The race is on in Japan to build cars that are connected and home to digital services, but according to some industry experts, leading manufacturers like Toyota and Nissan could risk being held back by consumers in their home market.
In contrast to car consumers in the USA and Europe, Japanese people are somewhat reluctant to pay for value-add digital services like being able to order a coffee from your car dashboard display. As such, so far, only 10 percent of cars on the road in Japan currently have embedded connectivity, versus around 49 percent in the USA and 31 percent in Europe. According to research from SBD Automotive, this figure is 20 percent in China, demonstrating that while APAC is getting its act together, Japan still lags behind somewhat. That said, over half the vehicles sold in Japan in 2016 were equipped with autonomous systems to apply brakes to avoid collisions, considerably higher than the 24 percent in Europe and 9 percent in the U.S. So the demand for embedded technology would appear to be there.
What is happening in the region?
Throughout APAC, digital adoption has always been high. Indeed globally, the region has always been known as something of an early adopter: whether talking about miniaturization of technology from the 1980s onwards to South Korea leading the world today in deployment of high-speed mobile broadband, APAC has been at the head of the queue.
Today, when it comes to connected cars, demand is definitely there. In China, citizens are prepared to pay up to 20 percent more to get their hands on a connected car. Throughout APAC, an increasingly large middle class with access to more disposable income is demanding more state-of-the-art digital tools in general, and that extends to a technology-powered driving experience.
As time goes on, more and more consumers in APAC will expect connectivity in their cars. They will want access to digital services while on the move, simply because a different type of younger consumer with more expectations is on the rise. In China for example, the average age for a premium car buyer is around 37, compared to 54 in the U.S. A big majority of Chinese consumers, 65 percent, is prepared to adopt connected car solutions, significantly much higher than 40 percent in Europe and 32 percent in North America. Consumers are demanding additional features that connected cars can offer, such as road safety monitoring, vehicle health monitoring and interactive entertainment solutions. Hopefully it is only a matter of time until Japan’s consumers come around and follow these trends.
What is happening in Japan?
Connected cars do seem like an inevitability, not least thanks to their capabilities to deliver improvements in safety, traffic management, efficiency and user experience. Technology can enable reduced travel time and cost through optimized car performance and overall movement of traffic – and they can have a positive effect on the environment. But what will be the "killer app" that sparks mainstream uptake in Japan?
Toyota has introduced a service it calls T-Connect that gives Japan’s drivers real-time traffic information and also allows them to book restaurant tables in real time – but uptake has so far been slow. The auto manufacturer has even gone to the lengths of creating an in-house company responsible for connectivity-related innovation and has a target of 70 percent of its new cars using the T-Connect system by 2020.
Nissan recently committed to providing connectivity in all new Nissan, Infiniti and Datsun cars by 2022. Honda has not set similar targets but has announced that it is working with SoftBank to come up with new connected technologies that it hopes will prove attractive to Japan’s consumers.
What's next for Japan?
Japan is one of the world’s major markets and along with China is one of APAC’s two biggest markets, so it is a key geography when it comes to the connected car. Japan has set targets for the number of autonomous cars it wants to attain, but while throughout APAC in general mass adoption of self-driving vehicles could be limited in the near future, mainly due to infrastructure constraints, Japan’s opportunity to grow a user base perhaps lies in offering specific, tailored packages and services that give "intelligent assistance" to drivers.
Could intelligent assistants be the killer app that propels Japan’s connected car industry forward? Embedded technology solutions demonstrate that Japan has indeed already entered the connected car era and is now ready for the next step forward. According to Statista, revenue in Japan’s connected car industry will total US$763 million in 2019, but will grow between this year and 2023 at a CAGR of 11.7 percent to a value of US$1.19 billion, to a connected car penetration of 32.9 percent by 2023. It will be interesting to see what trends and digital services emerge along the way.
To read more about the connected vehicle and its possibilities for APAC and Japan, read In the Driver’s Seat, our white paper produced in partnership with PwC.
Head of Cloud Asia Pacific, Orange Business
As Head of Cloud in the region, Christophe is responsible for driving and supporting APAC country teams to grow pipeline and win new and large transformational deals for cloud. He has lived in Japan for more than 10 years, and as head of Orange Business Japan for over seven years, is well versed in the Japanese market.