TOKYO -- In the race to build cars with digitally connected services -- such as ordering coffee on the dashboard display -- Toyota Motor Corp. and Nissan Motor Co. risk being held back by their home market.
In contrast to vehicle buyers in the U.S. and Europe, Japanese consumers are reluctant to pay for such features. That's resulted in only 10 percent of cars on Japan's roads having embedded connectivity, compared with 49 percent in the U.S., 31 percent in Europe, and 20 percent in China, according to consultancy SBD Automotive.
The threat to the Japanese carmakers -- which control almost all of their home market and do a major part of their product development there -- is that competitors pull ahead as global demand for connected services keeps increasing. Rivals including General Motors are betting on connectivity for new revenue streams as buyers in the U.S., Europe and China embrace on-board shopping, entertainment and customized coupons.
"For Japanese carmakers there's a big risk," said Masanori Matsubara, a senior analyst at IHS Markit. "They have to compete on a global level with the Detroit Three and the Germans, which have experience and have built the ecosystem and service platform."
Instead of choosing connectivity services built into the dashboard, Japanese drivers prefer to hook up their smartphones to the car's systems to, for example, listen to streamed music. That means the data flows through the smartphone provider, typically Apple Inc. or Google, denying the car companies a massive opportunity. The data generated from smarter and connected cars will create a market as big as $750 billion by 2030, according to an estimate by McKinsey & Co.
SBD Automotive predicts that two-thirds of cars in U.S. and Europe will have connected features in 2020. In Japan, such services will be in less than a third of vehicles that year, the consultancy forecasts.
"There needs to be customer pull," said Lee Colman, an analyst heading connected-car research at SBD Automotive. "The carmakers don't want to offer those services unless they know the customers will actually tick 'yes' in the optional box."