Returning to Brazil for the first time in a few months I was struck at the paucity of technology in the taxi cabs. Having recently been at the Consumer Electronics Show in Las Vegas I was accustomed to everything from smartphones and GPS devices to cameras, sensors, backseat advertising displays, and payment terminals in cabs. Suddenly, in the land of the vehicle immobilization mandate (Contran 245) I was confronted cab after cab with nothing but a dispatcher and fare machine.

That is, until yesterday in my cab ride from Garulhos Airport in Sao Paulo.  According to the driver, the taxi that took me and my wife to our hotel was part of a 500-cab trial of a backseat tourist aid that was a real revelation and nothing I had seen anywhere before.

Put together by a local company, Comtecno, for the Brazilian Ministry of Tourism (and also available in Recife, where the World Cup with be contested), the device was a Samsung tablet computer equipped with cellular connectivity.  Comtecno calls the device the Multitoky Mobile and the company has as its goal deployment at 14 Brazilian airports for a total of 12,000 devices.

The tablet was unobtrusively strapped to the back of the cab driver’s seat, and I wouldn’t have noticed except for the fact that I am on the constant lookout for in-car tech.  The device charges while in the pouch and its use requires no assistance from the driver.

I immediately grabbed the device, figured how to open the browser and accessed a couple of email accounts.  Before long my wife and I were checking out local tourist attractions and restaurants and peppering the driver with questions.

“Do people like it?”

“Yes.”

“Do you ever use it yourself?”

“Yes.”

“How do passengers use it?”

“To help tell me their destination.”

“Do customers have any complaints?”

“The connection is slow.”

“Will it play video and audio?”

“Yes.”

With only 500 cabs as part of the test it was not surprising that the only overt advertising on the device appeared to be public service announcements warning tourists against sex tourism and people trafficking.  Coming in to Sao Paulo one could imagine a few more pointed warnings, but overall the device was a true joy to discover in the rear seat of our cab and a promise of future innovations to come.

Given the relatively high crime rate and the country’s position as have the third highest number of highway fatalities, one could argue for the implementation of cameras for anti-theft and fraud, along with sensors for maintaining vehicle distance in traffic.  But, generally speaking, the cab drivers are some of the best drivers in Brazil.  (A good contrast is China where there is little respect for lanes, let alone other vehicles.)

But if a Samsung tablet in the rear seat – tethered by a security link – is a first step on the path to vehicle connectivity in Brazilian taxi cabs, it is highly welcome.  It is far superior to the annoying embedded backseat advertising displays found in Las Vegas, New York City and Shanghai, among other cities. 

The rotating messages on these backseat screens are entirely without any merit as far as helping to educate either visitors or locals regarding popular local businesses or for providing informational traveler alerts.  Anyone who attended CES in Las Vegas is likely sick and tired of hearing Steve Wynn tout his gambling properties – a fact reflected in the reflexive tendency of most cab drivers to try to at least turn off the volume on the device even if they could not stop the video.

Kudos to Comtecno and the Brazilian Ministry of Tourism and the for conceiving a creative solution for connecting with tourists.  The next step will be to enable all types of transactions, including perhaps paying cab fares.  Of course, Brazilian cab drivers are still talking on their mobile phones too much and, occasionally, watching video both while parked and driving.  Oh, well, they can’t get everything right all at once.

When visiting Shanghai a couple months ago I was struck by the fact that multiple auto dealers visited during my stay did not have cars available with activated telematics systems.  This meant that the dealer was not able to demonstrate the technology to customers virtually guaranteeing consumer apathy.

This past week I was visiting car dealers in Italy and discovered a new barrier to consumer adoption, cars without power in the showroom.  Now I am the first person to acknowledge that consumers put a greater emphasis on style, drive and price than they do on infotainment and telematics (see attached slide), but cars without power in showrooms seems absurd in an age when the electronic and software content in cars is on a steep rise relative to the value of the vehicle.

These incidents were shocking to me because I experienced the telematics disconnect in multiple dealers in China (FAW Toyota, Nissan, BMW) and the power failure in multiple dealers in Italy (Fiat, Volkswagen, Hyundai).  The Chinese experience was exceptional because in the past I have had successful telematics demonstrations at Buick, Cadillac, Toyota, Lexus and Roewe dealers.

At the time of my visit to Shanghai, the dealer said that there was only one BMW in all of Shanghai that had telematics service provisioned for the purpose of providing a customer demonstration, but that vehicle was located on the opposite side of town.  The Nissan and FAW Toyota dealers simply had not activated any of their cars.  The only similar experience from my past was with Roewe’s Inkanet-equipped 350 which was most often lacking power on the dealer floor because the Android-based infotainment system had drained the battery.  (Roewe eventually installed Inkanet demonstration kiosks with their own power.)

The experience in Italy was surprising for the manner in which it was discovered.  The hatchbacks of many of the cars – which close electronically – were all ajar, not completely shut.  The natural instinct when one sees a door that is not fully closed is to give it an added shove or open and close it again.

Attempts to close these hatchbacks brought either a panicked or slightly amused response from the dealer sales person who had to explain that the hatch was powered and, when left on, tended to drain the battery in the showroom rendering the feature useless and the hatch not “closable.”  Usually the dealer had taken the added measure of wrapping paper or cardboard around the latch to prevent damage from customers trying to slam the hatches shut.

Is this problem emerging because cars are sitting too long in showrooms unsold?  Are dealers trying to avoid paying steep electric bills?  Not likely.

What is more likely is that dealers simply consider the electronics in the car to be a low priority, a fact that is borne out by Strategy Analytics research (http://bit.ly/XLOWpJ - Vehicle Purchase Behavior and Priorities of Chinese Consumers).  They have either reached this conclusion on their own in reaction to customer behavior or they are responding to a lack of auto supplier focus on selling sophisticated infotainment systems.  The danger, of course, is that dealers are following the lead of the factory.  If OEMs are not making a priority of infotainment systems then low attach rates and low customer satisfaction scores will result - ie. a self-fulfiling prophecy.

It may also be that dealers don’t want to engage in resolving consumer confusion regarding smartphone connections, voice recognition, navigation systems and apps.  Years ago Fiat was touting Blue&Me with point-of-purchase materials throughout much of Europe, but Blue&Me signs are no longer present in Fiat dealerships in Italy.

The picture is even more complex for Fiat, given the presence of Garmin, TomTom, and Magneti Marelli/Wind River navigation system options on its cars.  But Volkswagen has a growing range of infotainment options, as well, none of which could be demonstrated at the dealer visited in Italy.

The one exception encountered during this brief dealer tour was Hyundai.  Hyundai had a large sign touting the special edition of its i20 with a Pioneer infotainment system (the Aha Radio) enabling connection to a customer’s iPhone to access content and applications.  The dealer opened the hood to engage the battery to enable the demo, which amounted to a self-demo of the system which paired quickly and streamed audio via the supplied cable.

The sad reality is that solutions exist for both the telematics system provisioning problem in China and the power failure in Italy.  But the message is clear.  Selling infotainment and telematics systems introduces a new challenge to the process of selling cars – calling attention to power requirements, user interfaces, smartphone connections and apps.

Car makers from Ford and GM to BMW and Hyundai have introduce special dealer training programs and even Apple-like genius bars to bring customers – and dealers – along on the technological journey.  Clearly more guidance and support are needed if the industry is to achieve success with connected cars.  But making sure cars in showrooms are powered and that embedded telematics systems are provisioned seems like pretty basic stuff at this stage.

Tweddle set out more than five years ago to shift its printed manual business into the digital world.  That step has led the company to the development of vehicle relationship management solutions, a content and application delivery platform and, most recently, the ability to handle software over-the-air updates to cars.

Tweddle has learned quickly that vehicle connectivity is an all-in proposition.  Once connected to the car, either via an embedded modem or interfaced smartphone, the owner, dealer and car maker relationship to the vehicle is permanently altered.

Enabling a digital manual experience in the car – including static images and video of vehicle systems – not only needs to be VIN (vehicle identification number) specific, it also needs to be kept up to date.  It also means that the dealer and the OEM need access to that VIN-specific vehicle information.

This means that the VIN specific information must be accessible and updatable, which means it must be stored on an off-board server.  And it means that there must be a capacity for synchronizing on-board and off-board information.

But understanding these needs and realizing them in an implemented solution in a production vehicle are two very different things.  Achieving that objective has brought Tweddle into the fully connected vehicle world where the company is now processing streaming audio, delivering apps and software updates, and exchanging vehicle data.

Tweddle’s capabilities have somewhat outrun its client base as the company is prepared with solutions intended to stitch together the car, the customer, the dealer and the manufacturer, but the full circle experience has yet to be fully realized.  Closing the loop with drivers and dealers is essential for extracting the full value from vehicle connectivity which includes higher customer satisfaction scores, customer retention and additional vehicle sales.

The cornerstone of Tweddle’s value proposition – its intellectual property – is built around its foundational understanding of vehicle information enhanced with digital delivery and ubiquitous access.  Tweddle may have started years ago with manuals and dealer diagnostic systems, but the current solution has a wider scope.

Tweddle’s assets are currently embedded within many OEM engineering organizations in support of service and owner information development.  The company offers EDI integration with OEM manufacturing for access and analysis of vehicle build data and also enables management of OEM workflows in support of marketing, legal and engineering approval of content.

Nearly gone is the physical owner’s manual, to be replaced by on-board systems already in the market from Chrysler, GM, BMW, Tesla and others allowing consumers to access vehicle information directly on board or off-board from a call center.  Tweddle claims market leadership in developing, managing and delivering relevant information to owners via multiple media channels including print, Web, mobile and in the vehicle.

Much of Tweddle’s work is visible in Chrysler’s Uconnect and Toyota’s Entune connectivity systems.  But Tweddle is preparing for the next stage in its evolution by enhancing and deepening the connections between OEMs, dealers and customers.  By broadening access to vehicle information Tweddle is giving new life to owner's manuals even as it is rendering physical manuals unnecessary.

Best Buy is kicking its Commercial Division automotive aftermarket efforts into overdrive in 2013 with plans to more than double the number of major metro areas covered from 12 to 27.  For the past two years Best Buy has been working with AddOnAuto to build an auto dealer-focused program of vehicle upgrades around a cloud-based platform capable of matching any car with a nearly comprehensive catalog of compatible accessory gear including everything from mud flaps to navigation systems.

The program is unique for a variety of reasons including the fact that it encompasses most aftermarket stereo brands and integrates the installer capabilities of Best Buy’s own 3,000-strong Geek Squad.  Most notable is that the program only includes products that cannot be shopped in retail stores or online, which is one reason for Sony not being included since the company lacks a two-tier program.

The program is operated by Best Buy’s Commercial Division and targets fleet, insurance and car dealer markets.  But the insurance program, for replacing stolen or damaged equipment, is not yet up and running and the dealer program is by-far the largest business segment. 

Kicked off in Boise, ID, more than two years ago, Best Buy’s mobile electronics program for dealers provides a subscription-based, Web portal where dealers and their customers can browse for compatible aftermarket products and even see what a sample vehicle will look like following installation.  The subscription is $450/month.  The portal replaces physical catalogs or more generic online ordering systems that lacked the car-level detail and visualization tools.

The program is currently operating in Los Angeles, Phoenix, Atlanta, Miami and Minneapolis among other markets.  AddOnAuto is separately recruiting dealers with a less robust offering, but the company claims in its promotional materials that 9 out of 10 consumers buy accessories for their new cars; six out of 10 spend as much as $1,500 per car; but that auto dealers capture only 10% of this business, even though 75% of consumers tell AddOnAuto that they’d prefer to buy from their dealer.

Best Buy will also provide sales training, marketing support and sales tools along with free concierge pick-up and delivery, according to company literature.  The group was recruiting dealer participation at the recent National Automobile Dealer Association convention in Orlando with a discounted subscription offer of $149/month.  Aftermarket mobile electronics suppliers contacted by Strategy Analytics confirmed the success and high expectations for the program thus far.  Best Buy representatives declined to share program revenue information.

“Fasten your seatbelts, it’s going to be a bumpy night.” – Margot Channing as played by Better Davis in “All about Eve”

It is the evening before my test drive of Tesla’s new Model S, the $100,000 sedan intended to change everyone’s thinking about what an electric vehicle can be or do.  But what the car can be or do is secondary to the impact the company is having on the automobile industry.

What is interesting is that Tesla’s impact has almost nothing to do with the car itself, but it is important to first understand how the car itself is influencing industry thinking about infotainment systems, safety and connectivity.

My test drive tomorrow in Washington, DC, follows an impromptu test drive last week in Silicon Valley.  I did not have the nerve to drive the car, which was privately owned, instead experiencing the naked, neck-snapping EV aggression from the comfort and safety of the passenger seat.

The Model S is a coiled spring capable of reaching 60mph in 4.4 seconds.  Along with that speed comes balance and poise with extra attention paid to steering and suspension. 

Of course, in the automotive infotainment industry the Model S has garnered attention for its 17” center stack display and embedded connectivity.  The display is impressive and the system’s access to streaming audio or Internet radio content sources via the embedded modem is the ultimate in convenience.  (Every competing system in the market accesses the driver’s mobile phone and data plan to deliver these services.)  The wireless access is free for the first three months and Tesla has yet to announce the pricing or pricing tiers thereafter.

More impressive than the convenient access to content, though, is the provision for over-the-air software updates – a capability that Tesla appears prepared to liberally leverage to its advantage.  In fact, the 17” display facilitates the process by detailing the latest software updates to the driver as they occur – usually overnight with the customer’s approval.  (Since first introducing the capability, Tesla has shifted to conducting initial download tests on the marketing fleet before deploying to consumers.)

The embedded modem also allows Tesla to monitor vehicle performance at all times, as was reflected in the recently disputed NYTimes review of Tesla's new East Coast fast-charging network intended to enable a gas-free, electrified journey from Washington, DC to Boston.  Setting aside the details, CEO Elon Musk's use of vehicle data to question the claims of the reviewer regarding his speed and use of HVAC was a revelation to some.  But, as a company representative clarified later to me, Tesla does NOT gather location information, only performance data.  And the customer opt in is purely binary - yes or no - and, with no location data, clearly does not encompass probe data for enhancing traffic information.

There are shortcomings to the Model S infotainment system which are readily apparent from a short drive.  The user interface – tends to default to a vehicle information screen.  Often featured prominently is a Google map which, while driving, may pixilate or disappear entirely based on the quality of the wireless connection.  This is a bit surprising given the fact that Audi has been out for two years already with AudiConnect consistently displaying Google Earth imagery over the Nokia Navteq map thanks to 2GB of cache memory.  Of course, Audi and Tesla currently share a lack of automatic crash notification capability.  (Tesla execs say they have yet to figure out a solution for replacing Google maps for the launch in China.)

What is missing in the homegrown head unit of the Model S, which is based on Linux, is a personalized experience that anticipates the driver’s needs and preferences and/or anticipates driving information needs such as traffic or weather data.  While multiple content aggregators have demonstrated interfaces fusing multiple inputs into a user interface capable of actively anticipating the contextual information needs and wants of the driver, Tesla appears to have put its entire emphasis on vehicle information management and map illustration.

Yet, even in its presentation of map information the Model S lacks 3D graphics or even Audi’s Google Earth.  Also missing is a more advanced safety portfolio leveraging sensors and cameras.  Company representatives say a more advanced safety offering is in the works and the center console display is ideally suited and prepared for such an integration.

But these “complaints” are quibbles, especially in the context of a car that can be transformed overnight by software updates.  The Model S I drove in last week may actually be different, by now, from the Model S I drive tomorrow.

But the real impact of Tesla lies in its distribution and service strategy.  Tesla is selling its cars from more than 22 stores nationwide and has won its first battle with traditional automobile dealers as a Massachusetts court dismissed a lawsuit brought by the Massachusetts State Automobile Dealers Association (MSADA).  The lawsuit claimed that Tesla was in violation of Massachusetts law governing the sales and servicing of cars.

The National Automobile Dealer Association has indicated its intent to support the MSADA’s efforts to challenge Tesla’s sales model setting up an ongoing clash between the massively influential and politically connected NADA and Tesla, which is backed by a combination of deep pockets, green technology cachet and its own political connections.

At a time when antipathy between North American automobile dealers and OEMs is at a peak around the question of facilities standardization and modernization strategies, Tesla presents a disruptive approach to vehicle sales that aligns well with the growing retailing mantra of the Apple Store.  In fact, as part of the NADA’s Phase II report on factory image programs focused on showroom modernization and standardization, the association’s consultant noted Apple’s stores as a touchstone for future store design.  (Tesla hired Apple's former VP of real estate, George Blankenship more than two years with precisely this objective in mind.)

It is no secret that car makers have been trying to steal a few pages from Apple’s playbook with “genius bars” popping up in Hyundai showrooms and with Ford, BMW and GM all adding more in-store personnel/sales counselors to explain new vehicle systems.  But if Tesla is successful in defending its right to sell cars from company-owned stores, a no holds barred struggle could emerge between OEMs and independent dealers in North America.

Further challenging the traditional model is the fact that Tesla showrooms are divorced from the vehicle servicing function.  Vehicles are serviced by independent agents dispatched directly to visit customers.  Tesla has indicated plans, at least in Massachusetts, to open a service location separate from its store, but even this concession is viewed by MSADA as either a violation or a compromise of the law governing vehicle franchises which must have service on-site.  (Tesla is showing its cars in a mall in Natick, Mass.)

So, Tesla is disrupting the automotive market in a number of ways such as:

Including the cost of the embedded wireless service in the cost of the vehicle – though reserving the right to charge for this at some point in the future

Delivering Internet radio and streaming audio via the embedded modem

Delivering seemingly unlimited and endless software updates over the embedded modem

Developing vehicle systems almost entirely “in-house” with only limited support from traditional industry suppliers

Servicing the cars using independent agents

But, most importantly, selling the cars via company owned stores and with little or no service component - since there is almost nothing to service.

With all of the attention paid to Google’s self-driving cars in the past year, one might have concluded that Google was the most disruptive force in the industry.  In fact, it is Tesla that is rocking Motown, Munich, Tokyo et. al. with its fresh-baked, homegrown approach to automotive marketing.

In comparison to Tesla, Google is a virtual lapdog doing everything it can to play nice with car makers offering up Google Maps, POIs, Google Earth, Google Search and even Android as tools for vehicle development.  Even the Google car is seen as nothing more than a marketing platform for Google technology intended for sale to the industry.

Tesla is taking no prisoners and tipping its hat to no conventions as it continues to hit or surpass its own financial and production targets.  The company is selling cars with 25% margins in a market where new internal combustion engine driven cars are sold with single digit margins and dealers hope to make up the revenue on service.  And, like Google, Tesla is sharing its powertrain development with Toyota (RAV4 EV) and Daimler - which provided Tesla with a steering wheel for the Model S.

What should OEMs do?

It is not too late for car makers to update their dealer franchise strategies and business models.  Among the steps that ought to be considered is giving dealers greater flexibility around the manner in which facilities upgrades are funded and approved.  Car makers should recognize the important customer interface role played by dealers and work to lower their costs of doing business (ie. reduce the expenses associated with diagnostic hardware and software) and give dealers access to vehicle data derived from telematics systems.

Independent dealers need to be viewed by car makers as important allies in connecting with consumers.  It is time to put aside the adversarial relationship that is undermining the customer interaction – a relationship that is essential to improving customer satisfaction scores and retention.

It is inevitable that OEMs – particularly in the luxury segment - will seek to open showrooms to match Tesla’s high profile market presence.  But these measures should go hand in hand with supporting the existing independent dealer network.  Whether or how the OEMs choose to walk this tightrope remains to be seen.  In the meantime, Tesla will be opening soon in a mall near you

*A final note on the Model S infotainment system: The car comes with access to Slacker and TuneIn Radio via the embedded modem, an industry first.  Additional apps will require Tesla approval before being implemented.  The system also allows for Web browsing.  More importantly, the nature of the configuration suggests an upgrade path focused on software rather than hardware, since the 17" display consumes so much of the space normally reserved for a more traditional center stack.  Not all drivers will be pleased with the 17" display, which tends to wash out in bright sunlight, but it is fairly stunning at night.  The navigation feedback in the display is supplemented with instrument cluster guidance.  Some customers will be tempted to rip out the standard 17" display and start from scratch - but most will be too jazzed by the car's performance to much care about that kind of radical automotive surgery.

Sometimes a company does something so wrong-headed it is impossible to ignore. The normally very clever executives at Scosche - pioneers in automotive infotainment system integration - have announced their plans to re-enter the car stereo market with a head unit that enables use of the mobile phone as a remote control, according to a report in the CEOutlook newsletter (http://bit.ly/RbDe4k - Scosche Debuts Car Radio at KnowledgeFest). Even worse, Sony has similar plans for 2013.

At a time when U.S. government regulators are threatening to disable the use of mobile phones in cars altogether to mitigate distracted driving, Scosche is launching a system that encourages the driver to use his or her mobile phones as a remote control for the car stereo. The whole objective of OEM automotive engineering efforts around integrating mobile phones in the car for the past eight years or more has been to shift control of the phone to the vehicle HMI.  The over-arching message to consumers: Don't touch your phone when you are driving.

Somehow, Scosche has seen fit to affect an industry U-turn to shift control back to the phone. Scosche has also somehow missed the tidal wave of headlines pronouncing the imminent arrival of Apple’s Siri voice interface for automotive aftermarket integration, along with competing solutions from Nuance, AT&T and others.  The goal, again, control the phone with the vehicle HMI - steering wheel controls, voice, head unit touch screen, hardware controller.

The only possible good news perceivable in this announcement is that it will shine a white hot light on aftermarket remote controls and, maybe, clarify the need for some industry soul searching as to the efficacy of these systems in a voice-enabled in-vehicle interface future. I have a lot of respect for Scosche and I am confident they will recognize their bungle and get a Siri or some other kind of voice-based interface in the box with their new systems before they launch.

The National Highway Traffic Safety Administration was busy last week hosting three public comment sessions across the country on its driver distraction guidelines. The guidelines discussion were attended by auto makers, but NHTSA needs to reach out to a wider constituency including wireless carriers, handset makers and app developers.

These hearings follow, by two weeks, NHTSA’s announcement of delayed rule-making for a long-anticipated back-up camera mandate. The two issues are related since the back-up camera mandate will require a large center-stack display and the driver distraction agenda is intended to limit whatever else auto-makers may wish to do with that display. The back-up camera mandate came about as a result of a combination of legislation and extensive research by the agency. (NHTSA – Notice of Proposed Rule Making - http://1.usa.gov/g58Tyh) The rule-making is projected to save approximately 100 lives annually with an estimated cost to the automotive industry of $1.9B-$2.7B.

The link in the previous paragraph to the US Department of Transportation Website provides all of the relevant insight and analysis behind NHTSA’s back-up camera decision. Many observers of NHTSA attributed the rule-making delay to election year considerations in the U.S. – the potential negative political fallout associated with the cost of implementing the mandate.

Whether politics entered into the consideration of the delay is less important than what the back-up camera mandate implies for the newly-commenced distracted driving debate. But, first, it is important to understand where NHTSA stands in its distracted driving deliberations.

The hearings last week were largely inconclusive and pointless and have likely spurred NHTSA to turn up the temperature. The industry representatives who testified before NHTSA representatives were not in a position to answer the single most important question for NHTSA: What are the automotive industry’s long-term plans for enabling mobile device connectivity in the car?

Car makers find it difficult to answer this question for two reasons. First, for competitive reasons car makers are loathe to reveal elements of their long-term strategy. Second, as far as connecting to mobile devices is concerned, car makers have no long-term strategy.

In the absence of long-term automotive industry planning, NHTSA announced its own plan for developing guidelines to cope with driver distraction: http://1.usa.gov/GANj5q.

The three phase process defined by NHTSA includes:

Phase I: Set two goals for ensuring that vehicle systems and devices do not distract or interfere with the safe operation of the vehicle. First goal is to reduce the complexity and amount of time required to operate devices and systems. The second goal is to disable certain types of functionality – such as manual destination entry for a navigation system.

Phase II: Proposed guidelines for the use of brought in devices of all kinds.

Phase III: Proposed guidelines for voice-activated controls for line-fit and aftermarket systems.

While all three elements of NHTSA’s plan are so-far described as guidelines with the corresponding voluntary industry adoption that that implies, the specter of mandates and rule-making is looming over the entire process. Any executive or observer who attended the hearings last week left with no doubt regarding the seriousness of NHTSA’s commitment to reducing driver distraction.

In contrast to the estimated 292 lives lost to back-over accidents in 2011, NHTSA has put a preliminary estimate of 3,000 on the number of lives lost to distracted driving. The agency has not yet been able to narrow down what portion of that figure can be attributed to the use of mobile devices or complex on-board systems, but NHTSA is working toward creating such a metric.

It is clear, though, that if the saving of 100 lives is enough to justify rule making, as in the case of back-up cameras, there is ample motivation for the agency to take action to mitigate driver distraction. The best news remains the fact that NHTSA has taken the voluntary approach that it has.

Unfortunately, the issue at hand in driver distraction is an ambiguous one fraught with conflicting philosophies and perceptions regarding human-machine interfaces and driver behavior. While a substantial amount of research has already been done and NHTSA has at least two studies already in process, the range of conflicting findings and methodologies suggest a lengthy process of discovery ahead for the agency and the industry.

At the same time, the back-up camera mandate will guarantee a wider deployment of large center-stack screens in cars in the U.S. and, likely, around the world. NHTSA is arriving somewhat late to a standards and guidelines discussion that it has brought about with its own rule making.

Implications:

Distracted driving is a problem all over the world. It is a problem that has existed as long as cars have existed. The proliferation of mobile devices in cars has contributed to the problem and may be contributing to additional highway fatalities.

Large displays are also proliferating in cars. Large displays are also increasingly perceived as an added potential source of driver distraction, depending on what kinds of functionality are enabled. At the same time, car makers, handset makers, wireless carriers and app developers are looking to smartphone integration and connectivity to the larger in-vehicle display as a means to reduce distraction and limit, manage and control use of the mobile device in the car.

The auto industry is embarked on a journey to a new in-vehicle experience which will increasingly be defined by connectivity to off-board resources. This connectivity experience will encompass the integration of personal driver information – largely derived from the driver’s personal portable devices – vehicle sensor and map inputs and off-board resources such as weather or roadway information derived from other drivers.

Car makers and app developers are still working hard to determine how the output of this big data integration will manifest itself in the car to aid the driver and render the driving experience safer. Given the early stages of this application development, a light, guiding regulatory hand from NHTSA is what is most needed by the industry participants.

Hopefully, by its current efforts, NHTSA will establish a public policy framework for wireless carriers, application developers, wireless device manufacturers and auto makers to collaborate for the purpose of defining the nature of the driver distraction problem and agreeing on a solution. This means NHTSA needs to expand the scope of its current outreach and auto makers need to be more forthcoming about their plans.

Best Buy reported some disappointing financial figures last week blaming stalled consumer demand for TVs – including new IPTVs and 3DTVs. Going unmentioned in the company’s earnings call was its ongoing outreach to Detroit with a deal to sell and install EV charging stations for the Ford Focus EV and its plan to sell and install OnStar’s aftermarket mirrors. It’s time for Best Buy – and other large box retailers around the world – to seek closer ties to domestic car manufacturers to leverage the emerging connected and electric vehicle opportunities.

The Best Buy-partner announcements:

Best Buy-Ford Sync: http://bit.ly/eNGZ18

Best Buy-Ford Focus EV Charging Stations: http://bit.ly/e0CHWF

Best Buy-OnStar: http://bit.ly/eoJGeq

Best Buy understands the importance of connectivity as its Best Buy Mobile strategy has clearly become the engine of growth for the company. Best Buy Mobile is gaining more square footage in Best Buy’s large box stores – absorbing floorspace previously dedicated to selling shiny discs. And the company says it intends to open 150 Best Buy Mobile standalone stores in the U.S., bringing the total to 325.

The importance of Best Buy Mobile to the future of Best Buy is important to understand on two levels. The arrival of smaller Best Buy Mobile stores reflect Best Buy’s need to explore alternatives to its existing large box retail store model – built around destination shopping. And it also reflects the wider so-called “connections” business strategy of selling hardware that comes with a connection and, usually, a service subscription.

The category cited on the Best Buy earnings call as generating the single largest sales increase was mobile broadband and Wi-Fi connectivity devices, up 50%. The only category garnering more attention from Best Buy merchants than mobile broadband devices and, of course, smartphones themselves (where Best Buy claims a 6% U.S market share) is tablet computers. Best Buy has seen significant sales from tablets and expects even bigger numbers in the future, hopefully replacing sales lost from other computing platforms.

This is precisely where the automotive industry outreach comes into the picture. Traditionally at odds with the automotive industry, Best Buy has suddenly become the go-to retail partner for auto makers seeking stronger customer relationships. Car makers are themselves wrestling with the rise of the smartphone and table computing platforms and their influence on consumers.

Best Buy is experiencing this outreach from Ford and OnStar at precisely the moment it is experiencing the most competitive heat from online retailers and audio and video content streamers. Ford and OnStar need Best Buy’s trained sales people to explain new connectivity solutions to their customers – and to validate device compatibility, as in the case of Ford Sync. Best Buy needs Ford and OnStar to connect with new car buyers who may be considering aftermarket purchases.

 Best Buy fields an army of connectivity experts in its stores – which is precisely the marketing force needed by car makers bringing systems such as MyLink, Sync, Entune, mbrace and Uconnect to the market. But is Best Buy missing the boat even as it welcomes Ford and OnStar aboard? Yes!

The challenge facing Best Buy is preserving the relevance of its large box retail stores – where growth has eased or ceased altogether – in a market where consumers have almost perfect visibility to product assortments, information, and pricing online and gasoline is expensive. It is no coincidence that Best Buy launched two new online-to-store initiatives in 2010: Ship to Store and Friends and Family guest pick up.

Best Buy touted the improvements in its online-to-store initiatives in the past year. The company said in its earnings call that the number of in-store pick-ups for online sales grew to 40% from 35% in the year-earlier period. And 80% of big screen TV purchases made online were picked up at physical stores.

Best Buy’s large store future is inextricably linked with the pervasive car culture in America and elsewhere. It is a strange irony, then, that the mobile electronics department has become a virtual afterthought buried in the back of most Best Buy stores and frequently unstaffed.

One of the indications that Best Buy has not recognized, on its own, the opportunity presented by its new-found auto industry connection is the disconnect between the OnStar initiative and the Ford initiatives. The OnStar mirror is handled by the mobile electronics department, while the Ford Sync initiative is handled in the mobile phone department – and never the twain shall meet.

Normally such a disconnect would be rational and tolerable except for the fact that smartphones and tablet computers are playing an increasingly important role in the automotive market. What better marketing environment than a large box Best Buy store for companies such as Apple and RIM and Motorola (and?) to tell their tales of in-vehicle integration?

The opportunities to be derived from leveraging auto maker relationships include:

• Demonstrating smartphone and tablet computer integration alternatives in cars – along with distracted driving mitigation messages. (Tablet computers are ideally suited to aftermarket rearseat video solutions.)
• Demonstrating and selling aftermarket safety systems.
• Demonstrating and selling mobile broadband devices.
• Safe driving clinics for teens
• "Pimp My Ride" rallies in the parking lot?

Best Buy’s large box stores are veritable palaces to destination shopping actually dependent on the automobile. It makes sense for the company to take advantage of the in-store space and product assortment and trained sales force to promote enhanced driving experiences.

Implications:

The strangest thing about this emerging opportunity is Best Buy’s failure to recognize it. Auto makers have historically been hostile to automotive aftermarket retailers – and with good reason. A substantial proportion of a typical OEM’s profitability and of the profitability of its dealer base comes from aftermarket sales. (Maybe Best Buy could coordinate its efforts with local car dealers. Better yet, maybe Best Buy could negotiate pricing on new cars - it works for Costco.)

The mere fact that OnStar and Ford are reaching out to Best Buy and other retailers marks a tipping point in the industry. Auto makers are suddenly recognizing that they have entered into the consumer electronics market. On this new turf they clearly understand that they will need all the help they can get in explaining and demonstrating their own consumer electronics solutions. (Coincidentally, Ford and GM have drastically cut the size of their dealer organizations - adding a further rationale to the retail outreach.)

While Ford has reached out to its dealers to offer more training and more incentives to usher them into this new consumer electronics-laden era, retailers like Best Buy are being asked to fill a yawning gap between the available technology and the available means of explaining it. The marriage of Best Buy and the automotive industry is a marriage of convenience, but Best Buy should take advantage of this opportunity to build stronger customer relationships, higher connectivity market share and increased profit from the resulting service and installation business.

Additional insight:

http://bit.ly/ePD2Df - GM Shrinks Development Cycle in Game of Connectivity Catch-up - Roger C. Lanctot - Automotive Multimedia & Communications Service

http://bit.ly/dJXnU2 - Aftermarket Telematics: Let's Get It OnStar - Roger C Lanctot - Automotive Multimedia & Communications Service

GM’s Chevy Volt is the best thing to happen to electric vehicles since the Prius hybrid. In fact, it would be even bigger than the Prius if more than 10,000 were being made next year. The car represents revolutionary technology. It makes electric vehicles palatable to the mass consumer – at least conceptually if not based on the $41,000 price tag. The electric vehicle business was in desperate need of a car like the Volt that could take the worry out of driving electric. By adding the internal combustion engine (ICE) to drive the electric motors when the vehicle’s on-board battery is exhausted the Volt offers an acceptable range for any kind of driving requirement.

The car also features cutting edge componentry with a low-weight, low-energy stereo system from Bose, an OnStar telematics system (with five years of free service) with an iPhone app, and a multiple-screen vehicle diagnostic experience. The car looks and feels and drives like the future. But the simplicity of the Volt concept belies the complexity of the electric vehicle business and therein lies some long-term concern for the viability of any alternative fuel vehicles. A big contributor to the complexity of the EV picture has been the Regulatory Authorities.

My kingdom for a PZEV

The regulatory authorities are well-meaning bureaucrats who are trying to stimulate demand with financial incentives for specific types of cars while providing guidance to the auto maker community regarding which kinds of vehicles will be acceptable to meet fleet emission standards. These efforts have produced an alphabet soup of vehicle categories and a maze of definitions that have been further confounded by the automotive press. From the regulatory authorities we were originally given (see Strategy Analytics reports referenced below for detailed definitions and history):

·        TLEV – Transitional Low Emission Vehicle

·        LEV – Low Emission Vehicle

·        ULEV – Ultra-Low Emission Vehicle

·        SULEV – Super-Ultra Low Emission Vehicle

·        ZEV – Zero Emission Vehicle

These categories would be humorous in and of themselves but they have already been superseded by:

·        ILEV – Inherently Low-Emission Vehicle

·        PZEV – Partial Zero Emission Vehicle

·        AT-PZEV – Advanced Technology Partial Zero Emission Vehicle

·        NLEV – National Low Emission Vehicle

Again, it is tempting to chuckle, but these categories have very real and very specific definitions that can mean the difference between a $7,500 vehicle incentive and a combined $12,500 vehicle incentive. The Volt is a case in point. Because the car was introduced with an 8-year/100,000 warranty on the battery instead of a 10-year/150,000-mile warranty it did not qualify as an AT-PZEV according to the California Air Resources Board (CARB) requirements and missed out on the additional $5,000 incentive in California for which the Nissan Leaf does qualify. (This was in spite of the fact that GM reportedly tested and validated the car for the 10-year warranty and expects to boost the warranty for the current Volt or on a new version of the car by 2012.)

EVs not EZ

To make matters worse, the automotive press and industry trade associations have their own roster of EV categories – presumably reflecting their assessment of consumer perceptions. The Electric Drive Trade Association lists the following categories:

·        HEV - Hybrid Electric Vehicles

·        BEV - Battery Electric Vehicles

·        EREV - Extended Range Electric Vehicles

·        Plug-in Hybrid Vehicles

·        Fuel Cell Electric Vehicles

The Volt is sui generis! It is the only EREV, according to the EDTA. This is something that bothers industry types. This would be a minor point if it were the end of the conversation regarding the definition and categorization of the Volt, but it is not. According to some sources the Volt operates as a “plug-in series hybrid” or as a “power-split or series-parallel hybrid” depending on speed or driving mode. By the way, in California, the Volt is considered a ULEV and not a SULEV based on emissions testing.

When is a Volt not a Volt?

Few cars in the history of the automotive industry have been subjected to as much scrutiny as the Chevy Volt – suggesting some strange American instinct toward eating its own young. The Chevy Volt is unquestionably the nastiest, most clever move the automotive industry has pulled in decades. It just seems to frustrate the heck out of regulators and journalists and analysts. GM pulled a fast one out of its hat – one just wishes the company had plans to pull more than 10,000 out of its hat this year. (One might argue that Subaru of America has been a good deal more clever than GM. The company has sold a combined total of hundreds of thousands of PZEV designated Foresters, Legacies and Outbacks that are “sometimes even cleaner than some hybrid or alternative fuel vehicles,” according to the company.)

“I’ll ask my manager.”

Which is where the Chevy dealers come into this story. Having recently attended a Chevy Volt launch event I visited my local Chevrolet dealer. There was a single Volt on the showroom floor, as promised by the Website. (There are four or five Chevy Volt dealers in the area. Not all Chevrolet dealers qualified to sell Volts.) The car in the showroom had a “Do not touch” sign on it with a message that the car was already sold. Of course, that meant that the car was also locked so that the dealer was not able to give test drives, could not demonstrate the clever on-board and OnStar systems, and could not allow a customer the experience of simply sitting in the car. A salesperson indicated that he did not know when they would get any more vehicles and he was not sure what other dealers in the area had any Volts. I returned home and entered my name on the dealer’s waiting list and was called almost immediately. The salesperson on the phone said four cars were due to be shipped in January and one, a white one, was not spoken for. To reserve this incoming Volt, the salesperson said, I would have to put $5,000 down. I asked about the widely reported $350 lease on the car – an attractive option considering the limited life of the battery. The salesperson said there was no lease available and then he suddenly added that to get the Volt that was coming in January I would have to pay $5,000 over MSRP. There is little that will kill enthusiasm for a new car faster than a dealer charging $5,000 over MSRP. It wasn’t bad enough that I could not drive the car, could not sit in it, could not see it do its sexy technology stuff right there in the showroom.

Whether you want a ULEV, an EREV or a serial-parallel hybrid, you will still need to be prepared to do battle with a dealer who will use your enthusiasm against you. Who knew changing the automotive industry would be so difficult. (For the record, GM and Chevrolet representatives say they have specifically asked dealers NOT to charge above MSRP for the cars and there definitely IS a $350 lease offer on the Volt.)

Further insights: http://bit.ly/gtyxic - EV/HEV Technologies Supply & Fitment Database - Kevin Mak - Automotive Electronics Service http://bit.ly/devMOq - Hybrid Technologies Legislation/Support - Kevin Mak - Automotive Electronics Service http://bit.ly/eC7kFy - Impact of Volt, Leaf Transcends Modest Sales Expectations - Roger C. Lanctot - Insight – Automotive Multimedia & Communications Service