“I have no doubt that the auto industry will change more in the next five to 10 years than it has in the past 50,” said Mary Barra, chairman and CEO of General Motors (GM), during her speech  at the Consumer Electronics Show (CES) in Las Vegas earlier this month. “The convergence of connectivity, vehicle electrification and evolving customer needs demands new solutions.”

Given that most of the world’s major car manufacturers have made announcements in the past two weeks about everything from smartphone-enabled dashboards to the latest advances in driverless vehicles, Barra was not exaggerating the seismic level of transformation.

Partnerships between car makers and tech brands are driving this change. The most eye catching announcement at CES was GM’s $500m (£340m) investment in car-sharing service Lyft, which will see the two companies work together on developing driverless vehicles. Ford inked a deal for US telecoms giant AT&T to power its new Sync Connect system, while Microsoft partnered with connected product maker Harman to incorporate key elements of Microsoft Office 365 into in-car ‘infotainment’ systems.

The Microsoft tie-up will use voice-activated personal assistant software to allow drivers to schedule meetings, hear and respond to emails and join conference calls, according to a statement. Microsoft also claims drivers will be able to hold Skype calls and conferences when stationary, or on the road in driverless vehicles. “We will allow consumers to be more productive during their driving hours, while enjoying far greater convenience, safety and reliability,” says Peggy Johnson, executive vice-president of business development.

Connectivity central to marketing strategies

Amid all these announcements and new technologies, car brands are tentatively starting to make connectivity a bigger part of their marketing and branding strategies. Korean automaker Kia announced a new sub-brand at CES for its driverless technology – Drive Wise – as it confirmed plans to launch partially autonomous cars by 2020 and fully autonomous vehicles by 2030.

Kia, which alongside sister brand Hyundai is investing $2bn (£1.4bn) in developing driverless technology, unveiled several new features at CES, including an ‘automated parking valet’. The feature lets drivers get out of their car and direct it to a parking spot via their smartphone.

However, Kia’s Drive Wise announcement also reflects the auto industry’s current state of limbo. Brands can tantalise consumers with demonstrations of new technology, but there remain numerous hurdles to making driverless cars a reality. This includes the simple fact that wireless infrastructure is not yet advanced enough to facilitate it.

Connected car technology is expected to change the industry in the next five to 10 years

The introduction of 5G mobile internet – expected in the next few years – is a key piece of the puzzle, but for now car makers are waiting for technology to catch up to their vision. The same is true of legislation, which will restrict brands as they wait for governments around the world to introduce appropriate safety and insurance regulations.

As manufacturers experiment with new technology, car brands are also struggling to define and communicate the benefits of connectivity to their customers. Terry Hogan, co-founder of  car website Motoring.co.uk, suggests that this stems from uncertainty about which of these nascent technologies are useful, and which are pointless and distracting.

“A connected car that can book itself in for a service is useful, but a car that checks social media for me is arguably distracting,” he says. “At the moment, [the connected car] is just replacing your phone with a screen in your car that responds to verbal communication. I don’t think that’s enough – it’s not a game changer.”

Hogan believes that because of various factors such as the rise of car-sharing apps and the growth in people buying vehicles on finance arrangements, the status of drivers is shifting “from owners to users” of cars. This has prompted tech giants like Google and Apple to develop their own self-driving cars as they realise the enormous business potential of connected cars that run off their respective operating systems.

Car makers become tech brands

Such competition is in turn leading car marques to form their own partnerships with tech brands and build connected car ‘ecosystems’ that aim to maximise their users’ data. In other words, car makers are becoming tech brands themselves, opening the door to countless brand partnerships.

“Car brands are looking at the connected car as a retention product [through which] they can communicate better with you as a consumer,” says Hogan. “So if you have an accident, the car can direct you to a body shop that uses manufacturer-approved parts – or it can offer you an insurance replacement vehicle from the same manufacturer. That whole area of service is a multibillion-dollar business.”

GM is one car maker using connected car technology to deepen its engagement with drivers and develop new revenue streams. Its connected platform OnStar runs on 4G LTE technology and is available to all owners of GM models in the US and Vauxhall owners in the UK. It provides services such as mapping and navigation, communications for roadside assistance and advanced diagnostics so that drivers can check on the health of their vehicles via the OnStar mobile app.

Last year, GM also launched coupon distribution feature At Your Service. The tool, which is so far only available in the US, appears as a section within the app in which users are served location-based coupons and offers from merchants according to their driving behaviour, such as places that they commonly visit. At CES this month, GM named coupons company Groupon and petroleum giant ExxonMobil as its two latest merchant partners.

Tech giant Google is developing self-driving cars

The latter, which has more than 10,000 Exxon- and Mobil-branded petrol stations in the US, will incorporate new fuel and convenience store offers into the At Your Service platform. GM communications manager Deana Alicea claims the car group “remains on track to build an ecosystem across multiple categories” after meeting with other potential partners at CES.

“While it is still early, the initial response from our users [is positive] based on initial usage  and a high percentage of return users,” she says. “The numbers also reflect a high level of interaction within the app, [with people] viewing offers, linking to sponsored merchant locations and closing the loop on the interaction by sending directions for navigation to the vehicle.”

Promoting safer driving

Several UK brands are also finding ways to engage with customers via connected cars. Last month, insurance group Aviva launched its ‘Good Thinking’ campaign, which seeks to encourage people to drive more safely by downloading the Aviva Drive smartphone app. This uses GPS tracking to monitor braking, cornering and acceleration, and provides a score based on the driver’s overall safety.

Aviva is using the app to offer car insurance discounts to customers for safer driving, signalling its intent to expand its promotional activities through connected technology. It reports that more than 50,000 people downloaded the app in the first two weeks of the campaign.

Although Aviva declined to comment on whether the company is developing services that could work on in-car connected platforms, a spokeswoman confirmed it as an area of interest for the group, adding that the brand is “excited about the development of connected car technology”.

She says: “This has the potential to significantly improve road safety and be a real benefit to consumers. It opens up the opportunity for further developments in telematics, accident breakdown notifications and real-time fault diagnosis.”

Breakdown cover provider AA cited many of these benefits when launching its own connected car joint venture earlier this month. Together with roadside assistance clubs in the Netherlands and Austria, the AA has launched Intelematics Europe for developing connected car software.

The proposed services – delivered via a small device that plugs into a car’s diagnostics port – include improved vehicle security, faster and more accurate assistance deployment and the ability to diagnose and pre-empt breakdowns. Similar to Aviva, the AA says this level of data tracking could result in cheaper car insurance.

AA president Edmund King explains that the company will use its existing app, which has more than one million downloads, to promote and synchronise its connected car services (see Q&A). It also plans to poll its panel of more than 300,000 members to find out how they would like to use connected car services. As all brands battle to gain a stake in the world of connected cars, such consumer insights could prove highly beneficial.

“This technology opens up and promotes our brand into the future,” predicts King.

Q&A with Edmund King, President of AA

Q: How does the AA plan to communicate the benefits of its new connected car service to customers?

The innovative AA app is taking off, with more than one million downloads and 9% of all personal members who broke down last month using the app to report or assist with their breakdown. This is great as it saves time and allows the member to track their patrol. The app will be a means of linking customers with the benefits of the connected car.

We also have the biggest dedicated motoring panel in Europe – the AA Populus panel – with  more than 300,000 participants who we poll on a monthly basis. The responses are running at around 30,000 per month, so this will also be a good target or pilot audience.

Q: Will the connected car service provide opportunities for the AA to collaborate with other brands such as hotel chains or petrol station operators?

Yes, the service opens up a host of opportunities. We already deal with thousands of hotels through the AA hotel accreditation scheme, so have excellent connections. We also integrate hotel locations and flag them up through our popular AA route planner and our AA app locates the nearest and cheapest petrol and parking spaces. So as a company we are already engaged in many of these markets, but the connected car roll-out will enable us to link these services together in a more dynamic way.

Q: What effect will this technology have on how the AA interacts with customers?

We will be able to pre-empt breakdowns by giving advance warning of faulty batteries or potential faults. We will be able to offer solutions before our members break down.

The new connected car technology should also help us to advise whether it is still safe to drive when a fault is flagged up on the dashboard. Perhaps more importantly, the technology will also help us to offer benefits and services to our members even if they don’t break down, such as telematics insurance or help in locating the best AA Rosette restaurants.