Satellite radio provider Sirius XM purchased connected car start-up Automatic Labs (Automatic) in April, in a move to expand its connected vehicle services. The transaction cost $115m in cash, and Automatic's data will likely be used to boost Sirius XM's existing Connected Vehicle Services subsidiary (which it purchased from Agero in 2013). Connected Vehicle Services provides telematics, roadside assistance, and other connected car services to auto OEMs in the US, such as Honda, Toyota, and BMW, but it hasn't fulfilled revenue or user expectations.
Automatic gives Sirius XM a large addressable market
Automatic makes adaptors for onboard diagnostic (OBD-II) ports in cars. These adaptors pair with a smartphone app to provide telematics data to drivers, diagnosing engine trouble, detecting accidents, and helping users improve their driving. Most US cars dating back to 1996 have OBD-II ports, giving Automatic an addressable market of around 200 million cars.
Automatic will remain a separate brand, and will continue signing deals with partners such as insurance providers to share telematics data so that subsidies can be offered to safe drivers. Its activities will also feed into Sirius XM's development of safety products and turn-by-turn navigation. Automatic will benefit from Sirius XM's experience in selling to consumers and OEM partners. Through Sirius XM, Automatic can promote its connected vehicle services to a wider pool of drivers than it could reach on its own.
Meanwhile, Sirius XM will benefit from Automatic's expertise in delivering entertainment and connected car services via smartphones and the deals Automatic has already signed with insurance providers.
This is Sirius XM's second purchase in the connected car sector, following its 2013 purchase of Agero's connected vehicle services unit. According to Sirius XM's CFO, connected vehicle services will grow faster than Sirius XM's core satellite radio business. The Agero purchase represented a shift in focus for Sirius XM from B2C to B2B, as Sirius's partners in this space are primarily auto OEMs rather than consumers. By purchasing Automatic, Sirius XM can reorient itself toward the consumer segment, while also tackling the automotive aftermarket, which has so far eluded it.
On the Radar: Automatic, TE0004-001038 (August 2015)
"CES 2017: Auto OEMs drive the autonomous and connected car vision forward," TE0019-000027 (January 2017)
Francesco Radicati, Senior Analyst, Consumer Technology