Auto’s Duty to Data Details
April 3, 2024
As our world has grown increasingly interconnected over the last three decades, more and more of our time is spent online. Online transactions and interactions all involve the exchange of differing amounts of data, whether it’s credit card information to make an online purchase, or a live information feed from a connected car. The commonality in all of these various types of interactions is the data being passed over the Internet. Just like any other essential and widely used consumer function, questions of monetization can arise. Companies ranging from Tier 1 Automotive Suppliers to Auto OEM’s themselves seek to establish the best (and most profitable) practices for monetizing these exchanges in data, in an attempt to create the best possible business models. With the advent and widespread implementation of connected car services and now EVs, data monetization has steadily made its way and its presence felt in the automotive world. Data monetization is undeniably an enormous opportunity for growth and profit within the industry, but it has to overcome some growing pains in order to meet the demands and challenges of the coming decade.
To contextualize the scale of the market at hand (and therefore the challenges), it is pertinent to examine profit projections and the accompanying issues. All the way back in 2016, McKinsey & Co. forecast that the data monetization market would bring the auto industry around $750 billion per year in incremental revenue by 2030. Since then, McKinsey has revised this number downward, but the potential for profit still remains enormous and enticing. For example, GM and Stellantis have publicly committed to generating an incremental $25 to $30 billion per year in (high margin) revenues through their connected services and data monetization platforms. These impressive commitments and projections appear to signal a clear path towards mass profitability, but there are roadblocks that stand between such lofty numbers and the current reality. In the European Union and the United Kingdom, the General Data Protection Regulation (GDPR) has instituted strict privacy laws surrounding consumer data, forcing companies to tread carefully with data monetization so as to remain compliant. In the US, companies are limited by state legislation such as the California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA), which are mainly centered around California’s regulations for commerce within the state. OEMs and data companies must be cautious to avoid disastrous consequences.
The gravity of the matter was exposed publicly two weeks ago, as a variety of news outlets reported that GM (through its OnStar subsidiary) and insurance provider LexisNexis were being sued for allegedly collecting driver data without clear consent and sharing it with insurers. This resulted in some drivers having significantly higher insurance rates. Far from the massive profitability promised by McKinsey, these companies have instead found themselves in deep PR and legal trouble. The data privacy issues and the resultant class action lawsuit are now causing some skittishness within the industry, as other companies and OEMs seek to avoid the public relations problems facing GM and LexisNexis. While the courts will decide if the data collection methods employed breached any laws, they certainly have negatively impacted consumer trust while at the some time reportedly netting only minimal profits. Together with the legal restrictions in the EU and US, along with potential ethical issues, it is easy to see the growing discomfort around the future of automotive data monetization. However, this incident should not be seen as a death knell for data monetization, but actually an incentive for reform and the creation of best practices for companies seeking to enter this market going forwards.
To help you maneuver through these turbulent waters, the team at AutoMobility Advisors has put together a new whitepaper to outline these best practices and some professional recommendations for navigating data monetization in a profitable, legal, and consumer friendly manner. Prepared for client use by Allen Levenson and Chip Goetzinger, two veteran automotive technology experts with decades of combined experience, this original document provides excellent insight into the convoluted rules set forth in markets domestically and abroad as well as the key issues, such as ethics, feasibility, etc.. Our industry experts have carefully crafted 7 main tenets of data collection such as: Always follow all local and federal laws and regulations, never use data to hurt the customer, collect and transmit only necessary data, give customers the ability to explicitly consent to data usage, ensure robust internal controls and cybersecurity practices, assess ethic and PR issues, and lastly, where possible, use data for good. By keeping these principles at the forefront of your data monetization business, it is possible to run a legal, profitable, and ethical operation, avoiding liability and potential scandal. Stay tuned for the release of the complete AutoMobility Advisors’ whitepaper on proper approaches to data monetization – coming soon!
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