2020 will be built with internet-connection hardware. That's up from 10 million connected cars shipped this year. Revenue from connected-car sales will reach $2.4 trillion in 2020.
  • But only about 40% of consumers who have internet connections in their cars will actually use the services. Of the 220 million total connected cars on the road globally in 2020, we estimate consumers will activate connected services in 88 million of these vehicles.
  • In terms of the total installed base of automobiles, connected cars are still a minuscule slice. By the end of 2015, only 3.4% of cars — 34 million of the more than 1 billion cars on the road globally — will be able to connect to the internet.
  • Connected-car vehicle prices are out of reach for most car buyers, but they will drop significantly in the next few years. The current average selling price of $55,000 is driven by the fact that connected-car shipments tilt toward the luxury category. We expect ASP to decline significantly over time and hit $35,000 by 2020.
  • Connected-car technology is now split between approaches that put the internet connection in the car and those relying on a secondary device. Embedded connections don't require a phone's data plan to operate, and consumers and carmakers gain access to a wider variety of features and data.
  • Embedded connections will win, in part, because they offer two clear advantages to carmakers. They allow auto companies to collect data on cars' performance and send updates and patches to cars remotely, avoiding recalls related to the car's software. The average car today has about 1 million lines of computer code, creating a vulnerability to software glitches. Fifty-six million cars were recalled in the US between January and October 2014, primarily for small problems like software patches.

The connected-car market will be big but underused

Connected Car Shipments Forecast<span [...]