Manufacturers must develop slick 'connected car' offerings whilst managing legal risks, says expert

Munich-based technology and outsourcing law specialist Michael Horn of Pinsent Masons, the law firm behind Out-Law.com, said that car manufacturers must embrace the connected cars age or risk losing their market share.

Manufacturers will, he noted, increasingly battle to differentiate their connected car offerings from those of rivals, with both the individual services offered as well as 'user friendliness' influencing consumer decisions. However, legal issues such as data ownership, privacy rights and liability for faults must not be ignored by the manufacturers whilst they strive to remain competitive, Horn said.

'Connected cars' is a general term used to refer to vehicles that allow information to be transmitted and received, often involving use of SIM cards and public communication networks, to enable a range of services in respect of the vehicle and its users. Examples include, an automatic lock/unlock feature, car operating status monitoring and access to 'infotainment' services like Facebook.

"Connectivity in cars will enable an increasing range of services to be provided, with many examples already emerging on the market," said Horn. "These services have the potential to improve the end customer's pure enjoyment using the car, particularly through infotainment, but also to significantly improve car performance and safety. For example, services enabling car performance issues to be more readily identified, allowing associated problems to be addressed earlier in the repair cycle, can save the car owner money and help ensure they drive a more reliable vehicle."

"Car performance data can also reveal the frequency with which functions of the car are being used and therefore inform research and development projects and decisions on future designs," he said.

"Regarding infotainment, there is a range of possibilities for the 'shape' of future service provision. For example, content providers may commit to exclusive agreements to promote certain services, such as films on demand or games, within a particular car manufacturer's connected cars. This might act as a point of potential differentiation in a market that will soon see consumers significantly influenced by factors beyond 'traditional' aspects such as engine performance and aesthetics. The range of connected services available and the ease with which those services can be purchased and used will become increasingly important to car buyers," Horn said.

"The connected cars concept involves, importantly, the creation and transmission of a lot of data," he noted. However, there remains significant uncertainty as to how, for example, matters of ownership in data generated by such connectivity will be best resolved between car manufacturers, service users and third party service providers, Horn said.

To secure rights to use at least certain classes of the generated data and meet privacy requirements, car manufacturers will in many use-cases need to obtain appropriate service user consents, the expert said.

"There is a tension between the need to make the user experience as simple as possible and the need to meet legal challenges and obligations relating to use, ownership and privacy," Horn said. "A major challenge is finding solutions that enable manufacturers to exploit the technologies in connected cars and related data, whilst ensuring drivers properly understand the intended use of such data, as well as agreeing to other terms of use. Hiding the information away deep in a car sales contract is unlikely to comply with privacy laws in many jurisdictions, but equally repeatedly seeking consents during usage for every new service function is likely to be seen as unattractive to consumers and those promoting the offerings."

"It is imperative that legal considerations are taken into account as part of the systems and service design process, as 'retro-fitting' can be extremely difficult, expensive and may produce unsatisfactory results, in terms of the end result's ease of operation and legal compliance," Horn said.

The rise of connected cars is expected to be supported by an increase in the use of telematics systems. Those systems are already used by some insurance companies to capture data on drivers' behaviour and tailor motor insurance premium prices as a result.

Swedish researchers Berg Insight said research it had conducted showed that there are likely to be 54.5 million telematics systems embedded into manufacturer's equipment sold worldwide a year by 2020. There were 8.4m such units sold last year, it said.

It also forecast that "the number of cars sold worldwide equipped with head-units featuring handset-based telematics capabilities will grow from 7.0 million in 2013 to 68.5 million in 2020". It predicted that there will be 158.9m subscribers of telematics services by 2020, compared to 16.6m globally at the moment.

Berg Insight said that car manufacturers are increasingly looking towards "cloud-based telematics services". It said they allow service packages to be customised to the "needs of individual customers"

"Several car manufacturers have app stores that enable car owners to download apps directly to the infotainment system of the car," Berg Insight said.