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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