Connected vehicle data market faces setbacks as two of its largest players exit

Introduction

Connected car data was once touted as the "new oil," but an exit and a bankruptcy from two of the industry's largest players reflect a different reality. Otonomo and Wejo aimed to tap into the opportunity for monetizing connected vehicle data (CVD), aggregating billions of data points through partnerships with original equipment manufacturers like Honda Motor Co. Ltd., Ford Motor Co. and General Motors Co. and turning it into insight for infrastructure firms, cloud hyperscalers and insurance providers.

The idea was that CVD buyers could use this data to inform future infrastructure site selection or smart city planning decisions, measure intersection performance, and roll out novel usage-based insurance use cases. CVD is often aggregated with or supplemented by location-based services data and data from onboard telematics devices. Although the connected vehicle data market was thought of as the future of vehicle services, the reality — at least in the near term — has been much bleaker.

The Take

As with any market deploying the "new oil" adage, the value of the product correlates to how much can be sold. CVD companies like Otonomo and Wejo had plenty of product, but could not sell it fast enough to survive. Beyond business-to-business sales woes, connected car services have struggled to gain adoption from consumers, with many remaining nascent, thus placing limits on the amount of data to be captured. In many ways, those obstacles mirror earlier challenges in the mobile data monetization market, where data aggregators, including large telcos, struggled with data quality, privacy concerns and high-profile vendor exits. However, despite two major exits in the connected vehicle space, contenders targeting specific niches in public sector and core automotive (thanks to more favorable ownership and go-to-market approaches) may yet get to cash in on their early-mover advantage, as a new generation of connected vehicles comes to market.

Context

Wejo and Otonomo were part of a pandemic and post-pandemic wave of companies that went public via reverse mergers with SPACs (special purpose acquisition companies). Both took this route in 2021, with Otonomo valued at $1.4 billion and Wejo at $657 million, according to S&P Capital IQ Pro. Just a couple years later, both companies hit hard times. In February, Otonomo was acquired by roadside and mobility SaaS provider Urgent.ly via a reverse merger for $270 million. Wejo declared bankruptcy in May.

The burden of expectations stemming from those SPAC deals proved too much. Even though both companies were growing, their 3x-4x sales growth in 2022 produced revenue of $15 million combined. That was not steep enough to come close to reaching their go-public valuations, or enough to keep up with the more than $250 million in operating expenses that the two racked up last year.

In addition to the unrealistic expectations, Wejo and Otonomo were looking to disrupt an auto industry where many companies were not yet ready to be disrupted, or to share vehicle and driver data. Territorial battles around data ownership, and logistical, technological and business decisions around revenue sharing, were among the many hurdles the companies faced in meeting lofty revenue goals.

The monetization of connected vehicle data will require deep and equitable partnerships and agreements among myriad stakeholders that include automakers, tier 1 component manufacturers, sensor producers, providers of on- and off-car compute, bandwidth, datacenter and cloud infrastructure, application vendors, and public and semipublic agencies and organization.

Ultimately, the total addressable market for connected vehicle data was much smaller than expected, and both firms struggled to monetize data streams beyond ad hoc deals. Meanwhile, consumers are not adopting connected car services at the rates industry players had hoped for. According to our VoCUL: Connected Car, Services 2023 survey, the majority (60%) of respondents today do not have a car enabled with connected car services. Of those that do, just less than half (46%) pay monthly for these services.

A path forward

While news of the exits has brought the industry as a whole into question, all is not doom and gloom. Both Otonomo and Wejo went public via SPACs, which contributed to underperformance against high expectations. Several other contenders, public and private, remain in the space, including HERE Technologies, TomTom NV, Streetlight Data, INRIX and AirSage. These vendors place varying degrees of emphasis on CVD as a data input, and many supplement CVD with location-based services or other data sources. A look at each company's clients offers insight into how vendors are staying alive, and who consumes their data.

HERE and TomTom focus on clients in core automotive and IT enablement. In 2022, HERE penned deals with AWS, Ericsson, VinFast and BMW ADR, and saw positive adjusted EBITDA of $131 million, up 15% YoY. The majority (75%) of HERE's clients are in the auto sector, with the rest in transportation and logistics, manufacturing, and retail. TomTom's approach targets three verticals — half of its 2022 $578 million revenue was generated from auto, one-third from enterprise clients in fleet management and logistics, and one-fifth from direct-to-consumer services.

INRIX, Streetlight Data and AirSage place more emphasis on public sector customers. Working with state and federal agencies, in addition to enterprise or private sector customers, affords vendors some security. On the city and state side, on top of returning cleansed connected vehicle data back to automakers, INRIX sells heavily to government entities looking to understand and respond to traffic conditions, as well as media providers interested in real-time traffic updates. The company planned an IPO in early 2022, but instead went for a $10 million round of funding midyear, bringing total capital raised to $213 million.

StreetLight (acquired last year by Jacobs for $209 million) takes a similar approach on the sell side, with the majority of its clients in the public sector. The company's services include assisting states, cities and counties with transforming their transit networks and preparing for multimodal transportation using historical data and modeling.

AirSage, which formerly tapped the mobility data-as-a-service market, is also seeking deals in the public sector. The Atlanta-based provider has raised $40 million across five funding rounds and works closely with federal and state agencies including the Federal Highway Administration, NASA and the EPA. AirSage most often provides its trip-matrix analysis, which public sector agencies can use to inform traffic planning and upgrades, population density measurements, and points of interest. Other vendors here include Mobileye and RoadMedic.

S&P Global projects that the connected car market — the source of all of this potentially valuable vehicle data — will likely explode in coming years. According to S&P Global Mobility, 350 million vehicles on the road globally will have over-the-air update capabilities in 2025. In addition, about one-quarter of new vehicles sold in 2025 will have built-in 5G connectivity. Combined, these two features should help foster and grow mobility use cases that rely on and require massive amounts of data for compute on-car, as well as transfer on the upload and download for data compute, storage and analysis.