Onboard diagnostics market needs to add more value
The consumer market for on-board diagnostics dongles is overcrowded and won't reach its potential unless they find solutions that add value in a broader, more complex context, according Liz Slocum Jensen, founder of connected-car start-up, Road Rules. Insurance, security, in-vehicle Wi-Fi, and fleet management will be the main drivers that keep dongles on track to reach the $1.6bn a year market predicted by Frost & Sullivan for 2020.

Join top executives in San Francisco on July 11-12, to hear how leaders are integrating and optimizing AI investments for success. Learn More

For as long as I’ve owned a car, I’ve always been interested in extracting data from it.

One of my earliest experiments involved using a paperclip to complete a connection between a red wire and a green wire beneath my dashboard so that diagnostic error codes would flash on the dashboard of my ‘91 Honda.

Nowadays, we have a variety of OBD-II dongles that plug into the diagnostics port of every car sold in the U.S. since 1996. (OBD refers to “onboard diagnostics.”) Most of these OBD-II devices offer a platform that allows developers to create connected car apps. Leveraging data from the diagnostics port helps bring any car into the Internet of Things (IoT) and will prove valuable when merged with contextual computing.

Image Credit: VB Profiles (Disclosure: VB Profiles is a cooperative venture between VentureBeat and Spoke Intelligence.)

This article is part of the Connected Car Landscape. You can download a high-resolution version of the landscape here.

Data from the car

A 2011 Machina Research study forecasted that by 2022, there will be 1.8 billion machine-to-machine (M2M) automotive connections, consisting of 700 million connected cars and a $1.1 billion aftermarket in devices for services.

For the last few years, I’ve had a buffet of OBD-II dongles on my desk: Carvoyant, Automatic, Ford OpenXC, Metromile, and Munic. I’ve looked at the APIs of all of their developers’ platforms. I’ve also examined the APIs of Ford, GM, Nissan, Tesla, and Toyota. Admittedly, some of these were reverse-engineered by connected car enthusiasts, but the fact that there is no such thing as a private API is a different post geared toward product managers.

The basic rule of thumb for car data is that if you can see it on the dashboard, there is a data point available. This includes battery, acceleration, fuel levels, door status, headlights, and internal temperatures. Dongles don’t offer any data point that the carmaker APIs don’t. But where the dongles stand out is in measuring events like speeding (a configurable threshold), collisions, and hard braking/accelerating. Their value proposition is further amplified by mobile apps that offer mileage trackers, expense reporting (Expensify, Xero, Concur), roadside assistance (Urgent.ly), and teen driver monitoring. These apps are available for iOS and Android.

Dongles provide some great functionality but are far from perfect. For instance, some of them can drain the battery. Dash’s troubleshooting guide cautions, “In general, it’s a good idea to remove your OBD-II interface if it’ll be more than a few days before your next drive.” This is duly noted in my household, since I went through three new car batteries in 18 months on two different cars with two different dongles. Ideally, an app would have notified me of any issues, unless it lacks the constant connectivity of something like the Bluetooth-based dongles. The good news is that many of the dongle apps offer roadside assistance.

A dongle provider once asserted to me that in a high tide, all boats float. As of this writing, there are over 16 dongle providers offering consumer products with very similar apps, such as fuel tracking, trip monitoring, and IFTTT integration. In 2014, Frost & Sullivan forecasted that OBD-II applications will grow from $160 million in 2013 to $1.6 billion by 2020.

Despite this rosy projection, I am concerned that the consumer dongle market is an ebbing ocean that is already overcrowded. The only way for this many boats to float is for them to find solutions that extract data from cars and add value in a broader, more complex context. Insurance, security, in-vehicle Wi-Fi, and fleet management will most likely be the main drivers that keep dongles on their trajectory toward a $1.6 billion market.

Beyond data reporting

Several companies are using the OBD-II data from the car to approach everyday problems in ways that change the status quo.

For instance, MetroMile aims to disrupt the auto insurance market. We are used to paying a fixed cost for car insurance. MetroMile offers Pay-As-You-Drive insurance by taking data directly off of the car, instead of relying on self-reporting or other inaccurate variables.

There are also companies whose new technologies may wow consumers used to waiting years to buy a new vehicle — one of the bigger purchases that some people make in their lives.

Pearl is a rear-view backup camera that mounts on the license plate. The Pearl RearView uses the OBD-II dongle in two clever ways: (1) It monitors such data as speed to help alert drivers when obstacles are in the rear pathway and (2) It codependently pairs with the camera so that the two only work when together, mitigating the incentive to steal the camera.

Vinli is trying to break away from the consumer dongle crowd by offering an in-vehicle Wi-Fi connection on a 4G LTE network. This provides a functionality to older cars that is normally only found in cars from the past two years.

Small fleet management

Fleets is a sub-sector of the connected car landscape that has used embedded telematics for decades to track assets via GPS. While performing exploratory research on a connected car API in 2013, I spoke with fleet managers about what tracking solutions they used. They explained that their drivers didn’t like having their locations tracked and would tamper with any monitoring devices.

Fast-forward to 2016, when comfort with smartphones and GPS tracking has altered people’s perceptions. ULU, GoFleet, and Automile are among the few fleet tracking solutions that offer a dongle. This provides a quick, flexible opportunity for small fleets to leverage vehicle data for asset management, location, expense reporting, and fuel consumption.

Dongle 1.0

Currently, most dongles are in what I would call a Dongle 1.0 stage. They are sourcing much of the same data and, in this early stage, I’m afraid the majority of the consumer dongle market is the proverbial solution looking for a problem. I have long wondered how each dongle company will distinguish themselves, especially when bigger companies like Verizon, Delphi, and Samsung are dabbling in the space.

The average age of a car on the road in the U.S. is expected to be 11.7 years in 2019, according to a 2014 IHS Automotive study. This means that the typical car is unconnected, for the foreseeable future. Dongles thus have the opportunity to act as a bridge between factory-built connected cars and, ultimately, autonomous vehicles. And as these dongle companies search for more sustainable business models, we will soon start to see their consumer apps building this bridge to the future.