ArticlePDF Available

Access to digital car data and competition in aftersales services markets

Authors:

Abstract

This study looks at car data markets from an economic perspective. We start from several options for the technical characteristics of data access points that have been discussed among stakeholders in the automotive industry. We examine the structure of data markets that are likely to emerge from these characteristics and the implications for the welfare of manufacturers, aftermarket service providers and drivers. Car manufacturers face competition in car markets and aftersales services. However, they can design the car data architecture to ensure their exclusive access to the data. That would give them a monopoly in the market for car data from their brand. They can use this to increase their leverage on aftersales services markets. Our baseline scenario is the Extended Vehicle proposal that manufacturers prefer. This ensures their data access monopoly and enables them to maximizes revenue from data and data-driven aftersales services. It reduces welfare for drivers and aftersales service providers. Two technical variations on the baseline scenario reduce manufacturers' leverage over data server governance and their monopolistic power. That could reduce social welfare losses and transfer more surplus to drivers and service providers, compared to the baseline scenario. Other scenarios examine alternative data access gateways, for instance by keeping the OBD plug open and by applying real time data portability under the GDPR. These scenarios may offer some scope for regulators if they wish to keep alternative data access channels open in order to stimulate competition in aftersales services markets. However, they entail additional hardware and switching costs for consumers, compared to the baseline and are therefore partial and imperfect substitutes. In two final scenarios we examine the market position of B2B data marketplaces and consumer media services platforms. The potential for data aggregation across car brands and other sources creates some possibilities for these platforms to provide a counterweight to monopolistic behaviour by the manufacturers. However, manufacturers' control over the data supply and access to the in-car human interface ensures that they retain substantial leverage over these platforms. Regulators may consider creating the conditions for a more level playing field between OEM services and third-party aftersales service providers.
A preview of the PDF is not available
... We focus on the business-to-business (B2B) automotive industry because data marketplaces differ vastly between industries. Data marketplaces are relatively mature in this industry, reflecting on the existence of such marketplaces that mediate between original equipment manufacturers (OEMs) and aftersales service providers (Martens & Mueller-Langer, 2018). Data marketplaces are emerging because OEMs can monetize vehicle data in new ways, mainly when third parties utilize them to create services that are different from their main products (Kaiser et al., 2021). ...
... As explained by an interviewee, when fixed pricing mechanisms are applied, "the data price is predefined, and the total price is determined based on how much data the data seller consumed" (DM6). Data pricing mechanisms are often "set by data sellers" (Martens & Mueller-Langer, 2018) in the automotive industry. Martens and Mueller-Langer (2018) explain that OEMs can fix a price for their data because they have monopoly power. ...
... Data pricing mechanisms are often "set by data sellers" (Martens & Mueller-Langer, 2018) in the automotive industry. Martens and Mueller-Langer (2018) explain that OEMs can fix a price for their data because they have monopoly power. In limited cases, ...
Article
Policymakers and analysts are heavily promoting data marketplaces to foster data trading between companies. Existing business model literature covers individually owned, multilateral data marketplaces. However, these particular types of data marketplaces hardly reach commercial exploitation. This paper develops business model archetypes for the full array of data marketplace types, ranging from private to independent ownership and from a hierarchical to a market orientation. Through exploratory interviews and case analyses, we create a business model taxonomy. Patterns in our taxonomy reveal four business model archetypes. We find that privately-owned data marketplaces with hierarchical orientation apply the aggregating data marketplace archetype. Consortium-owned data marketplaces apply the archetypes of aggregating data marketplace with additional brokering service and consulting data marketplace. Independently owned data marketplaces with market orientation apply the facilitating data marketplace archetype. Our results provide a basis for configurational theory that explains the performance of data marketplace business models. Our results also provide a basis for specifying boundary conditions for theory on data marketplace business models, as, for instance, the importance of network effects differs strongly between the archetypes.
... Alongside drivers and OEMs, new players outside the automotive sector are also entering this traditionally closed ecosystem, increasingly launching datadriven services such as remote diagnostics or road condition monitoring [4]. While OEMs are seeking to exploit their supremacy position with exclusive data access, independent service providers explore alternative gateways to get access to vehicle data, for instance, through emerging data marketplaces [12][13][14]. Accordingly, the current research addresses both the digital transformation of incumbents [15][16][17] and the penetration of emerging startups [8,14,18] competing or collaborating in the connected car market. ...
... The latter offers on demand services to consumers through its Autopilot, including features such as performance-and batteryboosting software [27]. However, while OEMs have exclusive access to the generated car data, independent service providers have to identify other approaches to capture this valuable data [12][13][14]. The majority of startups, including Mojio, Vinli, and Zubie, utilize a telematics-equipped dongle connected to the on-board diagnostics (OBD) interface to allow remote access to the vehicle data [5,18,23,25]). ...
... Whereas other startups such as Zendrive and Vialytics use the sensors built into modern smartphones to capture data while driving [14,18]. Furthermore, emerging data marketplaces such as Caruso Dataplace or Otonomo offer another alternative for getting access to vehicle data [13,28,29]. Those marketplaces are third-party platforms acting as neutral intermediaries and allowing others to sell standardized data products [30]. ...
Conference Paper
Full-text available
Data monetization has proven to be one of the most viable profit pools across industries. As vehicles become increasingly connected, leveraging their collected data through novel business models is the most promising value driver for automotive enterprises. Despite the increasing practical relevance, theoretical and conceptual insights on connected cars and their associated business models are still scarce. Thus, we develop a taxonomy of data-driven business models in the connected car domain according to four perspectives-value proposition, value architecture, value network, and value finance. Further, we apply the taxonomy to analyze the business model of 70 companies acting under the realm of connected cars. A subsequent evaluation indicates both the robustness and general feasibility of our taxonomy. Our taxonomy contributes to descriptive knowledge in this emerging field and enables researchers and practitioners to analyze, design, and configure data-driven business models for connected cars.
... Teaching local people to perform complicated service operations can require substantial resources from the provider and would probably not benefit the provider or customer, especially when a complex service will only be performed once or twice. An increase in connectivity would enable better planning of the service beforehand and ensure the right knowledge and parts at the local warehouse, which could eliminate unnecessary transportation of products and parts (Martens and Mueller-Langer, 2018). ...
... Moreover, it is highly unlikely that a customer will return the product without any sort of incentive (Theodore et al., 2005), so the service is driven by the customer's willingness to cocreate with the provider based on the value the customer places on the postulated incentive. According to this study, there are two ways providers can obtain this information; either through connectivity (Martens and Mueller-Langer, 2018) or through contracting, in accordance with Theodore et al. (2005) and Nußholz (2018). We recommend that providers access product information throughout its lifetime through connectivity and/or contracting and intercepting when the product is obsolete. ...
Purpose The purpose of this paper is to identify requirements and tradeoffs on logistics services for enhanced circularity of materials and resources. Design/methodology/approach Based on multiple case study design and abductive reasoning, the study investigates 13 different product categories. The data were analyzed based on theoretical, a priori codes from the literature review. Inductive, emerging codes were added to the coding scheme during the analysis. Findings Requirements of logistics services to support slowing of resource flows are categorized with respect to initiator, location of the service, single or multiple actors, and transportation of parts, products and people. Moreover, the study identifies new logistics tradeoffs: material and people, knowledge and people, and information and knowledge. Transportation of product, people and parts can be reduced by increasing local knowledge and improve information sharing. Research limitations/implications This review contributes to the understanding of the relationship between logistics services and enhancement of circularity by highlighting requirements on logistics services in the aftermarket supply chain that support slowing of resource flows. To enhance circularity, logistics services must extend the traditional material information flow with the flow of people and knowledge, respectively. Practical implications The categorization provides practitioners and researchers with an overview of requirements and tradeoffs on logistics services to enhance circularity of a particular circular cycle. The implications will provide an opportunity to address environmental impact of transportation and improve the utilization of scarce materials. Social implications Variety of tradeoffs in logistics services can enhance slowing and hence circularity of scarce materials. Originality/value First, the authors illustrate how traditional tradeoffs in logistics such as flow of materials, resources and people need to be addressed to enhance circularity through slowing. Second, the authors identify two new tradeoffs in logistics services: knowledge flow and degree of customer involvement.
... Data retrieval for the insurer would require permission from the OEM for the usage of the system architecture. In the EU prices for access to vehicle data is charged at GBP 100 [60]. If we assume that an insurer has 20,000 vehicles with telematic enabled policies, the GBP 100 cost per vehicle can contribute an additional GBP 2 million in operational costs for the insurer. ...
... Efforts have already been made by OEMs to standardize their communication and data access requirements through Extended Vehicle Data architecture [72]. However, legislators and insurers should be careful as this leaves OEMs with a privileged market position [60]. An alternative solution involving a third party should be considered where data is held, and access is provided by the third party. ...
Article
Full-text available
A telematics device is a vehicle instrument that comes preinstalled by the vehicle manufacturer or can be added later. The device records information about driving behavior, including speed, acceleration, and turning force. When connected to vehicle computers, the device can also provide additional information regarding the mechanical usage and condition of the vehicle. All of this information can be transmitted to a central database via mobile networks. The information provided has led to new services such as Usage Based Insurance (UBI). A range of consultants, industry commentators and academics have produced an abundance of projections on how telematics information will allow the introduction of services from personalized insurance, bespoke entertainment and advertise and vehicle energy optimization, particularly for Electric Vehicles (EVs). In this paper we examine these potential services against a backdrop of nascent regulatory limitations and against the technical capacity of the devices. Using a case study approach, we examine three applications that can use telematics information. We find that the expectations of service providers will be significantly tempered by regulatory and technical hurdles. In our discussion we detail these limitations and suggest a more realistic rollout of ancillary services.
... A natural situation is, for example, the one in which the final good transmits data to the data broker that can eventually feed it back to downstream firms. In the car sector, this is the real-time vehicles data transmission envisaged in Martens and Mueller-Langer (2020). We can conjecture that such integrated data broker would not have an incentive to share the data about their clients' segment with the downstream unit, as that would lead to a fiercer overall price competition. ...
Technical Report
Full-text available
The unprecedented access of firms to consumer level data facilitates more precisely targeted individual pricing. We study the incentives of a data broker to sell data about a segment of the market to three competing firms. The segment only includes a share of the consumers in the market around one of the firms. Data are never sold exclusively. Despite the data are particularly tailored to the potential clientele of one of the firms, we show that the data broker has incentives to sell the list to its competitors. Such market outcome is not socially optimal, and a regulator that aims to maximise consumers and social welfare should consider mandating data sharing.
... Access to upstream data has important implications for downstream transport service markets. The platform can monopolise access to the data in order to extract more revenue from suppliers and consumers (Martens and Muller-Langer, 2018). The platform may even decide to start producing its own transport services, in direct competition with other service suppliers, because it has much better market information than individual services suppliers. ...
Article
The increasing efficiency of the transport system during the last 100 hundred years has fuelled and sustained the unprecedent economic growth of our society. It has shaped our livestyles and influenced the development of our cities and town. At the same time it has posed several challenges to our world as the provision of transport opportunities has heavily contribuitred to the depletion of natural resources, pollution, greenhouse gas emissions, etc. Road transport in particular has had a major role into this. Several policies have been introduced during the last 50 years in the attempt to limit the impact of the transport system, but they have been effective only to a certain extent. During the last years, however, new technologies and social trends are promising to disrupt the transport system and make it substantially more efficient and more sustanable. The present paper discusses the possibile environmental impacts of some of the new technologies applied to transport, in particular highlighting how its complexity may jeopardize the possible improvements that the new technologies promise without properly governing their use.
... On the other hand, the competition resulting from new digital business ecosystem platforms that use in-vehicle data to offer customers innovative services, may hamper insurance companies and other third party providers in their own telematics-based service offerings. This opens the debate on the legal and technical aspects related to the access to in-vehicle data and the conditions for a more level playing field between car manufacturers and third-party aftersales service providers (Martens & Mueller-Langer, 2018). A lower crash rate would also drive a large part of the changes expected in the maintenance and repair sector, with revenues decreasing as a result of a lower demand for crash-related repairs (Thierer & Hagemann, 2015). ...
Article
Full-text available
Connected and Automated Mobility will disrupt the road transport sector which has remained substantially unchanged since the vehicle became mass produced in the first half of the twentieth century. Given the central role of mobility for our society and economy, the implications of a transformation in the transport sector will not be limited to transport but will regard many other aspects of our society. The aim of this paper is to analyse the possible future socio-economic implications of such a disruption in the road transport sector. It builds upon a set of future road transport scenarios and aims to identify the main impacts in different economic sectors mostly from a qualitative perspective. Results show that the deployment of Connected and Automated Vehicles could provide profitable opportunities for sectors like automotive, electronics and software, telecommunication, data services, digital media and freight transport; but other sectors including insurance and maintenance and repair are identified as businesses that might suffer revenue decreases in the future. In all scenarios, the policy implications of the transformation can be strong, which implies that the evolution of the transport system has to be carefully monitored in order to promptly cope with possible future effects.
Article
Full-text available
We study the case of a Chinese industrial policy, implemented in Shanghai that makes it mandatory for car manufacturers to share electro-mechanical performance and real time navigation data from their entire fleet of electric and hybrid vehicles with local and central government authorities. This policy seeks to prevent fraud in state subsidies, reduce emissions, assess the performance of New Energy Vehicles and strengthen the competitiveness of Chinese manufacturers of these vehicles. We argue that economies of scope in data aggregation may provide traditional market failure arguments in favor of government intervention and mandatory data pooling. Our paper illustrates how data access regimes could be used for economic competition. The EU and China pursue similar data sharing and pooling policy goals that hinge on economies of scope in data aggregation. However, they follow very different political processes to achieve these goals.
Article
Full-text available
This paper starts with some basic economic characteristics of data that distinguish them from ordinary goods and services, including non-excludability and non-rivalry, economies of scope in data re-use and aggregation, the social value of data and their role in generating network effects. It explores how these characteristics contribute to the emergence of large digital platforms that generate a combination of positive and negative welfare effects for society, including data-driven network effects. It distinguishes between lexicographic and probabilistic data-driven matching in networks. Both may lead to market “tipping”. It emphasizes the social value of data and the positive and negative social externalities that may come with this. Platforms are necessary intermediaries to generate the social welfare or network externalities from data. However, the economic role of data-driven platforms is ambivalent. On the one hand, platforms enable society to benefit from positive externalities in data collection via economies of scale and scope in data aggregation of transactions and interactions across users, both firms and consumers. That gives them a privileged market overview that none of the individual users has. Platforms can use this information asymmetry to facilitate interaction and increase welfare for users. These data externalities attract users to the platform. On the other hand, data-driven network effects may result in monopolistic market power of platforms which they can use for their own benefit, at the expense of users. Any policy intervention that seeks to address the market power of online platforms requires careful balancing between these two poles. Finally, the paper briefly discusses ecosystems that leverage data to coordinate interactions between different platforms.
Article
Full-text available
Suppose that a firm in charge of a business ecosystem is a firm in charge of a microeconomy. To achieve the highest growth rate, how open should that economy be? To encourage third-party developers, how long should their intellectual property interests last? We develop a sequential innovation model that addresses the trade-offs inherent in these two decisions: (i) Closing the platform increases the sponsor's ability to charge for access, while opening the platform increases developer ability to build upon it. (ii) The longer third-party developers retain rights to their innovations, the higher the royalties they and the sponsor earn, but the sooner those developers' rights expire, the sooner their innovations become a public good upon which other developers can build. Our model allows us to characterize the optimal levels of openness and of intellectual property (IP) duration in a platform ecosystem. We use standard Cobb-Douglas production technologies to derive our results. These findings can inform innovation strategy, choice of organizational form, IP noncompete decisions, and regulation policy.
Article
This report provides an overview of the relevant economic research literature on platforms or multi-sided online markets. It discusses platforms from a regulatory policy angle, including potential market failures in platforms, the extent of self-regulation and possible regulatory responses through existing competition policy, consumer protection and data protection instruments. It covers selected policy issues associated with these platforms including possible sources of bias in search engines and search rankings, data protection and the use of personal data in platforms, and platform liabilities within and beyond the e-commerce directive.
Article
We develop a model of data pricing and targeted advertising. A monopolistic data provider determines the price to access "cookies," i.e., informative signals about individual consumers' preferences. The demand for information is generated by advertisers who seek to tailor their spending to the value of each consumer. We characterize the set of consumers targeted by the advertisers and the optimal monopoly price of cookies. The ability to influence the composition of the set of targeted consumers provides incentives to lower prices. Thus, the monopoly price of data is decreasing in the reach of the database and increasing in the number of competing sellers of exclusive data. Finally, we explore the implications of nonlinear pricing of information and characterize the exclusive data sales that emerge as part of the optimal mechanism.
Article
Due to network effects and switching costs in platform markets, entrants generally must offer revolutionary functionality. We explore a second entry path that does not rely upon Schumpeterian innovation: platform envelopment. Through envelopment, a provider in one platform market can enter another platform market, combining its own functionality with the target’s in a multi-platform bundle that leverages shared user relationships. We build upon the traditional view of bundling for economies of scope and price discrimination and extend this view to include the strategic management of a firm's user network. Envelopers capture share by foreclosing an incumbent’s access to users; in doing so, they harness the network effects that previously had protected the incumbent. We present a typology of envelopment attacks based on whether platform pairs are complements, weak substitutes or functionally unrelated, and we analyze conditions under which these attack types are likely to succeed.
Article
We provide a roadmap to the burgeoning literature on two-sided markets and present new results. We identify two-sided markets with markets in which the structure, and not only the level of prices charged by platforms, matters. The failure of the Coase theorem is necessary but not sufficient for two-sidedness. We build a model integrating usage and membership externalities that unifies two hitherto disparate strands of the literature emphasizing either form of externality, and obtain new results on the mix of membership and usage charges when price setting or bargaining determine payments between end-users.
Article
Computer platforms provide an integrated architecture of hardware and software standards as a basis for developing complementary assets. The most successful platforms were owned by proprietary sponsors that controlled platform evolution and appropriated associated rewards.Responding to the Internet and open source systems, three traditional vendors of proprietary platforms experimented with hybrid strategies which attempted to combine the advantages of open source software while retaining control and differentiation. Such hybrid standards strategies reflect the competing imperatives for adoption and appropriability, and suggest the conditions under which such strategies may be preferable to either the purely open or purely proprietary alternatives.
Article
Incentives for specialization, trade, and the production of comparative advantage through investment are shown to arise from increasing returns to utilization of human capital. Indivisibilities imply fixed-cost elements of investment that are independent of subsequent utilization. Hence the rate of return is increasing in utilization and is maximized by utilizing specialized skills as intensively as possible. Identically endowed individuals have incentives to specialize their investments in skills and trade with each other for this reason, even if production technology exhibits constant returns to scale.