Car connectivity: What consumers want and are willing to pay

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McKinsey projects that more than 90 percent of vehicles sold in 2030 will be connected, up from 50 percent today.1Unlocking the full life-cycle value from connected-car data,” McKinsey, February 11, 2021. To capture the full value of this growing market, OEMs and other mobility players should consider the following three questions:

  • What is the importance of connectivity for different customer segments, including those defined by region, demographic characteristics, and selected vehicle powertrain?
  • How can OEMs and other mobility players create a winning connectivity offering (including attractive features, customer willingness to pay, and smart bundling)?
  • How can OEMs and other mobility players maximize the commercial opportunity from connectivity through different payment models, such as one-time payments and subscriptions?

To support mobility players in the connected-car ecosystem, we recently surveyed more than 1,600 automotive customers in China, Germany, and the United States. The survey focused on 39 different features that could be part of a connectivity offering in six overarching categories: safety and security, comfort, autonomous driving, performance, infotainment, and assistant services. (For more information on the methodology, see sidebar “The McKinsey Automotive Digital Services Customer Survey: Methodology”). The survey findings allowed us to identify nine key implications that can help mobility players understand the current market, including regional differences, and capture the full value from connectivity by identifying features that consumers value, developing strong offerings, and setting the right price.

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Why connectivity is important

Car buyers often prefer vehicles with strong connectivity, and the survey results reflected this enthusiasm.

1. Connectivity will be crucial to win in growing segments globally, especially in the battery-electric-vehicle segment and in China

Many consumers are willing to switch automotive brands for better connectivity, especially in the battery-electric-vehicle and Chinese markets.

2. OEMs can expect average take rates of about 40 to 60 percent for connectivity features, if packaged and priced well

A majority of respondents, especially those in China, are very likely to buy connectivity features in their next vehicle.

How to create a winning connectivity offering

OEMs and other mobility players face a complex challenge when developing connectivity offerings because they must understand what customers in select segments want and what those customers are willing to pay. The bar for strong offerings is already high, especially in China, and will only rise higher.

3. Chinese OEMs are setting new standards in connectivity offerings

OEM connectivity offerings vary by region, with many more features offered as standard in China.

4. Connectivity features and offerings must be highly tailored to specific regions and customer segments

5. Connectivity features and offerings must reflect customer relevance and willingness to pay

Safety and security features

Comfort features

Autonomous-driving features

Performance features

Infotainment features

Assistant services

When examining feature relevance and willingness to pay, different archetypes emerge.
When examining feature relevance and willingness to pay, different archetypes emerge.
When examining feature relevance and willingness to pay, different archetypes emerge.
When examining feature relevance and willingness to pay, different archetypes emerge.
When examining feature relevance and willingness to pay, different archetypes emerge.
When examining feature relevance and willingness to pay, different archetypes emerge.
When examining feature relevance and willingness to pay, different archetypes emerge.

6. Bundling increases average customer relevance of connectivity features

Bundling connectivity features can increase relevance and intent to purchase.
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A new breed of car financing: Feature bundles and embedded services

How to commercially master the connectivity opportunity

7. Customers favor subscription models for connectivity services but prefer yearly payments over monthly payments

Customers increasingly want flexible payment options for connectivity.

8. Pricing connectivity features is more complex than expected, and finding the right balance between price level and take rate is crucial

Most customers in the premium segment are not willing to pay the current prices for connectivity features.

9. Continuous customer activation beyond first car owner is essential to capture connectivity’s full potential

Single features and connectivity bundles have a payback period of about three years for monthly subscriptions and five years for annual subscriptions.

Recapping: Winning the connectivity race

Winning the connectivity game requires several fundamental activities:

  • obtaining a sophisticated understanding of customers, including how their needs differ across regions; behavior-based segmentation can help reveal such nuances
  • developing features that strictly adhere to customer requirements
  • adjusting current processes, including those for R&D, product management, marketing, and sales and services, while simultaneously shifting to recurring revenue models
  • creating a strong commercial strategy that combines both sophisticated bundling and pricing in compelling offers and then ensuring that the value proposition is clearly communicated to customers and delivered through all sales channels
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