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

While major media and cable companies talk about four screen strategies the telematics industry is abuzz over the emergence of a three screen world. This was never more clear than at last week’s Telematics Update event in Novi, Mich. From OEMs to tier ones, software and service providers, the focus is on leveraging handsets, head units and the Internet to create closer and more profitable customer relationships. Companies on hand preaching the three-screen gospel included Nokia, Continental, Airbiquity, WirelessCar, RealVNC, QNX, Google, ATX, Tweddle Group Technologies and Parrot. The solutions demonstrated and debated point the way to a more connected experience in the car where the customer can access vehicle related information from outside the vehicle or on a phone or online when away from the vehicle. Even meta data provider Rovi and HMI supplier TAT offered their contributions to the three-screen vision. Nokia described and defended its terminal mode technology, a European-oriented campaign built around what some term a “screen scrape” transfer of a smartphone’s display along with a shift of device control to the vehicle HMI. Nokia intends to equip all of its smartphones with terminal mode technology by early 2011 and is working through the CE4A coalition to coordinate tier one head unit implementation of the technology throughout Europe, where Nokia’s market share is strongest. Using similar technology, RealVNC showed development tools for extending terminal mode technology into a wider range of devices and markets. While Nokia claimed to have two competing handset makers interested in the terminal mode solution, RealVNC’s more agnostic approach offers a suitable alternative. Airbiquity promoted its in-band modem technology by extending the platform to include a customized user interface, tied to the user’s mobile phone, along with app store functionality and location and user-relevant advertising messages. Airbiquity is increasingly taking on the role of a content aggregator, tying together content and applications in a single user interface. Airbiquity's Bluetooth-based approach was presented as a powerful and low-cost data-over-voice/packet alternative to packet-only solutions which require a payment for dial-up networking or SPP monthly service fees. Airbiquity estimates that OEMs deploying packet-only solutions will limit themselves to 20% of the penetratable market of which only 3-5% will have extra carrier service plan for BT DUN/SPP packet connectivity. On top of the data-over-voice solution, Airbiquity is layering its Choreo cloud service for both consumer and commercial markets. Airbiquity says Choreo allows OEMs to convert the car to an IT platform, creating a global infrastructure for content and service delivery. WirelessCar has also stepped into the content aggregator role, showing a clever vehicle-to-smartphone integration providing some basic vehicle control functionality and information access. The WirelessCar solution suggested the long-anticipated realization of a vehicle portal also accessible via smartphone for sharing vital vehicle data with the owner. OnStar has found this approach, with key vehicle status information, to be a valuable tool for driving customer traffic and service revenue via the dealer channel. To drive home its message, WirelessCar led a panel discussion with Ericsson and Cybercom, representing the wireless carrier and software integration perspectives on the implementation of a three-screen world.  Actually, WirelessCar has been pushing and demonstrating this concept for at least three years. Tweddle Group Technologies – the combination of Tweddle Group with UIEvolution’s former automotive division – is also looking to fill the content aggregator role. The company brings to the table its long history in the owner’s manual business – which itself is transitioning to electronic delivery – along with a relationship with Pandora. The Tweddle solution, which allows for the delivery of text and video content - via head unit or handset - related to vehicle systems has intriguing possibilities if integrated with CAN inputs such as alerts or other status messages. Tweddle has yet to marry these two sources of data, but the concept is certainly a powerful one. QNX has also envisioned sharing vehicle status information with the driver via on-board displays. The QNX LTE Car demo includes a “Virtual Mechanic” for providing the driver with images of vehicle systems and their status. Given Toyota’s recent disastrous recalls, the opportunity for these types of systems to catch on is strong. For its part ATX was demonstrating its new application for integration with Mercedes Benz’s TeleAid telematics service. The app provides for some basic vehicle control along with the ability to remotely send a destination to the vehicle’s navigation system. Continental’s AutolinQ concept may be a little ahead of its time in promising an on-board app store experience in an Android operating system environment. While car makers and suppliers have broadly embraced a variety of Linux distributions, Android is still running up against some industry prejudice over the issue of vulnerability to hacking and other perceived weaknesses. Industry buzz suggests that Android is being accepted and even specified in some RFQs, which is certainly a promising development for Continental. The growing Android momentum in the automotive, mobile and even consumer electronics markets suggests that Continental is on the right track. In support of its campaign, Continental announced an eco-system of solution providers contributing to the platform including Ygomi, Inrix, Navteq, Navigon and Deutsche Telekom. Continental will no doubt be flexible regarding these relationships if it means sacrificing a partner to obtain a new contract. But at least now the Continental vision has been clarified as a fully evolved proposition. Delphi executives attended the event, but did not demonstrate their own connectivity platform: D-Connect. Delphi has been vocal in its support of connectivity to Android devices, but resistance to building Android into the head unit. Since D-Connect has not been publicly announced it is hard to predict how Delphi’s final implementation will arrive in the market. Tier two Parrot showed chipsets optimized for mobile device connectivity including the latest Bluetooth protocols and Wi-Fi. Android also figures prominently in Parrot’s plans including some active programs, according to the company. Google announced additional “Send to” partners at the event – OnStar and Ford. For Google, the message for the industry is that it is a cloud-based world. Applications are no longer launched for desktop computers, they are launched on and for the Internet. Google’s recommendation is clearly that car makers facilitate cloud connections either on board or via mobile devices. OnStar, with the most powerful brand in the telematics industry, faces perhaps the greatest challenge in developing a cloud-oriented strategy. Not only must the company integrate its infotainment and telematics teams – long at odds over key applications such as Bluetooth connectivity and navigation – it must also reposition a brand identified almost entirely in relation to safety and security, not entertainment. The path is far from clear, but the promise of additional revenue from dealer service work to content consumption and, overall, a tighter relationship with the customer has car makers and their suppliers working overtime. All agree, at last, that the future lies in three screens. Leading the way are OnStar and Ford, each of which has defined its own three-screen strategy. BMW and Daimler are the next logical candidates to implement the handset-head unit-Internet approach. All of which points to common elements in future telematics solutions including: app stores (accessible via all three screens), vehicle control (across and between platforms), access to vehicle status information (all screens), content aggregation partner and back-end system provider, cloud-based content and services, and provision for multiple-handset compatibility. The emergence of these common threads are helping to clarify the future deployment of telematics systems speeding the delivery of in-vehicle connectivity. *Editor's note: Airbiquity executives suggested amending the strategy to FOUR screens. This week, Microsoft's embedded software division touted a FIVE screen strategy at the Fachkongress Elektronik in Ludwigsburg. Further insight: http://bit.ly/cMw4f1 - Solid Q4 for PNDs, but ‘Free’ Navigation is Shaking Up Monetisation - John Canali – Automotive Multimedia and Communication Service http://bit.ly/bMeg36 - Global Mobile Handset Navigation Forecast 2004-2014 - Nitesh Patel – Navigation and Location Opportunities http://bit.ly/8Yo4U6 - Nokia & Google Shake Up $3.8 B Handset Navigation Market - Nitesh Patel – Navigation and Location Opportunities http://bit.ly/6FC6W7 - Smartphone Market Developments Shaking Up Automotive Strategies - Lanctot - Automotive Multimedia and Communications

Change is coming to the automotive industry via U.S. government entities that suddenly have the cash, the power and the public mandate to significantly influence the direction of vehicle design and surface transportation. With multi-billion dollar investments in two of the one-time Big Three automakers, the Federal government suddenly has unprecedented leverage over the industry along with a clearly defined agenda for enhancing safety and reducing vehicle emissions. Just a few years ago industry participants were inclined to eye roll and shake their heads at the plans of connected vehicle (VII, V2X) and HEV/EV advocates, preferring to stick with the prevailing traditional disconnected ICE (internal combustion engine) vehicle mentality. In the words of an old American advertising slogan: When something works you stick with it. What a difference a few years, an economic downturn and a massive embarrassing recall can make! Consumers are shifting to 4- and 6- cylinder vehicles. And even without incentives, consumers are turning to HEVs most notably Toyota’s Prius. What were once seen as pie in the sky visions of connected electric vehicles have rapidly become remarkably realistic opportunities – even if substantial EV sales volumes are still somewhat out on the horizon (SA EV/HEV forecast - http://bit.ly/9s3lid). Hundreds of billions of dollars have been invested by federal and local governments – as well as overseas governments – to incent EV development and sales. (Strategy Analytics has a spreadsheet of more than 300 EV/HEV legislative initiatives worldwide -  http://bit.ly/aRdhK8.) At the same time, the National Highway Traffic Safety Administration (NHTSA) has stirred to life stimulated by both a distracted driving crisis (from growing fatalities due to talking and texting drivers) and the Toyota unintended acceleration debacle. NHTSA, which was quite recently focused on fusion safety system technology in cars – making use of multiple sensor inputs to assist drivers in maintaining lanes, monitoring blind spots and avoiding crashes – has firmly shifted to an emphasis primarily on avoiding and surviving crashes. The agency is also seeking data recorder mandates among other initiatives. The crash avoidance portion of NHTSA’s campaign has V2X written all over it. While monitoring blind spots and maintaining a lane are important vehicle applications, true crash avoidance technology can only be achieved with vehicle connectivity to other vehicles nearby and not so nearby as well as to infrastructure using DSRC technology. In fact, at the latest ITS meeting the organization made clear that it is compiling a database of 5.9MHz DSRC providers who will be able to meet the antipated demand for line fit and aftermarket modules. DSRC was heavily touted and endorsed at the latest ITS meeting in Houston. The ITS is on the verge of releasing its roadmaps for V2X implementation. It is worth noting that the organization is expending significant energy on providing for the use of mobile devices and aftermarket boxes to enable connectivity. (Coincidentally, the European Union has announced its endorsement of similar connected vehicle objectives and implementation plans – http://bit.ly/bFaIUm.) The time lines may still be conservative and technical issues remain (see ITS conference concluding presentation http://bit.ly/bYio4k), but the mandate and the mission is increasingly clear on both the emissions reduction and the safety fronts: In the future, connectivity will be king. Still, despite the increased interest in safety among legislators, consumers and the Federal government, safety remains a tough sell with consumers. (SA – Consumers Interested in Safety, but not at Current Prices - http://bit.ly/a56WTM) This is why the increased influence of the government is so important. It will require government mandates to change vehicle designs and force consumer acceptance. Now, more than ever, the Feds have the influence and industry participation they require to bring significant change to pass. This type of mandate applies to EVs as well. The U.S. is unique in the world in its governmental inability to force through the kind of fuel taxes that could change behavior. Lacking this lever, Federal and local governments have turned to incentives to encourage consumers – and car makers – to bring electric vehicles to market. (This and the CAFÉ standards regime - http://bit.ly/cBwp2r - U.S. #CAFE Standards Give Impetus to Wide Range of #Green Technologies.) Here, again, the influence of the government along with growing consumer interest in both HEVs and EVs are approaching a transformative critical mass. Industry observers have questioned the wisdom of fostering EV technology when the current state of technology is as limited as it is. But it is only with this kind of government support that the obstacles of charging infrastructure, battery capacity and price can be overcome. Ray Lood, the director of NHTSA, removed any doubt about the government’s passion for change in the automotive industry when he described his own anti-distracted driving efforts at the recent ITS event in Houston as “a rampage” (http://tinyurl.com/24vzrka). A rampage indeed! Change is coming, probably faster than previously conceived possible. It is coming with government impetus and supervision and it is coming whether the industry likes it or not. Additional Insight: http://bit.ly/bbhqGj - Voice HMI: Connected Car Opportunities and UX Best Practices - Chris Schreiner http://bit.ly/ajzQay - Future Promise of V2X Wireless Comms – Chris Webber http://bit.ly/9qf1Mh - EV/HEV Technologies Supply and Fitment Database – Kevin Mak http://bit.ly/9esI9W - Advanced Driver Assistance Systems: Supply and Fitment Database – Kevin Mak

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

It is very strange indeed to find Toyota at the focal point of a vehicle recall imbroglio after years of immaculate quality ratings and at the peak of its global market share. But the strangeness of the timing is even more severe than that, because it was Toyota’s Prius that was used by QNX and Alcatel-Lucent to promote their “ng connect” LTE Car initiative late last year. The Toyota Prius became the mascot for the ng connect program, popping up in Detroit, Los Angeles, New York, Washington, D.C., and Las Vegas, in fact anywhere cars or automotive technology were on display. The purpose of the ng connect tour was to spread the word about the onset of 4G LTE technology and what it will mean for connected cars. Of course, the tour was also a showcase for QNX’s vision of both on-board and connected applications. Chief among the roster of on-board applications was a so-called Virtual Mechanic. The virtual mechanic is intended to provide live in-vehicle status reports on a wide range of vehicle systems including brakes, transmission, fuel, etc. with text and graphics. QNX is already the enabling software behind OnStar which, like Ford’s Vehicle Health Report feature, provide drivers with emailed status reports. The difference with virtual mechanic is that the information is live and delivered inside the vehicle. For QNX, the virtual mechanic was merely a concept shown in the context of a wide range of other concepts including in-vehicle displays of remote traffic cameras, access to Internet radio (Pandora), and a host of other location-aware and entertainment oriented applications. But the plot thickens with the emergence of Toyota’s recall nightmare because QNX is a supplier to both GM and Toyota. The virtual mechanic concept appears to belong to QNX, but the possibility for GM or Toyota to adapt the technology for their own marketing and customer relations purposes changes the prospects for this technology considerably. The question now is which manufacturer, Toyota or GM, will be first to enable a virtual mechanic-type application in the car. Or could some other QNX customer leap to the front of the queue: BMW, Peugeot, Mercedes Benz, Chrysler, Hyundai? Any one of these companies can look at Toyota’s difficult situation and realize they could be the next car company with software-laden cars producing unexplained, and seemingly unfixable, failures. A challenge for both Toyota and GM in implementing QNX's virtual mechanic will be the limited number of cars both companies sell with full-screen navigation sufficient to graphically display on-board systems. But LCD attach rates are improving for all OEMs in all segments and this application is yet another justification for large display fitment. Suffice it to say that the virtual mechanic is a concept that has arrived just in time to offer a way forward for a damaged auto maker and possibly for the entire industry. Whether QNX’s customers view this prospect from the same perspective remains to be seen. A final note: In this analyst’s opinion, the virtual mechanic will also make a great customer demonstration for car dealers. Source:  Strategy Analytics

At a recent telematics event in Shanghai a General Motors executive, when asked who owned the vehicle data generated by the OnStar system, said the customer owned the data. His response was somewhat misleading, and it highlighted the quandary facing the automotive industry, particularly in the wake of Toyota’s unintended acceleration woes and related recalls. What vehicle data are car makers going to collect, who will have access to it and under what circumstances? In truth, customers have little or no access to the data generated by their telematics systems. In fact, the sharing of this data is anathema within the industry. Some limited information is being shared under very specific circumstances (vehicle location, fuel level, battery charge, etc.), but the volume of data being shared is miniscule in the context of the scope of data collection. Actually, for many OEMs it is a cardinal rule to not preserve or share vehicle data for a wide variety of reasons including, but not limited to, liability and privacy. It is for this reason that companies such as BMW, Mercedes Benz and GM have not provided Web delivery platforms for preserving and reporting comprehensive historical vehicle data to their telematics customers. While it might make sense to provide complete driving and service history to the customer it is also possible that either the customer or the OEM does not want all of this information shared for the reasons noted earlier. (Of course, OEMs are particularly concerned with liability, consumers are more concerned about privacy.) Toyota’s recent recalls related to vehicle acceleration and other failures have highlighted these limitations and threaten to upend the manner in which vehicle data will be managed in the future. One early press report suggested that the current Toyota on-board systems for capturing event data were limited and definitely not able to shed light on incidents that may have contributed to driver fatalities. Whether that is true or not, it is clear, by now, that Toyota either has insufficient data to properly diagnose the problem(s) in a timely manner or is hiding valuable information from its customers and NHTSA. It is hard to envision governmental organizations such as the National Highway Transportation Safety Administration (NHTSA) resisting the urge to demand higher degrees of data collection, disclosure and analysis. (A brake override system mandate is already in consideration, according to published reports.) Consumers may demand more data as well and solutions already exist from suppliers such as Hughes Telematics and QNX. Hughes has been showing for more than three years its concept of a vehicle Website showing the status of various vehicle systems in realtime. And QNX has demonstrated comprehensive on-board diagnostics including data and graphics and complete user interface with its LTE car project in conjunction with Alcatel Lucent. Ironically, even in a perfect world, the prospect of diagnosing vehicle problems from vehicle-generated data is far from guaranteed. Still, more data is generally better and the federal government in the U.S. long ago contributed its voice to the debate. A mandate for electronic data recorders – set in 2006 - comes in to being in 2011 in the U.S. laying out requirements for data collection, retention and the terms and conditions for access to the data. Perhaps Toyota would have benefited from such an implementation. (The U.S. mandate contrasts with Europe where privacy concerns have trumped the interest in accident diagnostics thereby forestalling wider EDR adoption either voluntarily or via mandate.) EDR data, unlike telematics-related data, is typically only gathered in connection with a vehicle accident and is normally only accessible to public authorities acting on behalf of law enforcement or insurance agencies with the cooperation of the vehicle owner. OEMs that have deployed telematics systems are already capturing, processing and leveraging vehicle data whether consumers have access to this data or not. GM, for one, claims hundreds of millions of dollars in savings from warranty claims avoided by leveraging OnStar data to resolve problems before they become recalls. Most consumers are not aware of what data is being captured or how it is being used. This contrasts with the mobile market where Droid phones, for one example, ask the customer to opt into sharing location-related information. The proliferation of connected vehicles will force OEMs to reconsider their data management and sharing policies. Toyota is no doubt weighing its strategy for managing its fleet; processing vehicle failure information; sharing that information with regulatory authorities, dealers and consumers; and responding to inquiries from the public and the press. Out of a worst case scenario for the industry is likely to come a new paradigm for information sharing that will be more open and comprehensive and which, hopefully, will lead to greater peace of mind, safety and understanding of vehicle functions among the driving public.

Telematics has become synonymous with automatic crash notification and roadside assistance, thanks to the admirable and successful marketing efforts of General Motors and OnStar. But telematics is so much more than this and this story needs to be told, particularly in the wake of Toyota’s recall debacle. I have been driving a telematics equipped vehicle for the past year.  For me, telematics has meant destination and navigation assistance, movie times and theater locations, and flight arrival times, but, most importantly, telematics has been a powerful connection with my dealer. When combined with on-board diagnostics, the telematics system in my car has meant notifications for low coolant, an engine failure (although the vehicle was still able to operate), low oil level, low tire pressure, and scheduled maintenance.  In each case, the warning in the vehicle caused me to contact the concierge service for guidance.  And in almost every case, the guidance led to an on-the-spot invitation to visit the dealer to correct the problem. While saving lives via ACN is certainly a valuable contribution for a telematics system to make, it is the daily needs related to maintaining a vehicle (and preserving its function and value) that determines the true worth of a telematics system to the dealer and the customer.  With each dealer visit I have learned more about my car and forged a stronger bond with the dealer and with the brand. The combination of diagnostics and call center connection has made the ownership experience one of the most pleasing automotive experiences I have ever had owning a car. In contrast, I receive occasional mailings related to my other vehicle when the computer for the dealer of that vehicle guesses that I have crossed a mileage threshold and am due for scheduled maintenance. (For some reason, dealers – at least the ones I have worked with - routinely fail to properly set the on-board diagnostic systems to the correct mileage thresholds or time stamps, which leads to premature visits for oil changes etc.) There is a big difference between an onboard service notification – which conveys a degree of urgency – and a dealer postcard that looks like a mass mailing come-on. The value of integrating diagnostics and telematics systems has not been lost on OEMs, as both Ford and GM have introduced diagnostic elements in their respective systems. Both systems provide email notifications of vehicle status and functionality. And Hughes Telematics’ vision for automotive connectivity includes Internet-delivered vehicle status reporting. For me, though, it is the integration in the car itself that is most powerful. What is missing in some systems, though, is a more complete integration. When I call the OEM call center, the OEM should already know that a problem has been flagged. The driver shouldn’t have to tell the call center what the error code is. In fact, there are some indications that OEMs such as BMW are moving toward more pro-active messaging to customers in the event of error codes or system failures. Acura, for example, leverages the XM satellite radio connection to the vehicle to provide for direct one-way communications to specific vehicles in the event of recalls or other urgent service issues. (The market is also moving toward onboard and offboard digital manuals, but OEMs will remain hesitant to focus on enabling the customer to correct any but the simplest vehicle problems.) The next step in this process will see a more complete and comprehensive vehicle connectivity solution.  Today’s integrated telematics and vehicle diagnostic offerings fundamentally help to preserve and extend the customer relationship as well as the value of the vehicle investment. For those reasons, it is time for a more complete portfolio of integrated messaging to include leasing, insurance and warranty service partners and their information. Customers should only have to go to a single Website to manage or obtain all of their vehicle information including financing, insurance, scheduled maintenance, maintenance history, and warranty information. Bits and pieces of this kind of integration exist, but the OEM or dealer group that makes a more complete solution happen will have a significant advantage in building customer relationships and maintaining the value of the fleet. Toyota’s woes – and the many other less noteworthy recalls that regularly afflict the industry – are a wake-up call.  As more OEMs move to bring vehicle connectivity to the market, the focus will be on the leveraging of diagnostic data for enhanced dealer-customer connectivity.