Why IoT is the Backbone of the Connected Car Industry

It’s fair to say that the consumer automotive industry has come a long way since Henry Ford rolled his first Model T off the production line in 1908. It cost about €22,300, had a top speed of 68 km/h, and famously only came in black.  

By now, next-gen vehicles are more recognizable as sophisticated, software-defined platforms on wheels. The connected car revolution has been driven by immense technological advancement and diversification of consumer demand, not only in terms of what a vehicle entails but when and how we access them. The global connected car market is projected to reach €327 billion by 2032, with over 90% of new vehicles sold being connected by 2030.    

The shift has not just enhanced vehicle capabilities, but altered how the entire market competes, with value now measured by software intelligence and digital experience, not just horsepower and mileage. A 2023 McKinsey survey ranks ‘connectivity’ as the second most important mobility trend, and claims that over half of consumers are willing to switch brands for better connectivity.  

Properly leveraged, connectivity enables safety features, engaging user experiences, and entire revenue stream models never seen before in the automotive sector. This article will take a look at the IoT tech that plays a critical role in the connected car sector, as well as the business models it enables, and how global IoT connectivity has gone from a nice-to-have feature to a strategic imperative for automakers.    

IoT Inside 

The engineering of a vehicle now means more than just physical structure, as each unit both internalizes and connects to a wider technological ecosystem. The modern commercial passenger vehicle is a complex fusion of hardware and software, a rolling data center that perceives, processes, and communicates with the world around it. Virtually all of the tech that’s enabling vehicles to be so digitally present originates in industrial IoT applications.  

Perhaps the most obvious category of hardware that connected vehicles have developed from IoT are the sensors. Defined in the simplest and broadest way, IoT devices are physical things connected to the internet that can send and receive data and act intelligently when they detect relevant changes in their environment. In pursuit of this, IoT tech pushed sensor technology to the next level. For connected cars, such sensors provide the raw input for everything from Advanced Driver-Assistance Systems (ADAS) to fully autonomous driving. The most common types include:    

• Cameras 
  Optical cameras provide high-resolution visual data for object classification, like identifying pedestrians and reading traffic signs, but are less effective in poor weather or lighting. Devices with optical or video cameras are virtually as old as the concept of IoT itself, with the University of Cambridge’s Trojan Room coffee pot from 1991 widely considered to be the first of its kind.  

• RADAR  
  Radio Detection and Ranging (RADAR) uses radio waves rather than light to detect an object's distance and velocity and came to replace Passive Infrared (PIR) tech as the go-to IoT sensor.  It’s robust in all weather conditions and can recognize objects at ranges of up to 250 meters, so is used to equip vehicles with features like adaptive cruise control and automatic emergency braking. 

• LiDAR 
  Light Detection and Ranging (LiDAR) combines light-spectrum sensors with the concept of radar to create detailed 3D maps using laser pulses, offering superior depth perception. Essential for higher automation levels, it works well in darkness and is a key enabling technology in smart agriculture, while in connected vehicles it’s an essential component for self-driving systems.     

• Ultrasonics 
  Ultrasonic sensors use sound for cost-effective and accurate close-range object detection where particularly fast-moving or granular tracking isn’t essential, making it ideal for IoT devices such as motion-sensitive lights in and in parking assistance systems for connected vehicles.    

For reliable imaging and detection in variable conditions, IoT applications proved that sensor fusion is key. Current-gen vehicle computers combine data streams, using the strengths of one sensor to offset the weaknesses of another. For example, a camera identifies a pedestrian, RADAR confirms its speed, and LiDAR pinpoints its exact location. This fused understanding enables reliable automated functions.    

The cloud in your car 

Traditional vehicle architecture was distributed, with 80-100+ individual Electronic Control Units (ECUs) each handling a single function. This model turned out to be a lot like an organization using lplenty of individual hardware stacks to do its computing, rather than centralizing the processing into a shared resource.  This complexity made software updates and feature integration difficult.  

The auto industry took a page from IoT’s use of cloud-distribution and centralized processing to move to zonal architecture, consolidating functions into a few high-performance computers that are the equivalent of datacenters. A key component is the Telematics Control Unit (TCU), the vehicle's communications gateway. The TCU integrates a GPS module, cellular modem, microprocessor, and memory, connecting to the vehicle's internal networks to manage all external data exchange.    

Information Superhighway   

Industry analysts estimate that the upcoming generation of connected cars will average around 25 gigabytes of driving, navigation, entertainment and telematics data per hour. None of which is of any practical use without reliable connectivity. The communications layer is the vehicle's link to the outside world and turns raw data into actionable intelligence for everything from safety services to new business models. There’s a strong argument that it’s this information architecture layer where the auto industry has gained the greatest advantages from IoT tech, over and above the sensors and pure hardware.   

The connectivity layer transforms the vehicle from an isolated machine into an intelligent, communicating node in a vast digital ecosystem. 

In-vehicle connectivity rapidly evolved in pace with 2G/3G to 4G LTE, with telematics and infotainment systems constantly pushing the limits of whatever new capacity they were given.  

The arrival of 5G is a quantum leap that is finally delivering the kind of power and flexibility to deliver on many long-held technological goals and next-gen mobility applications. Auto engineers looked to the efficiencies pioneered by IoT in edge computing, where 5G's speed has allowed time-sensitive data processing to occur locally or on nearby servers. This hybrid approach provides real-time processing for critical functions like collision avoidance, while using the central cloud for less urgent tasks like big data analytics. For the connected vehicle concept, 5G's power lies in three key areas:    

Bandwidth 

With speeds up to 100 times faster than 4G, 5G supports massive data throughput for downloading 3D maps, streaming high-definition sensor feeds, and uploading data for AI processing.   

Latency 

5G's ultra-low latency is critical for connected vehicles as it enables near-instantaneous communication, eliminating lags and delays when split seconds matter in high-speed scenarios. This real-time responsiveness is essential for safety systems like collision avoidance and advanced driver-assistance systems (ADAS) to process information and react to potential accidents faster than a human could, significantly decreasing the risk of accidents.  

Availability 

For reliable imaging and detection in variable conditions, IoT applications proved that sensor fusion is key. Current-gen vehicle computers combine data streams, using the strengths of one sensor to offset the weaknesses of another. For example, a camera identifies a pedestrian, RADAR confirms its speed, and LiDAR pinpoints its exact location. This fused understanding enables reliable automated functions.  

The open road with eSIM

An indispensable insight provided by the IoT sector to the automotive industry has been in managing connectivity across countries. This was one of the first major challenges that global OEMs needed to overcome when their products could be activated anywhere in the world and may remain geographically mobile for their whole operational lifespans.

The embedded SIM (eSIM) is the powerhouse of global IoT – a programmable chip integrated into the device’s hardware, or in this case, the vehicle's TCU.

eSIMs solve supply chain challenges by enabling a game-changing ‘single SKU’ model so IoT fleets and connected vehicles can be shipped globally and operate wherever they need to.

Instead of managing physical SIMs for each region, OEMs can manufacture devices and vehicles with a reprogrammable eSIM. The correct local network profile is downloaded Over-the-Air (OTA) at the vehicle's final destination, massively simplifying logistics.  

eSIMs also enhance resilience. By storing multiple operator profiles, an enterprise connectivity provider like 1GLOBAL can offer agile solutions that automatically switch to a backup carrier if the primary network fails or becomes unviable, ensuring minimal downtime for critical services.

A simple example of the value of eSIM for shared mobility systems is one of the most common applications: network switching. Should a user attempt to access a public shared-mobility or corporate fleet vehicle in a suburban area with spotty cellular coverage, they might find themselves unable to connect and validate, as the IoT device struggles to communicate with the central server to authenticate the user's request.

However, with sophisticated connectivity management such as 1GLOBAL’s, the vehicle’s own eSIM will automatically detect the failing connection and instantly switch to a secondary, more stable cellular network from a preferred provider. This automated failover ensures the authorization request goes through, users go on their journey, and reliable service is maintained – all without the user being aware that network switching was used to achieve the transaction.

eSIMs also allow for fully global total lifecycle management. OEMs can remotely switch network providers or update data plans for individual units, categories or their entire fleet, thus future-proofing a vehicle's connectivity for its entire lifespan.  

Connectivity management

Managing a global fleet of connected vehicles, either as a manufacturer or a business with its own fleet mobility assets, requires a centralized Connectivity Management Platform (CMP). A CMP is the command center for an OEM's IoT deployment, providing a single interface to manage the vehicle's connectivity lifecycle.

Key IoT functions that the connected car paradigm has made use of include lifecycle management for the remote activation, transfer, and switching of on-board eSIM profiles.  

Real-time data monitoring, once dedicated to IoT maintenance cycles, can now be used to analyze and predict mileage, enforce policies, and set up automated alerts to control costs – plus the original benefit of remotely diagnosing and even resolving mechanical or connectivity issues.

Another key takeaway from IoT is the utility of easy cross-system integration and automation. Vehicle manufacturers and fleet operators use APIs to integrate connectivity management into their own enterprise systems such as monetization, subscription, CRM and logistics platforms.  

A comprehensive solution from a leading telco partner like 1GLOBAL intuitively combines global eSIM technology with a powerful ‘single pane of glass’ CMP. This easy, unified ecosystem takes the complexity out of global telecommunications, allowing OEMs to focus on building vehicles and mobility providers on delivering innovative services.  

Driving new value

Sophisticated eSIM tech and robust connectivity have proven to be core enablers for a new wave of services and business models that are already starting to deliver on the promise of billions for the automotive industry.

The primary challenge for most automotive executives is not in making the technology itself work, as the key tools are already in place, but in finding the right monetization models and fostering customer adoption of connected services.  

Auto giant GM projected that by the end of the decade, 30 million connected vehicles would be generating an additional €20+ billion in annual software and services revenue.

Predictive maintenance

Traditional vehicle maintenance has always been reactive or, at best, preventive. Predictive maintenance is a paradigm shift, where AI algorithms analyze real-time sensor data to forecast component failures before they happen.

Deloitte, in their deep-dive analysis of predictive maintenance, projected that AI-assisted vehicle telemetry analysis reduced breakdowns by up to 70% and maintenance costs by 10-40%, while significantly enhancing vehicle safety.  

Leading OEMs are already deploying this technology at scale. BMW's CarData platform processes terabytes of data daily to monitor fleet health. Tesla claims that its own system has predicted failures weeks in advance, alerting owners to schedule service, thereby avoiding a potential breakdown. These capabilities all depend on reliable, high-availability data transmission to the cloud.  

The monetization engine

The culmination of these trends is what heavy-industry groups like Bosch are referring to as a “Software-Defined Vehicle” (SDV), where features and performance are controlled by software not hardware.

This decouples software from the hardware lifecycle, allowing for continuous updates and upgrades. If this sounds familiar, it’s because large portions of the telco industry are also undergoing hardware ‘virtualization’ – where cloud native entitlement servers are enhancing and advancing virtual networks.

The SDV enables the Features-on-Demand (FoD) revenue model. OEMs can install standardized hardware components that customers can activate later via one-time payments or recurring subscriptions.  

This creates an ongoing, service-based relationship with predictable, high-margin recurring revenue and sustained customer ‘stickiness’ and engagement. The entire SDV model relies on secure and reliable Over-the-Air (OTA) updates to fix bugs, add features, and enable subscriptions. This capability is entirely dependent on the vehicle's global connectivity solution, and the ability of Network Operators to provide architecture that specializes in gatekeeping privileged access such as Entitlement Servers.  

These monetization strategies are predicted to create a self-reinforcing ecosystem. A customer buying into a brand will likely trust it enough to also use their predictive maintenance alerts, making customers more likely to upgrade to further premium features. Success in the SDV economy is built on trust established by these foundational services, leveraged into up- and cross-selling, all powered by connectivity.

Next steps

It doesn’t require AI assisted telemetry to predict that software-defined mobility is likely to come with some significant obstacles. Successfully navigating this new market will require both automakers, fleet managers and mobility solution providers to confront at least two specific challenges and to build strategic telco partnerships to allow them to focus on their core competencies.

The two obvious obstacles are endemic to new digital products – cybersecurity and data privacy.

As any IoT professional can tell you, as a device (including a car) becomes more digitally active, autonomous, and massively serially networked to their fleet, so their electronic attack surface expands exponentially. A breach could lead to data theft or even remote control of the vehicle.

Some of the greatest authorities in cybersecurity are investing serious time and resources to addressing these threats through dedicated research and government authorities are rolling out rigorous security standards like ISO/SAE 21434.  

Data privacy is the other obvious hurdle. As mentioned earlier, connected cars collect vast amounts of potentially sensitive personal data, including home and personal locations and biometrics. Navigating global regulations like the EU's GDPR is a monumental compliance task for enterprises, requiring explicit user consent, data minimization, and transparency.  

A secure global connectivity partner is critical for mitigating these risks. As a telco pioneer, 1GLOBAL operates its own unique private core network, offering significant security and competitive advantages.

Distributed network architecture also helps manufacturers and service providers meet data sovereignty requirements under regulations like GDPR and its transatlantic equivalents such as the California Consumer Privacy Act (CCPA), making the connectivity provider an essential strategic partner in risk management.  

Our connected future

The automotive industry is undergoing a huge shift from pure mechanical products to hybrid digital platforms. While no amount of software will actually get people from A to B, the same virtualization, digitization and cloud migration that is transforming so much of our telco ecosystem is happening at speed within the automotive and mobility service provider industry.

The tools and techniques of this revolution, from sensors and datacenters to predictive services, are being taken wholesale from the IoT industry and enabled by global connectivity. Mastering secure, reliable, and internationally manageable IoT connectivity is the key to the connected car’s success. It is the foundation for everything from next-gen safety systems to the profitable new business models of the Software-Defined Vehicle.

For both manufacturers and service providers, the path forward is to partner with proven experts like 1GLOBAL who can manage the complexity of global connectivity.