SAIC brought its InkaNet embedded telematics system into the market earlier this year at the Beijing Auto Show under the Roewe brand. The system is now available in dealer showrooms and it is opening eyes to the possibilities around innovative telematics solutions in China and elsewhere. The ability to deliver location-aware advertising is one capability worth a closer look especially for its potential to subsidize telematics services. The InkaNet system was created with the assistance of Pateo. The founder of Pateo is also the founder of Energy Source, which is an advertising agent established in 2001. The functionality of the system, described in literature distributed in Roewe dealerships, includes a wide-range of location-relevant applications and services. While the system does not explicitly state this objective or capability, the description of the system suggests it may well be the first automotive system (in China) able to deliver location-relevant advertisements. If so, it is not unlike the service deployed in New York City cabs by Creative Mobile Technologies. Fitted for rearseat viewing by taxi passengers, the Creative Mobile Technologies solution is able to use GPS data to determine when and where ads are shown in the rearseat. The system also enables credit card payments and CMT has started to release data regarding the kinds of information passengers have requested from the system by day of the week, such as news, weather, sports, business, Zagat or People Magazine. New York’s taxi commissioner commented in a recent NYTimes article that in lieu of demanding advertising revenue, the city hoped that the additional income for vendors might encourage them to lower the fees they charge to cab owners, which could in turn reduce the pressure to increase fares. The only current player in the telematics eco-system offering the prospect of sponsored content or services is Pioneer Electronics with its Platform for Aggregation of Internet Services (PAIS). Pioneer has made clear that this social networking oriented system, enabled through a smartphone connection or an embedded module is built around a revenue sharing model unmatched in the industry. As Google and Bing bring their browser battle to the automotive segment, the opportunity for sponsored search or other subsidized content in the car is on the table. (Will Baidu offer sponsored search for connected cars in China?) And ClearChannel’s iHeartRadio Internet radio service deal with Toyota Motor Sales could include some advertising or promotional element. It is worth noting that one of the most successful connected services delivered to cars – as measured from a profitability standpoint, is Sirius XM. Sirius and XM bought their way into dashboards which eventually led to positive cashflow. Maybe it’s time for more content and service providers to pay up. InkaNet is showing the way. NOTE: The InkaNet system is not without its shortcomings. For further details: http://tinyurl.com/2b5vbvx - Enter, the Dragon: China Getting Its Moment on the Telematics Stage - Lanctot - Insight – Automotive Multimedia & Communications Service http://bit.ly/gWT4QX - Automotive Electronic Design Heads East - Kevin Mak - Automotive Electronics Service

TomTom’s marketing machine was in overdrive last week with announcements of a new OEM relationship (Mazda) and advances with existing partners (Toyota, Renault), enhancements to its (European) market-leading traffic solution (HD Traffic) and a traffic manifesto. But undoing all that positive spin was the note that the company still wants to charge about $50/year for its Live Services. It looks like TomTom didn’t get the latest email about automotive value propositions. As connectivity comes to more vehicles, drivers (and passengers) will get more of their content and services from the “cloud.” What this means is that car makers will increasingly have in place systems for sending, receiving, processing and managing all types of vehicle data – the “back end.” (This is not unlike what is happening at your average NASCAR or Formula One event every weekend – without the parking space availability and Internet radio.) The value of this data is manifest to the car makers for better understanding the performance of their vehicles on the road as well as better understanding how consumers use and abuse their cars. The implications for cost avoidance, warranty and recall management are in the millions of dollars of savings. There is no immediate or obvious benefit to the driver. For this reason, this kind of vehicle connectivity ought to be free. (On the other hand, OnStar and others have demonstrated that people will pay for safety and security.) As more drivers shift to smartphones (with mandatory data plans) with access to a wide range of content and services, they will be less likely to pay for any service from the car (or PND) maker that is available for free (or for which they are already paying) via their mobile phone. So how is the industry (and TomTom) going to monetize all this connectivity? Enter the back end value proposition. Auto makers and Tier Ones have gotten the message and recognize that driver and passenger eyeballs and “click-throughs” have value. A driver asking for directions to a restaurant or movie has economic value. A system that knows the location of the driver has value. Beyond this, a system that is able to provide a broader “cloud” perspective of all location-related activity – including everything from prosaic traffic information to “heat” maps of gatherings of people, weather, etc. – has other value-add implications for drivers, passengers and roadway systems and public transportation overall. But in the short-term, vehicle related information for diagnostics, safety and entertainment take priority. Continental, Harman, Visteon, Delphi and Pioneer clearly understand this. All of these companies have introduced systems or platforms that seek to leverage vehicle location information for commercial opportunities. Even Best Buy’s connected PND delivered sponsored links in its Google Search. Unfortunately, Tier Ones face an uphill struggle in trying to get a piece of this action. The telematics eco-system consists mainly of a telematics service provider (ie. ATX), a carrier (ie. Sprint or Verizon) and a system integrator (ie. TCS). Each of these operators is interested in the other’s business – with the possible exception of the call center. (No one wants the call center hot potato – too much cost.) While the call center tends to be shunned, the data back end tends to be either misunderstood or underestimated. But the back end system is rapidly becoming the backbone of the system altering the competitive landscape. The power and influence of back end systems is visible to the consumer in the growing variety of free content and services via smartphones. Google probably has the largest back end system currently influencing developments in the automotive market. With its free navigation, traffic and search and an open source operating system, Google has rattled the industry mightily over the past two years. Carriers, meanwhile, are trying to fight there way in – not content to be simply white label suppliers of bandwidth. Among the carriers sniffing around the telematics back end opportunity are Verizon, Sprint, T-Mobile, Telenor, Orange, AT&T Mobility, Vodafone and Ericsson. All of these companies recognize that their servers are as valuable as their networks. Some of these companies fancy themselves Tier One players. At least three handset makers have the potential to rise to the Google challenge: Nokia, Apple and RIM. Like Google, Nokia is offering free navigation while also seeding the market with open source development tools (Qt), operating system softare (MeeGo) and smartphone connectivity technology (Terminal Mode). But Nokia remains ambivalent about the automotive opportunity. MeeGo is not ready for market and Ovi has not been designed for automotive opportunities. RIM brings a unique value proposition combining its smartphone system experience with its newly acquired QNX automotive expertise. RIM represents the most immediate threat to Google’s potential dominance in the automotive market because of its potential to deploy navigation and traffic applications (based on handset probe data) and its ability to monitor, manage and mine its network data traffic. Apple’s strength lies in its secure systems for managing commerce for downloading applications and enabling the purchase of content. For these reasons, Apple and RIM both have the scope and scale to add value to automotive opportunities. The massive giveaway of content and services by both Google and Nokia is a setup for capturing click-through traffic and back end processing opportunities for creating metrics and analytic output. Google already has the analytic tools in place, unlike Nokia. The current landscape for back end services is highly fragmented and includes companies such as TeleNav, Airbiquity, Hitachi, TeleCommunications Systems, Hughes Telematics, WirelessCar, Oracle and IBM, along with the previously mentioned wireless carriers, RIM and Apple. (Strangely, Microsoft seems to have disqualified itself – having disbanded its automotive business unit. The original vision defined by Microsoft at multiple industry events included integrating more and more Microsoft solutions such as Bing, Tellme, and Silverlight into automotive platforms, but the complete vision – including back end services – never materialized. The one exception to this no-show for Microsoft are the company's ongoing efforts to capitalize on the Bing search engine.) The value proposition of back end service providers revolves around secure management and processing of vehicle and driver data for applications ranging from vehicle performance and safety to content and infotainment and, ultimately, commerce opportunities. Neither OEMs nor Tier Ones are equipped to manage this opportunity and traditional telematics providers lack the scale. The lack of scale is one reason Airbiquity has partnered with Hitachi to service Nissan’s connectivity needs around the world. It is likely that companies such as Hughes and TeleNav will seek partnerships with larger integrators such as IBM or Oracle for the same reason. Nokia, like RIM, already has the scope and scale and like Apple already has the commerce platform (Ovi) but, unlike Apple, has done little beyond the introduction of terminal mode to optimize its offerings for automotive. TomTom is another player in need of a partner to provide the scope and scale necessary to compete in the connected space. The larger organizations that are able to monetize the connectivity proposition will force out smaller players dependent on subscription revenue. If TomTom can enhance its navigation and infotainment platform to include safety and security telematics, it will greatly improve its value proposition and the likelihood of building a devoted subscriber base. Conclusion Google and RIM are best positioned to leverage the back end data processing opportunity presented by the automotive industry. Google faces trepidation among potential OEM customers who are suspicious of the company’s motives and objectives. Google’s failure to validate its Android OS for automotive applications is another stumbling block. Nokia has discrete elements of a solution in place but so far lacks the commitment and execution to challenge either Google or RIM. Apple is a wild card player in a market that remains fragmented with the door open to new entrants. Microsoft's Bing search engine is another contender gaining traction, but, in the end, Microsoft is more of an arms supplier to the contesting parties. Winners in the battle for the back end will be those companies able to bring security and state-of-the-art analytics and commerce management to the automotive industry. Google knows analytics. RIM knows security and network management. It remains to be seen whether Nokia or some dark horse will step forward to challenge these two dominant players, but the race is on. Additional Insight: http://bit.ly/c0OLhT - Consumer Implications for Smartphone-Vehicle Connectivity  - Chris Schreiner - Automotive Consumer Insights http://bit.ly/c1nvTq - Consumer Interest High for Connected Safety and Security Services - Chris Schreiner - Automotive Consumer Insights http://bit.ly/aGJHDj - Smartphone Market Evolution and the Automotive Opportunity Implications -Fitzgerald - Automotive Multimedia & Communications

Retention is the key to the imminent rise of usage-based insurance. More accurate rating and customer acquisition may be the immediate motivations for insurance companies, but only customer retention has the power to transform the industry – and reduce carbon emissions in the process. These conclusions were clear from the Telematics Update Insurance Telematics event two weeks ago in Chicago. Returning home from the event, though, I was soon inundated with the daily tidal wave of car insurance advertisements on U.S. television. The multiple offers of the deepest discounts, lowest deductibles and superior service seemed like far more relevant messages to me as a consumer than the proposition of allowing the insurance company to monitor my driving behavior. Allowing an insurance company to monitor my behavior, to me, sounds like a particular circle of Hell inconceivable to even the vivid imagination of Dante. What I was forgetting in this kneejerk reaction is the equal and opposite force within me (or most consumers I presume) that is powerfully drawn to any discount – no matter how small – particularly if it is associated with cheaper car insurance – a product one pays handsomely for and hopes never to use. (Because if you use it you may lose it or end up paying more for it in the future.) The offers on television from Progressive, Nationwide, AllState, State Farm, Farmers and others addressed all of my concerns as a consumer. There were discounted rates earned by parents extended to teenage children. There were deductibles that decline over time when there are no claims. There were offers to top competing discounts. UBI insurance offers the prospect of cutting through the advertising clutter with a message that has the power to draw in new drivers while making them long-term committed subscribers in the process. On the surface, usage-based insurance looks like an expensive proposition (for the insurer) built around the concept of providing discounts to an insurance company’s best customers, according to multiple presenters at the Insurance Telematics event. So let me get this straight:  As an insurer I am going to spend millions of dollars to create a data acquisition and management system and deploy wireless monitoring devices all so I can charge my customers less money? It truly sounds crazy, until one understands the challenges of providing insurance. (No tears, please.) The insurance industry has few reliable tools to offer consumers proper insurance rates. What to the consumer appears to be a generally expensive product is priced based on an opaque process based on age, gender and location and a limited amount of driving history such as infractions, accidents and mileage. The industry was recently revolutionized by the deployment of credit scoring as a rating tool. Not surprisingly, credit bureaus featured prominently among attendees at the Insurance Telematics event. Credit scores, the early insurance company pioneers such as Progressive discovered, were an excellent segmentation tool and proxy for assessing risk. Possessing a more accurate tool for determining risk meant that underwriters using this tool could confidently justify deeper discounts than competitors and they won truckloads of business as a result. Of course, competitors soon learned about the new risk proxy and all companies began using credit scores for segmentation and risk analysis. Usage-based insurance is the new proxy and insurance companies are wary of missing a competitive advantage. From presentations at the event it is clear that the early movers in UBI insurance have learned that the process must be as simple as possible. As a result, Progressive has shifted from an OBDII plug-in device that had to be removed and connected to a consumer’s computer, to a wireless module the customer can plug in and forget. (Progressive has already moved on to the next incarnation as well, read on.) Similarly, Octo Telematics, the European pioneer of UBI insurance with more than 1M subscribers via multiple insurance partners, has introduced a device that clamps onto a car battery. This is an alternative to a device that was professionally (and expensively) installed on the vehicle and provided additional services such as stolen vehicle recovery. Multiple exhibitors at Insurance Telematics touted Bluetooth-based or cellular-based OBDII connections for extracting vehicle data – including Directed Electronics, Zoomsafer, Telenor, Walsh Wireless, Numerex, SmartDrive, Scope Technologies, Matrix Technologies, Xact Technologies and Octo Telematics. (Attendees actively discussed word of legal action between Hughes Telematics and insurance and device providers and others over the use of wireless technology for acquiring vehicle data via the OBDII port. Some companies are reported to have settled with Hughes or, as in the case of Progressive, countersued. Suffice it to say that the intellectual property underpinnings of insurance telematics are unresolved.) The powerful interest of consumers in obtaining discounted insurance taken together with the newfound ability of insurance companies to offer discounts based on more accurate risk segmentation is the motivating force behind a revolution poised to sweep the industry. But why is there little or no advertising of UBI insurance in the U.S. when Progressive has been in the game for 12 years? (European advertising of UBI insurance is widespread.) The answer is simple: The insurance industry is governed by 50 different state authorities, some of whom, such as Pennsylvania, have challenged the rating models and others that simply haven’t made their final ruling. (Pennsylvania withheld approval based on their requirement that Progressive disclose the details of there rating model.) Progressive’s SnapShot product is currently available in 23 states. Another learning from the early UBI movers has been that the device need not be indefinitely installed in the vehicle. Insurers active in UBI have learned that a limited time (ie. one month? six months?) “snapshot” of a driver’s driving behavior is sufficient to assess risk and applicable discount. The SnapShot approach also means the device can be removed and plugged into another customer's vehicle for yet another driver assessment.  Of course, this same snapshot is also key to determining which drivers qualify – and insurers have found that not all drivers are suited to UBI programs. As speakers at the Insurance Telematics event repeatedly said: Everyone thinks they are an above-average driver, but only 50% of those can be correct. The key to success in UBI insurance will be to move early. Insurers feel an overpowering need to deploy systems absolutely as quickly as they can because the likelihood is that the first module a customer installs will be his or her last. Once the insurer learns that customer’s driving behavior and can accurately and affordably underwrite their risk, the customer is unlikely to switch insurers. The competing insurer will always be at a disadvantage, not knowing the customer’s driving behavior. For this reason, the industry is struggling to move very quickly in the U.S. in spite of the state regulators and IP issues. UBI has the ability to change the balance of power in the industry and no company wants to be left disarmed. Conclusion: This battle has just begun. Insurers are likely to package offerings built around comprehensive portfolios of driver services such as roadside assistance, navigation and maybe even stolen vehicle recovery to say nothing of on-scene claims reporting – all built around the modules they are bringing to cars. UBI insurance will not only transform the insurance underwriting industry, it also has the potential to alter the relationships between insurers and OEMs. Insurers that deploy telematics systems are in a position to threaten OEM relationships with their own dealers and consumers. Wireless carriers too have skin in the game as insurance applications are already deployed to mobile phone platforms. Insurance companies have powerful leverage over the customer and cannot be ignored by any of these parties and the mobile phone is an alternative path for a UBI deployment. UBI insurance will rapidly achieve ubiquity nationwide. The prospect of obtaining discounts based on driving behavior will lead to some actual improvements in driving behavior but, mainly, it will contribute to a reduction in driving activity overall, which may be the best outcome of UBI deployment. In the end, the insurance industry will achieve the road charging objective of reducing carbon emissions (a Federal goal) which will forever be politically beyond the reach of  Federal authorities. Additional Insights:http://bit.ly/aWhNuC - Automotive Sensor Demand Forecast 2008 to 2017: Global Economic Rebound Sparks Growth - Mark Fitzgerald - Automotive Electronics Service http://bit.ly/9QCIVw - Automotive Sensor Demand Forecast 2008 to 2017: Global Economic Rebound Sparks Growth - Datatables - Mark Fitzgerald - Automotive Electronics Service http://bit.ly/c0OLhT - Consumer Implications for Smartphone-Vehicle Connectivity  - Chris Schreiner - Automotive Consumer Insights http://bit.ly/c1nvTq - Consumer Interest High for Connected Safety and Security Services - Chris Schreiner - Automotive Consumer Insights http://bit.ly/9PUqjp - UBI Market Poised for Growth - John Canali - Automotive Multimedia & Communications

IntelliDrive, the USDOT program intended to create intelligent highways, stands at the crossroads of major funding and deployment decisions but may be overlooking a solution capable of realizing the smart roadways dream in the twinkling of an eye – relative to current timelines. To do so, though, may mean setting aside, for now 5.9GHz DSRC technology in favor of a technology most recently associated with bad driving behavior. Smartphones and the cellular network hold the key to the deployment of wireless systems and services capable of revolutionizing automotive safety and achieving the dream of safe connected highway systems. This goal can be achieved through opt-in solutions that provide for the sharing of device data and could serve as a transitional technology between existing systems and the DSRC technologies not likely to be deployed for another 5-10 years. Alternatively, the government could step in with its regulatory and legislative powers and mandate the provisioning of cellular data transmissions for connected vehicle communications. (Such a scheme was described to me by an ITS America member at the recent Distracted Driving event in Washington, DC. The executive asked to remain anonymous because his proposal may actually be at odds with the short-term interests of his employer.) So cellular technology, which is already part of the IntelliDrive vision along with DSRC and Wi-Fi, can be used as a transitional alternative to DSRC on a voluntary or involuntary basis. (DSRC is universally preferred for safety applications because of its low lacency.) On the involuntary side, concept is to require smartphones to share their location data and to be used for the reception of targeted emergency or road sign messages. The proposition involves a monthly charge to the subscriber of approximately 10 cents – not unlike the current eight-cent charge for mandated 911 calling on mobile phones – to cover the cost of the first 500Kb of monthly data use on the phone for ITS purposes. (It is worth noting as an aside that Wi-Fi technology has already been pioneered – notably by Dash Navigation – as a V2V technology for communicating highway and traffic conditions. With Wi-Fi technology proliferating on smartphones it will not be long before this same capability emerges in the handset space.) Confronted with this opportunity opponents are quick to note the privacy and liability concerns associated with cellular (and Wi-Fi) technology and the need for, at the very least, an opt in mechanism. The bottom line is that these concerns are not insurmountable and a mandated system is feasible. Opening up a data channel on all phones for location data and automatic crash notifications (transmit) and in-vehicle messaging (receive) will open the door to wide adoption of telematics technology and achieve the goal of connecting vehicles to the infrastructure, in-vehicle messaging and to emergency services. The business models to support the service rationale are not unlike those for RDS-TMC, 911 and 511 services, which means this solution is designed to be low cost but still requires some third party support from private companies. The barriers to be overcome are numerous and include – inter-carrier cooperation, the creation of a data clearinghouse for processing and filtering data, and the creation of a broadcast mechanism most likely via multiple private entities. Achieving comprehensive deployment on mobile phones will also require federal legislative and regulatory action. Because the mobile phone-based system will pay for itself while also taking advantage of ubiquitous handset technology and the cellular network it has massive advantages over the proposed DSRC-based system. The 5.9GHz DSRC technology will require BOTH auto maker support for an added module and antenna AND a huge deployment of transmitters and receivers along roadsides and the corresponding data processing infrastructure. DSRC is inevitable, but why must the driving public wait for a solution that will save lives. If the mandated approach is too onerous, then it is more or less left to private enterprise to implement their own prove networks along the lines of Waze and the CloudMade communities which are multiplying around the world. These emerging networks have the capability to bring these services to market almost immediately. More importantly the proliferation of OBDII connections (admittedly using wireless communication protocols claimed by Hughes Telematics) means smartphones are also capable of communicating vehicle sensor and camera data, further enhancing the value of the proposed systems. The proliferation of low-cost sensor and camera systems means there is a wealth of available inputs such a system can put to work to enhance safety, reduce congestion and hazardous driving conditions, and improve the overall driving experience. In fact, the proliferation of smartphones and inexpensive cameras and sensors are rapidly combining to mitigate the demand for the IntelliDrive DSRC vision. Consumers and industry representatives may discover after the implementation of a smartphone based network sharing vehicle and sensor data and communicating traffic conditions, the incremental enhancement of DSRC deployment is unnecessary. The concept also suggests that those car makers with embedded systems should be able to gain an advantage from having more direct and complete control of the user experience. And those car makers with existing probe networks will gain the first-mover advantage of having a larger volume of inputs to process for the benefit of their subscribers. Facilitating the implementation of this vision will be the rapid development and deployment of handset connectivity technology. From terminal mode to Delphi’s D-Connect and Apple’s iPod out, the technology is rapidly falling into place – alongside OBDII communications and sensor proliferation to facilitate the communication of traffic and other urgent messages to primary and secondary displays in the car. In fact, the mobile phone industry is facing the prospect of a handset FM receiver mandate that will create yet another pathway for communicating information into the vehicle either via the on-board radio or via the mobile phone. The handset FM mandate is intended mainly for the transmission of emergency alerts, but will also enable regular FM transmissions. Conclusion: The concept of using mobile phones and cellular technology to supplant or serve as a transitional solution to the proposed DSRC network for V2X communications is radical and lacks an advocate as a mandate but is already emerging as a voluntary solution in the form of discreet smartphone applications and related user communities. The mandate path is likely to die since the very companies that most recognize its value – those with currently deployed embedded telematics systems  - have the most to lose from its implementation. Other market participants such as content and applications providers and even telecommunications carriers may also be opposed to a mandated proposition as it threatens existing business models and relationships. But all parties are beginning to recognize the mobile phone as the key to solving multiple safety challenges in the vehicle. Whether anticipating hazardous intersections (Global Mobile Alert) or sharing probe data (Waze, TrafficTalk) the smartphone has established its credentials as a safety device. The phone also benefits from the support of a rich developer community rapidly moving smartphone technology into realms not previously foreseen. Additional Insights: http://bit.ly/aWhNuC - Automotive Sensor Demand Forecast 2008 to 2017: Global Economic Rebound Sparks Growth - Mark Fitzgerald - Automotive Electronics Service http://bit.ly/9QCIVw - Automotive Sensor Demand Forecast 2008 to 2017: Global Economic Rebound Sparks Growth - Datatables - Mark Fitzgerald - Automotive Electronics Service http://bit.ly/c0OLhT - Consumer Implications for Smartphone-Vehicle Connectivity  - Chris Schreiner - Automotive Consumer Insights http://bit.ly/c1nvTq - Consumer Interest High for Connected Safety and Security Services - Chris Schreiner - Automotive Consumer Insights

Driving has never been safer, with vehicle crash-related fatalities at an all time low in most areas of the developed world. But public authorities are pushing for zero fatalities and these efforts are helping to bring enhanced safety technologies to the market through a combination of embedded and off-board solutions. Still, not everyone agrees on how to make cars safer. The latest high-profile debate revolves around distracted driving and mobile phone use. Some argue that hands-free interfaces help drivers by allowing them to keep their hands on the steering wheel and their eyes on the road while interacting with their mobile phone. Others believe that no mobile devices should be in the car at all since they represent a driver distraction. Acknowledging the role of distraction (a suddenly loaded noun with many potent and potential meanings) in accidents, a purist might argue for an in-vehicle experience bereft of distracting displays. In this context, a shift to head-up display technology might make more sense than in-dash displays, MMI/i-Drive-type interfaces and touch screens. Even voice interfaces might take a backseat in this scenario. Companies such as General Motors and Microvision are among those leading the way down the head-up path. In an environment where regulators want drivers’ eyes on the road it is the only logical way to go. But the industry and consumers may not be ready for this leap. And with so much industry focus on in-car mobile phone use as part of the U.S. Dept. of Transportation’s Distracted Driving Initiative, the head-up display conversation is likely to be deferred, ignored, or simply drowned out. (It is important to note that head-up displays are no longer available from Buick or Cadillac, as recent dealer visits have confirmed. BMW is now the leader in head-up display technology in North America. The technology remains expensive and, generally, a special order item.) The USDOT’s Distracted Driving Initiative will see its second summit conference this year in Washington, DC, September 21^st. The goal of the event is to raise awareness of distracted driving resulting from in-car mobile phone use generally and texting in particular and to seek solutions to the problem in a public forum. Ford Motor Company stands in the eye of this storm with its high profile Sync hands-free system and the MyFord Touch upgrade arriving later this year. Ford is carrying the flag for hands-on-the-wheel/eyes-on-the-road driving in a struggle with Dept. of Transportation director Ray LaHood, the National Safety Council, the American Automobile Association and Oprah Winfrey, all of whom oppose the use of mobile devices in cars under any circumstances. (Ophrah may have changed her tune recently to allow for hands-free interfaces.) The debate raises fundamental questions regarding safety systems and automotive interfaces. Distracted Driving campaigners implicate the two-second glance to an iPod, iPhone or other mobile device as the culprit in more than a million roadway accidents (http://bit.ly/6uP3wu). All parties agree that there is a problem, but disagree on its nature and magnitude. There is also definite disagreement on the solution. And if a two-second glance is the culprit, what about all of those OTHER two-second glances in the car? Ford’s eyes-on-road-hands-on-wheel message could not be clearer and the company has backed up its position with its own research along with the results of both independent and industry-sponsored studies. Ford’s Sync and the unfortunately named MyFord Touch (which is intended mainly for voice, not touch, interfacing – in spite of the touch screen) represent the solution to a long-standing problem. Driver Distraction has been an issue confronting automobile designers from the very earliest days of the industry. The emergence of car radios in the 1930’s, for example, led to the introduction of push button channel selection to ease the distraction of locating stations with a dial. Multiple international standards-setting bodies and industry associations have long ago specified the appropriate viewing angle (30 degrees) of dashboard displays to minimize eyes-off-the-road time.  Designers regularly do battle over the question of touch screen or no touch screen, debating the finer points of changing focal lengths and distraction. Audi delved deeply into this issue before launching its touchpad interface. Yet all of the i-Drive and MMI-type interfaces still require a glance at a display in the car. Strangely, no one in the industry seems to be taking this distraction debate to its logical conclusion. If a two-second glance to an in-vehicle display is a source of potentially fatal crashes, the industry needs to be taking an entirely different direction. If displays of all kinds are the problem, then let’s do away with on-board displays completely. At the very least the industry should commence an initiative to explore a shift to head-up displays. But, wait, before we undo more than a century of HMI refinement let’s go back to the beginning. Highway fatalities are at an all-time low throughout the developed world and are especially low when indexed against the extraordinary increase in miles driven. During this time of declining road fatalities smartphone penetration has grown at an equally extraordinary pace. Smartphones, therefore, are not an obvious source of highway fatalities, but anecdotal evidence suggests these devices are not blameless. Ford is an interesting organization to find at the nexus of the debate. Not only has the company led the way in bringing voice interfaces into the car for safe operation of mobile devices, it has also pioneered the safe implementation of those interfaces. Examples of safe voice implementation by Ford: #1 Software development kit (SDK) enforces Sync constraints such as no keyboard entry or video while moving and list length limitations. This “policy management” layer is also being implemented within Apple’s iPod out, Delphi’s D-Connect, and Nokia’s Terminal Mode (http://bit.ly/b22buN), among other solutions. #2 When a vehicle is in motion, Ford locks out features and functions such as pairing a Bluetooth phone, editing or adding contact info, POI reviews, detailed sports scores or movie times, manual destination entry, all demo modes, keying in or editing messages, Internet access, external keyboard, editing settings, setting up short-cut buttons. #3 Ford limits list lengths (contacts/recent calls/POIs), the number of canned text responses and Sirius Travel Link information when the vehicle is moving. Ford’s recommendations for mitigating distracted driving include: #1 Passage of Jay Rockefellers’ anti-texting Senate Bill (http://bit.ly/aLMKL4) providing incentives for states to pass anti-texting legislation; #2 Primary enforcement of existing mobile phone bans; #3 Limiting mobile phone use for holders of graduated driver’s licenses – ie. teens; Ford also offers its MyKey technology for parents to limit vehicle speed, stereo volume etc. for teen drivers. #4 Education/public awareness campaigns – ie. Ford’s Driving Skills for Life (http://bit.ly/8TcMpn); #5 Elevate Alliance of Automobile Manufacturers’ “Driver Focused Telematics Guidelines” to regulatory status (http://bit.ly/ddCpRd); #6 Increase funding for research – handheld vs. voice; relative risks of distractions including cognitive; and review real-world driver compensation behaviors. The embedded, policy management side of Ford’s smartphone-based effort has been Volvo’s IDIS workload management solution. Not surprisingly, Ford is working on similar on-board solutions that take into account driving conditions and vehicle status based on messages on the vehicle CAN network including stability control and windshield wiper engagement, speed, and traffic. There is a small irony in Ford’s sale of Volvo given Volvo’s leadership in vehicle safety. The timing was rendered especially poignant given the National Highway Traffic Safety Administration’s shift in the middle of last year toward a focus on preventing rather than simply surviving accidents (http://bit.ly/9L6MFi). Volvo has been a leader in bringing technologies to market that anticipate and attempt to avoid accidents. IDIS (for Intelligent Driver Information System) is intended to shut down distracting in-vehicle functions – such as mobile phone access or even warning lights - in the presence of hazardous driving conditions – intersections, overtaking etc. IDIS takes into account such driving circumstances as acceleration, speed reduction, turn signal indicators, steering wheel angle, reverse gear engagement and infotainment controls. Its primary output is to delay/manage incoming calls and vehicle alerts. The next step for IDIS will be the integration of map data along the lines of map-based advanced driver assist system designs from Navteq (with partners Magneti Marelli and STMicroelectronics) and Intermap (Visteon). The integration of map data with vehicle safety systems will allow for curve over-speed warnings or pro-active braking when approaching sharp turns. One can expect more solutions to block mobile phone access – as in the case of Global Mobile Alert – in the proximity of hazardous intersections, school zones or rail crossings. Strategy Analytics research shows that consumers want safer cars. Recent Strategy Analytics surveys reveal high consumer interest in night vision, pre-crash safety, adaptive front lights, blindspot detection, adaptive cruise control, driver attention monitors, lane departure warning, parking assistance, V2V communication and automatic speed limiters. The challenge of course, is getting consumers to pay for these technologies. This reluctance to pay creates the conditions for Federal mandates. And Federal mandates are likely to change the public’s perception of safety from an exploding airbag to a pre-emptive braking experience. Auto makers are already responding to this shift. Infiniti, Toyota, Mercedes-Benz, Opel and Volvo are all actively touting active vehicle safety systems with the best and most advanced of these taking driving context into account. These systems are also increasingly taking distraction, inattention and even driver fatigue into account. Conclusion: In an ideal world, there would be no distracting displays inside the car to divert the driver’s attention from the eyes forward concentration on the driving task. In this ideal world, head-up displays would be widely deployed and traffic fatalities would be continuing their downward trajectory. We do not live in an ideal world. Therefore, everything else in the world of automotive HMI is a compromise. In the context of that compromise, vehicle systems that take into account driving circumstances and device connectivity are preferred to those that do not. This means that systems and devices – Apple’s iPod out, Nokia’s Terminal Mode, Delphi’s D-Connect – that provide a contextual policy management layer will be in demand. More importantly, with NHTSA shifting its focus to crash avoidance, perhaps the entire automotive industry will begin to rethink what safety is and what safety means. And when it comes to distracted driving, there will hopefully be a federal and industry embrace rather than a rejection of technological solutions such as hands-free interfaces. Additional Insights:http://bit.ly/94Mn1V - Delphi Emerges at SAE with Answer to Nokia Terminal Mode - Lanctot - blog - Strategy Analyticshttp://bit.ly/b5W8ZS - Nokia and RIM Push Into Automotive as ‘Apps’ Competition Mounts - Joanne Blight – AMCS http://bit.ly/b5XEJM - Advanced Driver Assistance Systems: Supply And Fitment Database - Kevin Mak - Automotive Multimedia and Communications Service http://bit.ly/cVcENg- Consumers Interested in Advanced Safety Features, but not at Current Price - Chris Schreiner - Automotive Consumer Insights http://bit.ly/b9oVAt - CTIA 2010: Distraction Mitigating Apps on Display - Chris Schreiner - Automotive Multimedia and Communications Service http://bit.ly/9BYNeR - Smartphones Bringing Safety Systems to Cars - Roger Lanctot - blog - Autmotive Multimedia and Communications Service

Presenters at Freescale’s Technology Forum sought to clear the air on some fundamental automotive development questions. Chief among the topics debated at the event were operating system trends generally and Android specifically, and the emergence of automotive application stores. Representatives from OnStar, Kia, Hyundai, and Visteon as well as system integrators such as IAEC all agreed that apps are coming to cars. It does not appear to matter whether they are built-in, brought in or beamed in. They are coming. To cope, auto makers will confront the challenge with a few key priorities in mind: Safety Liability In-vehicle HMI Branding Security OEMs say they need to ensure that the vehicle can be operated safely; that liability issues are pre-empted; that key elements of in-vehicle HMI are properly integrated; that branding messages are preserved and not superseded; and that the security of the on-board systems and the customer’s information are maintained. For these reasons, OEMs will be seeking assistance to establish validation processes and criteria for apps coming into the vehicle. Liability stood out among these issues as a point of disagreement. While OEM representatives say car makers will be blamed for any app failure, and dealers will be forced to cope with these complaints, non-auto industry executives thought consumers would simply blame the app maker, telecom carrier or handsets supplier. Unfortunately, car makers cannot afford to gamble that they won’t be blamed for failures. Because of the magnitude of this task, OEMs are already adding staff for software development while partnering with third party developers to create their own approved, branded solutions. While some applications are being developed in house, most development activity is taking place within the software developer community to OEM specifications. The long-term implications of these developments are monumental when the need for software updates is taken into account. It also means that OEMs are in many instances taking on the role of being their own tier ones – a function first defined by Ford with the launch of Sync. Ford has pioneered and, some say, mastered the strategy of acting as general contractor for its Ford Sync system with its growing community of software developers and service providers. Companies such as Kia Motors, Hyundai Motor America and Toyota Motor Sales all have followed suit with varying degrees of success. OnStar has made no secret of the fact that it is hiring technicians and expanding its supplier eco-system as it modifies its hardware and software model to make room for the app phenomenon. Hardware tier ones such as Delphi, Continental, Visteon and Johnson Controls are attempting to step into the general contractor role as well, offering to play the role of application certifiers. The acceptance of these appeals remains to be seen. Visteon and QNX demonstrated application store and content aggregation platforms at the Freescale Technology Forum. Visteon’s solution was built on Canonical’s Ubuntu Linux distribution. QNX’s offering was based on its own OS, although QNX is able to implement ann Android-based solution, if required, via its abstraction layer. Other automotive software suppliers on hand at the event included Canonical, Mentor Graphics, Wind River, Green Hills and Microsoft. Given the rapid growth in developer support for Android and its proliferation in the mobile market, it is logical that there be a connection to the app store debate. Suppliers to the automotive industry continue to debate the question of Android in the car. But several presenters at the Freescale Technology Forum suggested the question was moot, not only because Android was simply another version of Linux, which is already widely distributed in the car, but because the automotive platform is already being implemented. Lingering objections to Android appear to boil down to two issues, according to a Freescale executive at the Technology Forum: boot time and versions. Android can take as long as 40 seconds to boot, as anyone who owns an Android phone can attest. Android supporters say the millisecond boot times required by automotive specifications can be achieved with hardware and software workarounds. With regard to the multiplying versions of Android, it is true that the platform is still at least partially in the hands of Google and new versions arrive on a regular basis. Additionally, the priorities for the propagation of new versions are governed by the exigencies of the mobile, not the automotive, marketplace. Android supporters say it is hard to imagine that any operating system platform will not be subject to change and updating, hence this objection does not appear to hold water. Freescale has waded into the debate with developer support for Android applications for mobile devices. Freescale has an i.MX51 evaluation kit with Android OS board support package (BSP). Freescale says its BSP is ready to be adapted to select i.MX platforms. “The i.MX51 multimedia applications processor running Android is an excellent platform for building a high-performance, low-power and cost-effective mobile device that successfully passes the Android Compatibility Test Suite (CTS).” According to an executive from Intrepid Control Systems (ICS), which has created an Android application - Sensor Spy - for extracting sensor data from a vehicle for triggering mobile device functions, Google retains control over access to a few aspects of Android including the Android Market, access to specific Google APIs, and access to cloud features such as voice recognition and push technology. But the ICS executive pointed out that Android can be used for its APIs and tools and that a home screen can be used to hide Android from the end user (via Mentor Embedded Inflexion UI). The ICS executive proceeded to describe how the Android model works concluding that Google TV may be an ideal automotive application. In conclusion, he pointed to the Android-based SAIC InkaNet optional connectivity platform introduced for the Chinese market earlier this year as the first automotive Android implementation. Indications in the industry are that it is only the first of many to come. Conclusion: App stores are a reality in the automotive marketplace. But automotive app stores will differ from the Apple App Store or Android Market. Automotive applications will have to be properly vetted for liability, security, HMI, safety and branding. For this reason, it is unlikely that car makers will be able to implement off-the-shelf application solutions. Car makers will be forced to create new supplier relationships and a new eco-system to support the app store model. They will be forced to do this in the context of an ill-defined path to revenue generation (from selling apps? from selling app-related enhancements or content?) in the hope that app stores will stimulate vehicle sales or as a customer-driven defensive response to the proliferation of smart phones and smart phone connectivity platforms in the automotive industry. The message from the Freescale Technology Forum: Like it or not, automotive app stores and the Android OS have arrived. Additional insights: http://bit.ly/cYvFZH - InkaNet – Mobile-Based Infotainment Comes To Chinese Autos - Automotive Multimedia and Communications Service - Kevin Mak http://bit.ly/aBwXvE - Enabling Technologies Forecasts A to E - Wireless Device Strategies - Bonny Joy http://bit.ly/bUxwrT - Automotive Semiconductor Demand Forecast 2008 - 2017: Datafile - Automotive Electronics Service - Chris Webber http://bit.ly/b5W8ZS - Nokia and RIM Push Into Automotive as 'Apps' Competition Mounts - Automotive Multimedia and Communications  Service - Joanne Blight Intrepid Control Systems - Android OS for Infotainment: Advantages of an Open Architecture - http://bit.ly/cTfBFG

A grand experiment is unfolding in the traffic reporting industry around the simultaneous confrontation between and combination of GPS probe and handset signaling data for traffic flow analysis. Both technologies offer the promise of transforming traffic data from an annoying and often disappointing proposition to a more precise and satisfactory experience. But push is about to come to shove in North America – with three pending OEM RFQs in play. The results of these OEM evaluations will likely have a global impact on the traffic data processing industry. To recap, current traffic data consists of: 1. GPS-based fleet data – derived mainly but not exclusively from commercial vehicles 2. Public data – loop sensors and other traffic tracking systems installed and managed mainly by public authorities 3. “Journalistic” data – incident inputs from emergency responders and private sources GPS probe and cellular hand-off data is, in essence, a fourth layer that is of increasing importance to traffic reporting and interpreting systems. The other key element, of course, is the secret sauce added by the aggregators and processors of this data. The aggregators and processors are of several types including those that aggregate a single type of data, such as AirSage or IntelliOne that process cellular handoff data, or that combine several different types of data, such as Inrix or ITIS Holdings, or that provide a system or a tool for processing or for publishing multiple data feeds, such as MILE (MobileInfo.Life Europe) Traffic and Travel, Gewi or PTV. Inrix is a fourth type of provider in offering a platform for both service and content aggregation – including traffic. Inrix has also been a pioneer, along with Navteq’s Traffic.com, in combining multiple real-time and historical traffic data into a predictive traffic model. This strategy has been adopted by others, most notably TomTom. MILE Traffic and Travel is unique for its model of licensing its data processing technology. TomTom is also best known for its pioneering work in integrating both cellular hand-off data (from Vodafone) and GPS probe data (from its Live Service subscribers). TomTom’s success in turning cellular hand-off data into a compelling solution in mobile devices has been an inspiration for both the emerging GPS probe market players (TCS, RIM, Google, Nokia Navteq, etc.) and the cellular hand-off companies. (ITIS claims to be the first to achieve this integration in a commercial solution.) The impending integration of both GPS probe data and cellular handoff data is a test for the industry to see if it can finally get the traffic data solution right. At stake are the hearts, minds and wallets of hundreds of millions of drivers using mobile devices and embedded navigation systems to seek out the most efficient means of getting from point A to point B. GPS probe data is renowned for its accuracy and increasing pervasiveness, as public authorities in multiple geographies have begun requiring GPS technology on handsets for emergency response purposes. The problem with GPS, though, is its impact of device power consumption. Because of this, many users choose to turn their GPS signals off when not in use. In contrast, cellular hand-off data is truly pervasive. While more difficult to interpret and notorious for the incidence of false positives, cellular hand-off data is unmatched for the sheer volume of data generated. For this reason, companies playing the cellular hand-off game, such as TomTom, MILE Traffic and Travel and AirSage, have an edge in the next wave of traffic data solutions. The only implemented solutions thus far have been TomTom’s industry-leading HD Traffic offering in Europe and Westwood One’s more limited use of AirSage data as an enhancement to its own traffic reporting products. AirSage is unique in its recent successful efforts to bring together data from multiple carriers. The company recently added Verizon to its existing Sprint relationship and is poised to deliver the first multi-carrier solution for North America. AirSage and other North American players have long been delayed in their efforts to deliver a cellular hand-off solution in North America due to the more heterogeneous carrier networks. The good news for these companies, though, is there is a significant business in logistics to be derived from the location data (for shipping, traffic management, store and cell tower locatin selection) and location-based advertising solutions are also beginning to emerge. The turning point for the industry likely lies in pending North American RFQs at BMW, Toyota and OnStar. From luxury vehicles to mass market movers, drivers have let car makers know that the current crop of traffic solutions are not cutting it. The information on the display does not correspond with the events unfolding in front of the windshield. The outcome of these OEM evaluations will likely determine the direction of traffic data processing for years to come. Additional Insights: http://bit.ly/bMeg36 - Global Mobile Handset Navigation Forecast 2004-2014 – Nitesh Patel - Navigation and Location Opportunities http://bit.ly/aoQdpd - North America Mobile Handset Navigation Forecast 2004-2014 – Nitesh Patel – Wireless Media Strategies http://bit.ly/aHhWeV - Nokia & Google Shake Up $3.8 B Handset Navigation Market - Nitesh Patel - Wireless Media Strategies http://bit.ly/cc6O9K - PND Owners Unlikely to Discontinue Using Their Device - Chris Schreiner - Automotive Consumer Insights http://bit.ly/c5f65I - Automotive and Portable Navigation Market Forecast 2008-2016 - Joanne Blight - Automotive Multimedia and Communications Systems http://bit.ly/b5W8ZS - Nokia and RIM Push Into Automotive as ‘Apps’ Competition Mounts - Joanne Blight - Automotive Multimedia and Communications Systems http://bit.ly/9NoM13 - From Probes to Crowd to Community to Ads – Traffic Data Evolving Rapidly - Roger Lanctot - blog - Global Automotive Practice

OnStar is expected to bring out a mirror-mounted telematics device for the retail automotive aftermarket sometime early in 2011. The move is part of a broader strategy to take OnStar beyond the shelter of parent General Motors to tap into the wider market potential of safety and security and to finally and safely integrate entertainment technology with the telematics solution. General Motors’ OnStar division has yet to officially acknowledge its plans for an aftermarket product introduction in 2011, but the company has come close to affirming their existence with a report on CNNMoney.com that the company will “extend the OnStar business even beyond automotive.” The statement comes in the context of an announcement of a relaunch of OnStar before the end of 2010. As part of that relaunch new OnStar president Chris Preuss has been spreading the word that OnStar is looking to hire 30 or more engineers and developers to drive the revamp of the 14-year-old system. OnStar has declined to comment on any aftermarket plans. Preuss has moved quickly to put his imprint on the brand. Preuss arrived at OnStar with a long pedigree within GM as a senior communications executive both in the U.S. and Europe and has joined the broader effort within the company to project the brand into the world of social networking and closer connections with customers. For at least the past two months, GM has been building a team intended to bring an aftermarket OnStar product to the world of “big box” retail epitomized by Best Buy and others in the U.S. According to industry sources, the original plan was to launch before the end of 2010, but it now looks like a 2011 time frame is more likely. But OnStar’s plans likely do not end there. The reason for the aftermarket launch, and a potential move beyond automotive opportunities, is the potential crisis foretold by declining sales volumes for GM vehicles which are packaged with OnStar as a standard feature. Vehicle sales for GM are in the midst of a three-year swoon (down 21% in 2008, down 32% in 2009, flat in 2010) based on JD Power estimates. Assuming unchanged subscriber renewal and retention rates, the OnStar subscriber base – long reported to be 5.5M – is likely in the midst of a precipitous decline and in sore need of shoring up from other sources of subscribers. OnStar currently offers its services free for one year on most GM models, and then at subscription rates of about $20 to $30 a month, depending on the level of service, or $200 to $300 a year. Those numbers translate to more than $1B in revenue. OnStar’s new president claims a better than 50% retention rate among new car buyers – though the overall renewal rate is likely lower. Even if OnStar is maintaining a 50% retention rate, the diminished vehicle sales volumes are undermining GM’s ability to replace subscribers lost to attrition. Under these circumstances, maintaining the 5.5M subscriber base will be a challenge. OnStar executives privately aver that the division is and continues to be profitable, but a significant decline in subscribers is putting that profitability in jeopardy. Further, OnStar is famous within the industry for claiming to save GM hundreds of millions of dollars in warranty costs from catching vehicle problems early in vehicle life cycles. And Preuss is quoted in the CNNMoney report saying that OnStar is a factor in at least two-thirds of customers' decisions to buy a GM product. The challenge for OnStar goes beyond the decline in vehicle sales volumes. GM is competing against Ford and other OEMs that are emphasizing smartphone connectivity, which provides many of the same features and functions as OnStar. With so many functions shifting to phones customers are less inclined than ever before to add yet another subscription, even if it is for an embedded vehicle safety system. One of OnStar’s greatest assets, though, is its brand, which is why the group is looking beyond GM. Preuss says OnStar may return to offering its system to competing OEMs or may vary its business model to allow for sponsored content or services such as ad-supported turn-by-turn instructions. There are other scenarios for an OnStar move beyond GM including a commercial telematics solution for fleet or asset tracking, offerings for insurance companies to target pay-as-you-drive or teen driver applications, as well as, finally, buy-here-pay-here products for the sub-prime auto lending market. Given the urgency of the subscriber erosion situation, it is likely that OnStar will bring multiple solutions to market including, no doubt, a smartphone application offering with roadside assistance, concierge services and other location aware functions. OnStar has shown such a concept in the past but never pulled the trigger on introducing it to the market. Now, such an application is seen not only as a potential source of revenue but also as a brand builder and, of course, an extension of the OnStar platform. Preuss has sent mixed messages regarding the positioning of OnStar going forward. In the CNNMoney report he says the focus will be squarely on vehicle safety. In an Automotive News article announcing his appointment he stated that “fun” will be a priority for OnStar going forward. There is not doubt, though, that OnStar is being re-architected and repositioned to be competitive in a world characterized by social networking and device connectivity. What is most likely in the short-term, is an aftermarket offering, most likely in the form of an OnStar-equipped mirror. In fact, Gentex, which manufacturers an aftermarket replacement version of the OnStar-equipped mirror, stopped distributing its product through distributor Mito two months ago, at the request of GM. OnStar is likely taking control of the distribution of the product in preparation for mass market sales. An introduction of the OnStar brand into the retail automotive aftermarket is in keeping with growing interest in vehicle connectivity, navigation and tracking in general and telematics in particular. The Federal government has made known its interest in standardizing event data recorders in vehicles as a result of the recent Toyota unintended acceleration recall debacle. And companies as varied as TomTom, Hughes Telematics, Guidepoint, Rosen Entertainment and Pioneer Electronics are enabling roadside assistance capabilities in their devices and systems. Guidepoint is the single largest incumbent supplier of aftermarket telematics solutions. The company distributes primarily through car dealers and maintains its own call centers for roadside assistance and concierge calls. Guidepoint recently partnered with Rosen to bring an aftermarket head unit to the retail market with an on-screen button to access call center services. Hughes Telematics is another company looking to enter the aftermarket. Hughes has had an aftermarket offering ready for more than a year and is believed to be putting the team together to bring the product to retail. Given the fact that OnStar has been hiring executives to staff a regionalized sales force, the indication is strong that the group is target both consumer opportunities through retail and commercial opportunities. And an offering to be sold through expediters to competing OEM dealers is not out of the question. (After all, what can a Ford dealer do when the customer asks for OnStar by name?) The key difference, and main advantage, of OnStar remains the automatic crash notification – a function which may be problematic to offer in an aftermarket device. No one believes an aftermarket solution will be an easy sell at retail. But an OnStar-branded device will likely get serious consideration from consumers. The wild card for OnStar will be the precise nature of its reconfiguration and repositioning. The best news is that OnStar is not sitting back in the face of incursions by Google, Apple and others into the vehicle connectivity and infotainment business. The challenge will be for OnStar to demonstrate its ability to retain its industry leadership position and maintain or grow its subscriber base. The announced hirings at OnStar and relaunch indicate much more than a business model tweak for the group. Further Insight: http://bit.ly/cZOxuG - Global Automotive OE Telematics Market 2008-2016 - Joanne Blight

Thanks to Meta Systems and its Octo Telematics subsidiary, the Italian market has become the de facto European proving ground for pay-as-you-drive insurance products. Octo Telematics pioneered pay-as-you-drive insurance in Italy and elsewhere in southern Europe with a connectivity box capable of providing tracking and stolen vehicle recovery services. As a result, it is no surprise that Allianz chose Italy for the launch of its Service Pack and Pay Per Use services more than a year ago. Many insurers in Italy provide PAYD products and services. By some estimates, as many as 800,000 drivers are enrolled in such programs. Allianz has set itself apart from the existing competition in a number of significant respects, but it is similar in also making use of a Meta System supplied “black box.” Both the Service Pack and Pay Per Use services from Allianz are enabled by this connectivity box. Service Pack offers customers eCall, bCall, theft notification and vehicle tracking applications via the Meta Systems box. The service is 99 Euro/year and requires the free installation of the box on the vehicle by a network of professional installers. The customer surrenders the box when the service is terminated. Allianz does not claim to offer stolen vehicle recovery, only theft notification. This notification is achieved through the use of an RF keyfob device, not unlike the way LoJack works in the U.S. If the vehicle is moved without the keyfob being on-board, the customer will be notified by Allianz representatives via the company’s wholly-owned Mondiale Assistance call center subsidiary. Vehicle recovery is left to the public authorities after the customer notifies the police. The Mondiale call center also support the bCall and eCall applications. Unlike the eCall services of competing insurance companies, the Allianze system provides for call center reception and processing of both eCalls and bCalls via an embedded SIM. Calls are activated manually via a single button or automatically in the event of a crash. Competing insurance companies that offer eCall-like features typically set up the application with the customer’s home or mobile phone number, with no connection to a call center. As a result, customers receiving these calls are responsible for seeking assistance for the driver. In this way, Allianz has put itself squarely in the eCall business for its Italian customers who choose Service Pack. Switzerland is expected to be the next market to be activated. The Pay Per Use product is an add-on service for customers who have already chosen Service Pack. The Pay Per Use service is targeted at low mileage drivers who can achieve savings of as much as 25% on their premiums based solely on the amount of driving they do – ie. mileage. Allianz is thought to be satisfied with the response thus far, though it has not been overwhelming. The 99 Euro/year price was introduced in 2009 as a promotional offer but remains more than a year later. The next steps for Allianz are to bring its solution to more European markets. The range of savings on the Pay Per Use product  will vary based on demographic and geographic calculations. The Allianz initiative shows a maturing in the PAYD market as location-aware insurance products begin to move into the mainstream. The Allianz offering is significant for its integration of eCall and bCall services along with theft notification all enabled via the customer’s phone, though the theft notification is enabled by an embedded connection.

Harman announced a return to profitability for its fiscal second quarter in an earnings call earlier this week. In that call, the company detailed its marketing plan which could be taken as a blueprint for the entire industry – particularly the company’s inroads into larger volume mid-segment vehicle categories.

Harman is pursuing emerging market opportunities in China, Brazil and India with local development and manufacturing presence – including a $1B revenue target for China by 2015. The emerging market initiative is reflected also in a targeted shift of engineering/R&D balance from 99% high capital and cost (HCC) markets to 60% HCC, and manufacturing/assembly from 81% HCC to 50% HCC by 2012.

The company expects to maintain its luxury segment leadership while leveraging its previously announced “scalable system” strategy, which has already contributed to a Toyota European design win for MY2011. The scalable system is part of an initiative targeting what Harman sees as a $5B high-growth, mid-segment market opportunity reflecting the company’s desire to capture a broader portfolio of business.

In that regard, Harman wants to pioneer energy-saving GreenEdge technologies for hybrid and electric cars in partnership with Intel and Texas Instruments developing solutions to reduce power consumption by 75% including high efficiency speakers, one of the few objectives the company has yet to realize in the marketplace. Similarly, the company is working with Lotus Engineering on Active Noise Management solutions for hybrid, electric and conventional vehicles to address impending legislation regarding pedestrian safety. Noise management will also apply to in-cabin noise cancellation and reduced weight and CO2 emissions. And Harman is also targeting advanced driver assist systems, an entirely new segment for the company.

In its earnings call the company mentioned winning $2B of additional business, expanding its contract portfolio to $10B, a figure the company claims is the largest in the industry. Included in its current and recently executed order book are:

->     Infinity branded audio systems for next-generation Chrysler SRT series high-performance vehicles;

->     Launch of Mark Levinson premium surround sound for MY10 Lexus GX 460;

->     Launch of JBL premium sound for MY11 Toyota Sienna in U.S.;

->     Launch of Harman Kardon Logic 7 HD system with Range Rover for MY10 mid-model year introduction;

->     Launch of Ferrari 458 Italia equipped with Harman audio and infotainment;

->     Exclusive Haman Kardon sound lounges at BMW brand centers in Munich and Berlin;

->     Press launch of Harman/Lotus Engineering HALOsonic sound synthesis technologies;

->     Selected by BMW for next gen, high-end “Professional infotainment system for all new platforms including BMW, Mini and Rolls Royce;

->     Selected by Daimler for next gen Comand infotainment system for new Mercedes S-Class and C-Class models;

->     Selected by Toyota to provide Harman next gen scalable infotainment for vehicles sold in Europe beginning MY11;

->     Selected by Toyota to provide premium JBL branded audio for 4Runner and Land Cruiser in the U.S., Europe and Middle East and the MY11 Siena in U.S.

All of this contributes to what Harman estimates as 45% global branded automotive audio market share, with Bose at a distant 25%. Harman’s branded audio solutions are used in more than 200 car platforms from 12 OEMs shipping more than 2M audio systems annually. Sources indicate that this 500,000 units/quarter pace is actually approaching 1M units/quarter – a pace that will no doubt be stimulated by the recent Toyota wins and future higher volume segment wins.

The pace of launches has eased somewhat for Harman, which may help explain the return to profitability as profits cusually come later in the program cycle. The company hit a peak of six program launches in FY08, followed by five in FY09. The programs for those years included Mercedes, PSA, Porsche, Audi, BMW, SSangYong, Chrysler and Hyundai. Going forward, Harman says it will have four launches in FY10 (including Audi, Mercedes and BMW (2)), three in FY11 (Toyota, Mercedes and Chrysler) and one in FY12 (BMW), before ramping up again in FY13 with four: Harley-Davidson, Mercedes and BMW (2).

The company further notes the evolution of its infotainment architecture:

1997: SH1/16MB – Tuner/CD/Navi – Turn-by-Turn

2002: SH3/32MB – MMI2000 – VxWorks – Tuner/CD/DVD – Phone/SDS – MOST25 – 2D/2.5D Map

2008: SH4/512MB/1024 – MoCCA Framework – QNX CAR Platform – Tuner/CD/DVD – Phone/SDS – MOST50 – 3D Map – Internet Connectivity

2012: Intel Atomm/1GB – MoCCA & DSI 2.0 – QNX CAR – Tuner/CD/DVD/Blu-Ray – Phone/SMS/Email – MOST150 – NDS Navi – Enhanced 3D Map – Internet.

Worth noting in the architectural evolution is the growing role of both QNX (CAR Platform) and Intel (Atomm) as well as the onset of Internet connectivity - pioneered by BMW - Blu-Ray, MOST and enhanced navigation features, many of which will revolve around 3D and augmented reality implementations.

Overall, Harman appears to have emerged victorious from its cost cutting regimen with fewer European facilities but with a profitable organization in place pursuing business building initiatives throughout Europe, Asia and the U.S. The most significant business transformation of all, though, will be the Toyota wins. Not even Toyota's recent marketing stumbles can tarnish this achievement and how its will transform Harman's operations and growth profile.