Toyota’s Connected Car Company- Latest to Join the Hybrid Mobility Player Category

Toyota unveiled today its connected car company, a name that it has assigned to its brand new connected car vision and strategy.  While the news that Toyota continues to leave behind Apple and Google with their respective Carplay and Android Auto solutions is surprising it nevertheless affirms the seriousness with which Toyota is getting into the connected game now.  Toyota is calling the brand “Connected Car Company” and the solution “Mobility Services Platform”, both very simple callouts to an overall vision which even though is very complete doesn’t come across as pathbreaking innovation. Toyota joins a long list of car companies ranging from Ford to Daimler to BMW to GM who have already set up initiatives and subsidiaries to tap into the growing mobility market potential. The big difference is the fact that Toyota holds the largest volume OEM tag and that could change things a bit especially given the fact that the new platform will focus its efforts on two of their main markets – Japan and US. And the other uniqueness here is the fact that Toyota has literally build this ground up internally instead of relying on third party partners and specifically as the media points out avoided any Silicon Valley touch to this.

 What is MSPF? --> Essentially a digital solution with roots in the car and the cloud. The MSPF features a new hardware that includes both the traditional telematics capabilities (like OnStar) and infotainment experience where Toyota is adopting the Ford SDL to connect Android and Apple phones to the car. This is where the anti-Google and Apple sentiment comes in where Toyota is probably the only OEM to resist them quoting ownership of the user experience and safety as key reasons. And Toyota plans to open the platform to third party developers who they hope will write apps using their API’s. The back end of the system is linked to the data center that Toyota is building in Plano (taking a leaf out of GM who moved from 23 outsourced data centers worldwide to 2 in Michigan built by them) connected through the Microsoft Azure cloud. This is where the game becomes exciting as Toyota’s intention is to start connecting every car sold in the US and Japan through these new devices and start collecting data that will allow them to do several cool things.  

·      The navigation experience for example will be highly connected and will also use some form of sensor data plus V2V communication and provide road condition warning to users (e.g. Black ice on the road). And eventually using the data collected (Like the HD map effort by HERE, TomTom and REM announcement by Mobileye) they will be able to keep the maps highly updated.

·      Prognostics with tight dealer integration is another use case Toyota will aim for. This service will pick up faults before they occur and with dealer integration even help you book an appointment with the service space. Again, a very similar service was launched by GM on the OnStar LTE dubbed Drive Assurance on several vehicles (limited to battery, fuel pump and starter motor currently). This is again a use case for all the data collected and ML that Toyota hopes to apply on them.

·      Another use case for the data that is being envisioned is using driving analytics for insurance premium benefits (Pay how you drive insurance). The big challenge here is insurance companies like Progressive and State Farm have been trying this for many years in the US with limited success and even OEMs like GM and Ford who are offering similar programs in the US are tasting limited success. There are legal challenges for this business model to succeed (between Toyota and insurance companies) and actual benefit issues for the user.

·      The real cool innovation on the platform is the smart key box unit that solves issues pertaining to accessing and using shared vehicles. By placing the smart key box connected to the vehicle CAN, all the users need to do is take their BT enabled phone to the vehicle and a digital key match opens the car. Toyota hopes to add this to all cars by 2020 and claims it can be retrofitted to older cars.

·      Using this technology and a strategic investment of about $10M in P2P car sharing service Getaround, Toyota hopes to generate more demand for its own vehicles and help the users make money. This is a double whammy of getting into the shared mobility game but still not losing out on car sales (like what Tesla is hoping to achieve with its $8000 self-driving hardware and the upcoming eHailing network). Already the announcement has come out that starting in San Francisco from January 2017 about 500 Prius buyers with their approval will be enrolled in the P2P car sharing program by Getaround that will help them generate additional money that will go towards the vehicle payments. With Getaround reporting that Prius owners in its network are already generating close to $500 per month, that is a sweet deal for owners and a cool driver for Toyota to sell more Prius vehicles and expand sales.

·      Another focus area of the MSPF is to use the connectivity to create a lifetime connected customer as against a customer who jumps to aftermarket once the warranty expires. Toyota is hoping to use areas like over the air updates and predictive analytics on the data to better this CRM experience as this will allow them to increase profitability on a already profitable aftersales business.

How it Stacks Up Against Competition-->Every few years Toyota has promised innovations from a connected perspective. The effort with Salesforce that started in Japan a few years ago to this one the overall promise is cool.

1)     Active stake in the growing mobility movement – Earlier in the year Toyota announced its investment in Uber (rumored to be around $100M) with the leasing offers through its financial services arm to help drivers pay for the lease by doubling as Uber drivers. That and the partnership with Getaround truly signals a movement from Toyota that is looking to keep its stake in the car selling game but also participate in the growing mobility user base. The net effect of how this will affect overall car sales and thus Toyota’s sales is unclear at this point as the effort seems to be more wanting to increase car sales through the partnership with players like Uber and Getaround. This approach in a few ways is like what OEMs like GM are doing with Lyft (Express Drive program) but different from how Daimler for example is approaching this (Daimler has a more organic brand called Moovel supporting its mobility efforts focusing on multimodal integration).

2)     Nothing innovative on the in-car experience – Even though Toyota has said no to Apple and Google the revamped system still seems commonplace compared to the increasing number of connected systems emerging from automakers. From GM to Ford to BMW, the focus increasingly is on delivering a truly connected, personalized and predictive experience to customers. GM in fact announced a first of its kind partnership with IBM Watson to bring the predictive and personalized aspects to its OnStar experience understanding user behavior and habits. Even location cloud vendors like HERE have been stepping up the ante on the same in its connected navigation experience (Already delivered to OEMs like JLR).

3)     All that data, ML and of course the Toyota Research Institute – All that data that Toyota will start collecting soon will enable them to develop several use cases ranging from HD maps to warranty analytics to prognostics to others and add the TRI effort on top which is focusing on AI use cases, the combination could be powerful. While the German trio took a stake in HERE to develop high def maps and brands like GM and VW are relying in parts on vendors like Mobileye, Toyota is taking a giant leap by focusing to do this on its own. Ultimately this will give Toyota several benefits- understanding their users and their commute patterns, smart city support they can provide thereby opening a new revenue stream possibly and most importantly decide on what level of autonomy is suitable for its customer base. The bottom line is the organic development approach Toyota is taking to all of this.

In a nutshell, Tesla might not be the only disruptor doing stuff internally, brands like Toyota with the volumes they sell might become a bigger disruptor in the future of transportation.