Connected Car Services for OEMs

Connected car services – also known as OEM telematics services – are transforming the automotive industry. They refer to the suite of digital features and data-driven services that vehicles can deliver via internet connectivity. These range from safety functions (automatic crash notifications, emergency calls) to convenience features (remote unlock via smartphone, real-time navigation, in-car Wi-Fi) and vehicle health monitoring (predictive maintenance alerts, over-the-air software updates). Automakers began offering connected services as early as 1996 with GM’s OnStar, which enabled automated emergency calls. Today, such connectivity has become standard across brands, and by 2030 an estimated 95% of new vehicles sold globally will be connected. In the era of automotive digital transformation, connected car services are no longer optional add-ons – they are strategic necessities that can redefine customer experience and unlock new business models for OEMs.

Strategic Value of Connected Car Services for OEMs

For automotive executives and product leaders, connected services offer significant strategic value. They are key to enhancing customer experience, generating new revenue streams, and differentiating in a competitive market, all while enabling operational efficiencies. Below are some of the core benefits:

• New Revenue Streams & Data Monetization: Connected car services open up recurring revenue opportunities beyond the initial vehicle sale. Automakers can offer subscription packages (for infotainment, navigation, driver-assist features) or one-time feature upgrades, creating ongoing income throughout the vehicle’s life. For example, industry forecasts suggest car companies could generate as much as $1,600 per vehicle from connected services in the future. Additionally, vehicle data monetization has huge potential – by some estimates the global revenue pool from car data could reach $800 billion by 2030. OEMs can monetize data by developing new services (e.g. usage-based insurance, personalized offers) or partnering with third-party services (for traffic insights, smart city planning) in a way that drives revenue while respecting data privacy.

• Enhanced Customer Engagement & Loyalty: Connected services help automakers build a continuous relationship with the customer beyond the showroom. Features like smartphone apps for remote vehicle control, real-time maintenance alerts, and personalized driver feedback keep customers engaged throughout the ownership cycle. This improved experience can translate to stronger brand loyalty. In fact, nearly 47% of drivers would consider switching car brands to obtain better connected features, indicating how critical connectivity has become to customer satisfaction. By delivering a superior connected experience (seamless smartphone integration, on-demand features, etc.), OEMs can increase retention and attract tech-savvy consumers who value digital convenience in their vehicles.

• Competitive Differentiation: In a market where vehicle hardware is increasingly commoditized, digital services are a key differentiator. Connected mobility platforms allow OEMs to offer unique ecosystems around their cars – for instance, exclusive apps, concierge services, or integration with smart home devices – that set their brand apart. Automakers that excel in connected services can position themselves as technology leaders. Tesla is a prime example: its reputation is not just about electric powertrains, but also the connected car experience (frequent over-the-air upgrades, feature enhancements) which consistently delights owners. Brands that lag in connectivity risk losing ground, as modern buyers equate a car’s digital capabilities with its overall innovation. On the other hand, those who invest in robust connected platforms can establish a differentiated value proposition that competitors find hard to replicate.

• Operational Efficiency & Cost Savings: Connected car technology isn’t just about new revenue – it also yields internal efficiencies. Over-the-air (OTA) software updates allow manufacturers to remotely fix bugs or update features, avoiding costly physical recalls and service visits. Research shows automakers lose about $900 million per year in the U.S. and Europe on recalls that OTA updates could prevent, and moving to OTA remedies could save U.S. OEMs $1.5 billion annually by 2028. This capability not only saves money but also protects brand reputation by resolving issues faster. Connectivity also provides OEMs with a wealth of vehicle data (engine performance, failure codes, driver behavior) that can improve R&D and product quality. For example, real-world usage data helps engineers identify and address issues proactively, leading to better reliability and fewer warranty claims. In aftersales, connected diagnostics and predictive maintenance notifications can drive customers to dealerships for service at the right time, boosting service revenue and customer satisfaction simultaneously.

In summary, connected car services give OEMs a strategic toolkit: they can monetize connectivity, deepen customer relationships, stand out from rivals, and streamline operations – all of which are crucial for future-ready automotive business models.

Real-World Use Cases and OEM Examples

Leading automakers worldwide are already capitalizing on connected services to deliver value to customers and boost their bottom line. Below we highlight real examples from industry front-runners, illustrating how connected car services are being implemented and the outcomes achieved:

• Tesla – Pioneering Feature Upgrades and Subscriptions: Tesla has set the benchmark for leveraging connectivity. All Tesla vehicles receive frequent over-the-air software updates that can improve performance or add entirely new functions – much like a smartphone update. The company also monetizes advanced features post-sale; for instance, Tesla’s Full Self-Driving (FSD) software is offered as a subscription add-on. This software-centric approach generates substantial revenue. In Q3 2024 alone, Tesla’s FSD subscriptions contributed about $326 million to the company’s revenue. By continuously enhancing cars with new capabilities (from improved battery range to entertainment apps and self-driving features), Tesla not only creates a recurring revenue stream but also keeps customers highly engaged with the product. Owners feel like their car keeps getting better over time, reinforcing brand loyalty and allowing Tesla to stand out as a tech leader.

• Ford – Building a Subscriber Base with Connected Services: Traditional OEMs are also finding success with connectivity. Ford’s connected car platform (integrated through the FordPass app and connected vehicle modem) offers services such as remote start/lock, vehicle health alerts, Wi-Fi hotspot, and hands-free driving features like BlueCruise. These offerings have proven compelling enough that Ford already has over 550,000 paying subscribers for its software and services, which generate “hundreds of millions” in revenue at above 50% gross margin. Ford is aiming even higher – targeting $20 billion in annual revenue from software-enabled services by 2030. One key to this success is focusing on useful features (e.g. safety alerts, convenience functions) that customers are willing to pay for. By bundling valuable services and simplifying enrollment (often providing new cars with trial periods for connected features), Ford is steadily converting its large owner base into long-term digital customers. This not only drives new revenue but also creates a continuous touchpoint with owners through the FordPass mobile app and regular software updates.

• BMW – Premium Connected Drive and Features on Demand: BMW has been at the forefront of connected car innovation among luxury brands, with its ConnectedDrive platform offering everything from real-time traffic info to concierge services. BMW vehicles come with built-in telematics that enable features like remote vehicle control, advanced navigation, and over-the-air updates for certain functions. In recent years, BMW has experimented with “features on demand” – allowing owners to activate hardware-based upgrades via software unlock (for a fee). Notably, BMW made headlines by offering a subscription for heated seats in select models. This particular approach received consumer backlash, highlighting that buyers expect some features (especially if hardware is pre-installed) to be included by default. The lesson learned was that customers are more receptive to paying for new or enhanced capabilities rather than ones traditionally provided upfront. Despite the misstep on heated seats, the concept of post-purchase upgrades is gaining traction. BMW continues to sell digital services like advanced driver assistance features, and its willingness to push the envelope underscores how OEMs are trying to find the right balance in monetizing connectivity. The industry took note that customer perception of value is key – as one observer pointed out, BMW was criticized for charging extra for heated seats, whereas Tesla had been selling a similar OTA add-on (a performance boost) for years with less pushback. Going forward, BMW is likely to focus on features that clearly add new value (such as improved lighting technology or driver aids) as on-demand purchases, leveraging its connected platform to deliver these instantly to owners who opt in.

• Mercedes-Benz – Revenue from On-Demand Upgrades: Mercedes has embraced connected services and the software-defined vehicle trend to enhance its luxury offerings. The latest Mercedes models (equipped with the MBUX infotainment and connected car system) can receive over-the-air updates and even purchase upgrades through an online store. For example, Mercedes offers performance boosts and advanced features like enhanced rear-wheel steering or improved navigation functions as post-sale upgrades. This strategy has shown tangible results – Mercedes-Benz reported over $1 billion in revenue in 2022 from software-based vehicle upgrades purchased by customers after vehicle delivery. This figure demonstrates both a strong demand from consumers for customizing their cars via software and the high profit margins of digital products. By integrating an e-commerce experience into the vehicle and companion app, Mercedes makes it easy for owners to add features they initially skipped or newly desire, from comfort features to driving modes. Such connected commerce not only brings additional revenue per vehicle, but also keeps Mercedes vehicles up-to-date and aligned with user preferences over time. It strengthens the brand’s luxury image by allowing personalization and continuous improvement, all enabled by connectivity.

• General Motors – From OnStar to a Connected Ecosystem: GM pioneered OEM telematics with OnStar and has expanded its connected services portfolio dramatically. OnStar today goes beyond emergency response to include turn-by-turn navigation, vehicle diagnostics, and a mobile app for remote functions – services that millions of GM customers subscribe to. Building on this foundation, GM is pursuing new business models such as usage-based insurance (UBI) through its OnStar Insurance arm, which uses vehicle data on driving behavior to offer personalized insurance rates. The company has announced bold goals for the next decade: GM expects $20–25 billion annual revenue from software and services by 2030 (including around $6 billion from OnStar Insurance). Key to GM’s approach is leveraging the broad connectivity of its fleet (which will only grow as nearly all new GM vehicles become connected) and finding partners to monetize that data in various ways. For instance, GM can use vehicle data to help finance and insurance partners – one cited plan is providing real-time location data to assist with vehicle recoveries in case of lease/loan default. Such ecosystem plays show how traditional automakers are turning connected cars into platforms for additional services. GM’s strategy exemplifies an OEM using connectivity to evolve from a pure manufacturer into a mobility service provider.

These examples highlight that across the industry – from disruptive EV startups to century-old OEMs – connected car services are driving new value creation. Whether it’s through subscription-based driver assistance, one-time feature unlocks, integrated insurance offerings, or remote diagnostics, automakers are finding innovative ways to serve customers and generate income using the connected capabilities of modern vehicles. Importantly, the market is responding: consumers are adopting these services when they see clear benefits, and OEMs are starting to see material financial returns. The success stories also underscore best practices, such as focusing on genuine customer value (e.g. safety, convenience, performance) and making the user experience seamless via intuitive apps and in-car interfaces. The more frictionless and valuable the connected experience, the more likely drivers will pay for it and stay within an OEM’s ecosystem.

ROI and Differentiation: The Business Case for Connectivity

Connected car services represent not just a tech trend, but a fundamental shift in the automotive business model – one that offers compelling ROI (return on investment) for those who execute it well. Automotive executives are increasingly treating software and digital services as core to their revenue growth and profitability in the coming years. Consider the ambitious targets and early results reported by major OEMs:

• Stellantis (the parent of brands like Chrysler, Jeep, Peugeot) is targeting €20 billion in annual revenue from software-enabled services by 2030 as part of its long-term plan. This reflects the company’s belief that connectivity and software upgrades can become a significant revenue pillar alongside vehicle sales.

• General Motors expects its portfolio of connected services (OnStar, Super Cruise subscriptions, insurance, etc.) to generate $20–25 billion by 2030, including roughly $6 billion from OnStar Insurance alone. For context, that is equivalent to a substantial portion of GM’s current revenues, indicating how transformative connected services could be to its business mix.

• Ford has already seen success, with over 550,000 paying subscribers for its connected vehicle services and software, yielding hundreds of millions in revenue at >50% gross margins. Ford is aiming to scale this to $20 billion annually by 2030 from digital services. Notably, the high gross margin underscores a key advantage of software-based offerings – once the platform is built, selling additional subscriptions or downloads is extremely profitable compared to manufacturing hardware.

• Mercedes-Benz in the luxury segment proved the willingness of customers to pay for digital enhancements, racking up over $1 billion in revenue in 2022 from on-demand software upgrades and services. This is pure high-margin revenue that likely did not exist a few years prior, illustrating how quickly the ROI can materialize when the offerings resonate with users.

Such figures make a strong business case: connected services can add incremental revenue per vehicle and improve profit margins, helping offset the traditionally thin margins on vehicle sales. McKinsey & Co. has noted that industry-wide, this could equate to roughly an additional $400–$500 of value per car on the road by the early 2030s as software-defined vehicles proliferate. For OEMs, the ROI comes not only from direct revenue but also from cost optimizations (as discussed, OTA update savings, streamlined warranty handling via diagnostics, etc.) and customer lifetime value. A well-executed connected strategy can keep a customer within the brand’s ecosystem for service, insurance, and future vehicle purchases, increasing their lifetime value to the company.

Beyond the financial metrics, there’s a strategic ROI in terms of brand strength. Offering cutting-edge connected features can boost an automaker’s innovation image and attract new customer segments (such as younger, tech-forward drivers or those coming from consumer tech brands). Surveys indicate many consumers now factor connectivity into their purchase decision; one McKinsey report found that 37% of car buyers would switch brands for better connectivity and autonomous features. This means investments in connectivity can directly influence market share. Early adopters of advanced connected services can win conquest sales from competitors and potentially command higher prices or loyalty. In other words, the ROI of connected car services is not only measured in new dollars earned, but also in customers retained or gained because of a superior digital experience.

It’s also important to note that achieving these returns often requires a different approach than the traditional auto business. OEMs must embrace a more agile, software-focused development process and potentially new partnerships. Building an ecosystem of services may involve collaborating with tech companies, startups, and developers (for example, to integrate popular apps or to co-develop mobility services). Many automakers are leveraging connected mobility platforms – either developed in-house or via partners – to accelerate their offerings. These platforms serve as the backbone for collecting vehicle data, analyzing it, and deploying services at scale. Comodif, for instance, is a technology provider in this space whose platform **“collects, classifies, and transforms telematics data into services through the cloud,” helping OEMs bring new connectivity features to market faster while managing cost and risk*. By using such platforms, OEMs can more rapidly prototype and roll out services (from simple mobile apps to complex AI-driven analytics) without reinventing the wheel for data infrastructure and security. The speed to market is crucial, given how fast consumer tech moves – an agile connected services strategy can be a competitive advantage in itself.

Future Trends: Connected Mobility and the Road Ahead

As we look to the future, connected car services are poised to become even more central to automotive innovation. Several trends are shaping the next generation of connected mobility for OEMs:

• Software-Defined Vehicles (SDVs): Cars are increasingly becoming “computers on wheels,” where software can define and change vehicle functions long after the car is built. This paradigm means that new features, performance enhancements, or even entire driving modes can be delivered via updates over the air. OEMs are investing in the capability to update nearly all aspects of a vehicle’s software remotely. The result will be vehicles that improve over time and can be tailored to user preferences through software. We will likely see a proliferation of app-like ecosystems in cars – much like smartphones – where owners can download or unlock apps and features. The car is evolving into a dynamic product that continuously adapts, which is a major shift from the static vehicles of the past. Manufacturers that master the SDV concept (with robust OTA update systems and cybersecurity measures to protect them) will be able to offer a stream of post-purchase upgrades, keeping customers engaged and creating ongoing revenue. This also extends the vehicle’s lifespan and relevance, as new tech can be introduced years into ownership, enhancing resale value and customer satisfaction.

• Personalization and the “User-Defined” Vehicle: Building on the SDV idea, the future will bring greater personalization of the driving experience. Drivers will expect their car’s digital environment to integrate with their digital life. We’re already seeing systems like Android Automotive OS and Apple CarPlay expanding to control more of the vehicle’s functions, effectively turning the car into another connected device in the user’s ecosystem. In the coming years, a car might allow multiple user profiles with individualized settings, apps, and subscription packages. Think of it as the “user-defined vehicle,” where each driver can configure software features to their liking, and even transfer those preferences from one car to another. This trend opens new avenues for OEMs: for example, offering app stores or marketplaces for third-party developers to create in-car apps and services (with OEM oversight for safety). Such app ecosystems could spawn innovations in entertainment, productivity, or wellness (imagine a meditation app that syncs with your driving or a route planner that integrates your calendar appointments). OEMs will need to manage these platforms and possibly curate developer partnerships, but the benefit is a richer, more personalized product that can appeal to consumers in a modular way. Connected car services will thus expand beyond what the OEM builds internally, to what they can enable via a platform approach, much like smartphone manufacturers benefit from third-party apps.

• Integration with Connected Infrastructure and IoT: As vehicles get smarter, they won’t operate in isolation. Future connected cars will increasingly communicate with the surrounding infrastructure and other devices – this is often referred to as V2X (vehicle-to-everything) communication. For instance, cars may interact with smart traffic lights, road sensors, and even connected homes. A connected car could automatically pay tolls or parking fees (some cars today already have integrations for toll payments), or coordinate with city traffic systems to optimize traffic flow. In-vehicle digital assistants might seamlessly interact with your smart home (e.g. opening your garage door as you approach, or adjusting your home thermostat when you’re a certain distance away). These capabilities will be enabled by collaboration between OEMs, city planners, telecom providers (with 5G networks), and IoT companies. Connected mobility platforms will extend beyond just the car, becoming part of a larger mobility ecosystem that spans ride-sharing, public transport links, and smart city services. For OEMs, this trend means that partnership and interoperability are key – no single company can build the entire connected environment alone. Those who forge strong ecosystem partnerships can offer customers a more integrated experience (for example, a navigation system that not only finds parking but also reserves and pays for a spot in advance). The future vision of connected mobility is one where the car is a node in a broader network of connected living, and OEMs have opportunities to provide services at the intersection of automotive and other industries (energy, telecom, retail, etc.).

• Data-Driven Services and AI: With the explosion of data from connected cars, OEMs will increasingly leverage analytics and artificial intelligence to create smarter services. Predictive maintenance is one area already using AI models to forecast component failures before they happen, minimizing breakdowns for drivers. Going forward, we can expect AI to play a role in personalized recommendations (e.g. suggesting routes or services based on driving habits) and even in-car voice assistants that learn the driver’s preferences over time. OEMs might offer AI-driven safety services – for example, systems that analyze driving patterns and coach the driver for safer behavior, or that automatically adjust vehicle settings in real time to match road conditions. Vehicle data monetization will likely involve anonymized, aggregated data being used to improve urban planning (smart cities), enhance mapping services (for autonomous driving, high-definition maps), or feed new insurance and fintech products. The key trend here is turning raw data into value-added services using advanced algorithms. Automakers will need to invest in data analytics capabilities, either internally or through specialists, to fully exploit this potential. Those who do can uncover new revenue streams – for example, selling traffic data insights to municipal agencies or developing proprietary algorithms that become a differentiator (such as a superior range prediction for EVs based on live data). Crucially, this must be balanced with data privacy and security, as consumers and regulators will demand transparent and secure handling of connected car data. OEMs that build trust through clear privacy policies and robust security (perhaps even giving users control over what data is shared) will have an edge in sustaining user participation in data-driven services.

Overall, the trajectory of connected car services points toward a future where the vehicle is deeply embedded in the digital fabric of consumers’ lives. Automakers are transforming into providers of mobility experiences and services, not just metal-and-rubber vehicles. This shift aligns with broader trends in the economy towards services and experiences. It’s a chance for OEMs to diversify their businesses (important in a time of electrification and autonomous tech disruptions) and to reimagine their role: from one-time seller to ongoing service provider. The most successful OEMs will likely be those that can blend the best of automotive engineering with the agility of tech companies – delivering reliable and safe vehicles, but also continuously updating and improving them through software and forging connections to a wider digital ecosystem.

Conclusion: Driving Forward with a Connected Strategy

Connected car services for OEMs represent a pivotal opportunity to achieve sustainable growth and differentiation in the automotive market. As we have seen, they offer tangible benefits – from new recurring revenues and higher margins, to stronger customer loyalty and valuable operational savings. Real-world examples from Tesla, Ford, BMW, Mercedes-Benz, and others demonstrate that connected services are already contributing to competitive advantage and bottom-line results. The trend is clear: connectivity and digital services will be as fundamental to auto industry success as engine technology or manufacturing efficiency have been in the past.

For automotive executives and product innovators, the imperative now is to craft a robust connected car strategy that aligns with the company’s brand and customer expectations. This includes prioritizing the development of features that truly enhance the user experience, investing in the right technology platforms to support over-the-air updates and data analytics, and ensuring data security and privacy are built into every service. It also means being prepared to iterate – learning from what customers value (or don’t value) in connected offerings and refining the business models (subscription vs. one-time purchase, bundled packages, free trials, etc.) to maximize adoption and satisfaction. Automotive digital transformation is an ongoing journey, and connected services are at its heart.

Finally, OEMs should recognize that they don’t have to navigate this complex landscape alone. There is a growing ecosystem of technology partners, mobility startups, and platform providers with expertise in connected vehicle solutions. Engaging in strategic partnerships in the connected mobility space can accelerate innovation and time-to-market. For instance, collaborating with a connected mobility platform expert like Comodif or integrating third-party services (such as a popular music streaming or parking app) into your vehicle can enrich your offering without starting from scratch. Such partnerships allow automakers to focus on their strengths – vehicle design, safety, manufacturing – while leveraging specialized knowledge for software, cloud infrastructure, and data monetization.

In conclusion, connected car services are a win-win when executed thoughtfully: drivers get a more personalized, convenient, and safer experience, while OEMs gain new revenue and a closer relationship with their customers. As the automotive world continues to evolve towards smarter and more autonomous vehicles, connectivity is the bridge to the future. Companies that invest in connected services today are positioning themselves as the mobility leaders of tomorrow. The road ahead is one of collaboration, continuous improvement, and creativity in delivering value beyond the vehicle itself. Now is the time for automotive leaders to accelerate down this path – to drive forward with connectivity at the core of their strategy, and to explore the partnerships and innovations that will turn that vision into reality. By doing so, OEMs can ensure they remain not just relevant, but thriving, in the new era of connected mobility.