Car maker emphasis on mandated modernization, standardization or expansion across dealership bodies has almost no proven investment return justification, according to the National Automotive Dealer Association’s update of its Factory Image Programs report.  The lone exception to this ROI deficit is service expansion, where investment returns appear to be more predictable. 

The second phase of the NADA study also attempts to identify the nature of the future car buying experience and how dealers will or should adapt their facilities and sales and service strategies.  The study is available here: http://www.nadafrontpage.com/facilitystudy.xml. 

Consultant and ex-McKinsey analyst Glenn Mercer conducted the study and captured the essence of its findings thus: “Renovating a dilapidated store pays off, and while one should not expect much of a return from maintenance spending, service expansion can pay off well, whereas modernization investments tend to depend on how much assistance the OEM offers, and standardization spending is almost always a pure deadweight loss.”

The first phase of the study, released at last year’s NADA gathering, drew a standing-room-only crowd to hear the results.  With a more forgiving economy easing the pressure on dealers, this year’s release captured wide attention, but not the same level of intensity.  But the message was no less important.

Car makers have not given up on their image campaigns, and NADA has not given up its campaign to reverse or redirect these efforts.  “We’re requesting that auto manufacturers redouble their efforts to provide dealers with better business cases before investing in facility upgrades, and especially, to ease off on standardization demands that seem very hard to justify,” Mercer said.

Mercer’s report, which encompassed inputs from car makers and dealers along with retailers from other industries and architects, among others, attempts to paint a picture of the car dealer of the future.  In this context, he was able to identify the widespread interest in and adoption of Apple retail tactics, though he was also quick to note the customized external look and feel of most Apple stores and the crowded interiors – unlike the typical “garage Mahals” characteristic of many car dealers.

At the same time, selling and servicing a car is a different experience from selling a mobile device.  Study respondents identified the streamlining of paperwork and more efficient customer throughput at the dealership further complemented with concierge-like off-site service or vehicle pickup and dropoff as strategic directions in the market, few of which have been targeted by OEMs.

“Our conclusion is that the dealership system will fundamentally remain intact in 2025, but there is the possibility for much more efficient design of facilities, for example by moving support functions offsite, and by using new format approaches to grow service volumes,” Mercer added.
Mercer expressed great concern that the current trend to build more expensive and more brand-customized stores will lead to excessive and wasteful spending, as dealers repeatedly raze and rebuild their facilities, and as automakers constantly update their brand image campaigns.
“Meanwhile, as customer needs and behaviors continue to shift, we urge automakers and dealers to get more creative in addressing those changes, especially in service work, and that automakers become more flexible in approving low-cost ways to implement these ideas,” he said.

The disconnect between OEM and dealer priorities was manifest on the NADA show floor where dozens of companies offered customer relationship management (CRM) solutions, but few were offering the means to connect with consumers directly in their cars.  More service related apps were offered by companies such as Kaarma and DME Automotive, but the pieces of car connectivity tied directly to dealers were missing in most booths with the exception of Xtime, which was announcing additional dealer management system (DMS) integration and compatibility along with enhancements to the company’s service scheduling application.  But to achieve those returns, dealers need the tools to reliably and predictably capture more service revenue from new and existing customers. 

Competing solutions from AutoLoop, TimeHighway or DealerSocket.com focused on service scheduling via mobile apps or online, but were not showing the kind of deep integration offered by Xtime and reflected in the service scheduling function built into Hyundai’s Bluelink.  BMW, GM, Ford and Mercedes-Benz have all made some efforts to integrate in-vehicle connectivity platforms to dealers, but more work needs to be done and better integration with dealers needs to be achieved.

The need for enhanced customer connectivity strategies is made clear from the statement in the attached exhibit: “assuming you can fill the bays quickly.”  The best opportunity for most dealers to grow and capture a return on their investment is from an expansion of the service department.

The systems that are emerging to enable a stronger customer connection include on-board digital service manuals from companies such as Tweddle linked to telematics systems capable of integrating with dealers.  According to data released by Experian at the NADA event last week, cars are lasting longer.  And the longer cars last the greater the challenge facing dealers in holding onto that business.

Dealers need help with online resources and apps as well as access to vehicle data.  Car makers should be doing more to help dealers build the systems, solutions and programs to keep customers returning to the dealership and filling those service bays.  In the end, what good is an OEM image campaign focused on dealers if the customers are not bringing their vehicles back for service.

Ramping up service volume is important for a variety of reasons not touched on in the NADA report.  Enhanced and expanded service feeds on itself as added volume contributes to improved efficiency.  It also contributes to higher customer satisfaction and repeat vehicle sales.

One ominous note from Mercer’s findings is that only about 20% of dealers perform body work.  For most dealers, the volume of body work is insufficient to justify the investment.  What dealers may not realize is that a car that has experienced a collision reflects a customer at the lowest point of their ownership experience.  Body work is a strategic service offering for any dealer, one that is capable of contributing directly to higher customer satisfaction and repeat sales.

What’s good for the dealer is good for the car maker.  Car makers and dealers have a common interest in vehicle service and repairs being handled with authorized parts by a certified technician.  Proper service delivered in an appropriate manner contributes to positive CSI and repeat business.  Facilities programs contribute little or nothing to this process and poison dealer-OEM relations.  The sooner OEMs can shift their focus to helping dealers expand and improve their service offerings, the healthier the dealer-OEM relationship and resulting profits will be for both. 

“Gentlemen… We have the technology…” paraphrasing Richard Anderson in character as Oscar Goldman in the opening sequence of “The Six Million Dollar Man.”

In the U.S., three times as many people are killed in accidents that occur at intersections than are killed as a result of distracted driving. The technological remedies for this highway holocaust exist, but traffic authorities continue to be distracted by short-term fixes of dubious efficacy (red-light cameras) and daunting budget barriers.

This issue has particular resonance now that U.S. Dept. of Transportation Director Ray LaHood has announced his departure.  A new director will be resetting the agenda of the National Highway Traffic Safety Administration (NHTSA) and intersection accidents ought to be high on the priority list. 

The issue of intersection safety has implications for fuel efficient driving and the coordination of urban traffic grids.  Some of the key applications for NHTSA’s proposed vehicle-to-infrastructure communication (using dedicated short-range communications – DSRC – technology) are built around the timing of traffic lights to ensure the smooth movement of traffic, the reduction of congestion and emissions, and the prevention of accidents.

Two innovative solutions (and a Federal study), take quite different approaches to meeting these challenges and highlight the use of smartphones and existing wireless technology, while also raising questions about the ability to transition the current fragmented traffic light infrastructure in the U.S. and elsewhere to DSRC technology.  (A more detailed discussion of this issue is available to Strategy Analytics clients at: http://bit.ly/VWQEBx - Vehicle Safety at the Crossroads – Literally.) 

The two solutions come from Global Mobile Alert and Green Driver.  The Federal study is being conducted by the Federal Highway Administration (FHWA). 

Global Mobile Alert has patented (http://bit.ly/XfZCdQ) the use of either an on-board or off-board map accessed by a mobile phone to alert drivers who are using the phone to hazardous conditions ahead including intersections, railroad crossings and school zones.  Alerts and messages to the driver can be tailored to the nature of the hazard. 

Global Mobile Alert has further patented the use of wireless communication between the traffic light and a mobile device to determine the phase of the light in relation to the speed of the car in order to alert the driver, particularly in the event of the mobile phone being in use.  Global Mobile Alert executives envision a variety of scenarios and applications of this patent - but – the fundamental functionality revolves around cellular communication and location technology.

Green Driver, on the other hand, taps into an Internet feed from local municipalities to access signal light timing data which can be fed to smartphones for the purpose of enabling more fuel efficient driving by letting drivers avoid red lights.  But the Green Driver approach can also alert users to red-light runners, as long as those drivers have the app downloaded to an operating phone. 

Meanwhile, the Federal Highway Administration (FHWA) in the U.S. is in the midst of a two-year project to reduce traffic delays by enabling communication between vehicles and traffic lights.  (BMW is a sponsor of the research along with two universities.)  The FHWA estimates that “poor traffic signal timing accounts for 10 percent of all traffic delays – about 300M vehicle-hours – on major roadways alone.”

The FHWA’s objective is to use probe data associated with the deployment of vehicle-to-infrastructure communication to achieve a transformational change in how traffic is controlled.  To quote the study abstract: 

“This part of the study looks at the development of algorithm sequences for a connected vehicle to inform only relevant traffic signals about the vehicle’s proximity, velocity and signal request.  Information is sent from a traffic signal to a cloud-based data center, and then communicated over a 3G/4G network to in-car applications.

“With this data, the car is able to display signal phase and timing (SPAT) information to a driver and, if required, adapt the cruise control in real-time, according to the vehicle trajectory, to get through a signal corridor without stopping.  The technology, called ‘smart cruising’ also allows a driver to choose between reduced travel time or increased fuel efficiency.  Using ‘motor stops automatically’ technology, the vehicle can drive while the engine is switched off, effectively sailing along a corridor.” 

The FHWA’s use of the 3G/4G cellular network for its study reflects the fact that the only intersections equipped, today, with DSRC transponders are associated with a handful of pilots, such as the UMTRI V2I pilot in Michigan.  Global Mobile Alert takes the map-as-a-sensor approach to alerting drivers to intersections, but has also provided for RF communication between the car and infrastructure to support intersection alerts to drivers via the smartphone.

Green Driver’s work in connecting with the IP-based SPAT information of local municipalities (the company is currently operating in Eugene and Portland, Oregon; across the entire state of Utah; in the Dallas suburb of Garland; and in San Jose), has revealed a significant degree of fragmentation in traffic light systems and infrastructure around the U.S.  Some cities are online and able to “play ball” with Green Driver – sharing their SPAT info.  Other cities are able to share, but decline to do so.  Still other cities simply do not have the capability due to the limitations of the back-end systems or the physical roadside infrastructure. 

All three approaches – each targeted at different problems – are built around existing wireless technology.  Both Global Mobile Alert and Green Driver are essentially using the map as a sensor.  Green Driver obtains the SPAT data via the Internet while GMA proposes the use of cellular communication from the traffic light to obtain the timing info.

The new leadership at NHTSA has an opportunity to prioritize the reduction of intersection crashes and fatalities around a market-based approach based on existing technology.  Smartphones, map data, the cellular network and Internet connectivity ought to be leveraged to put into the dashboards of drivers the traffic light location and phase status necessary to improve the efficient management of traffic, reduce congestion and polluting emissions, and prevent fatal accidents. 

The Insurance Institute for Highway Safety (IIHS) continues to advocate for the efficacy of red light cameras to reduce red-light running and related accidents citing its latest research on installations in Virginia.  Not only do the IIHS findings conflict with more rigorous studies conducted by traffic authorities and universities everywhere from California and New Mexico to Virginia and New Jersey, it is by now clear that red-light cameras are nothing more than a revenue producing distraction and an invasion of privacy.

Red-light cameras do not even put additional officers on the street better able to focus on more important law enforcement matters.  In most deployments, officers must review and approve the citations – shifting the burden rather than conserving resources. 

We, indeed, have the technology to save lives, reduce congestion and emissions, and enable the safe, smooth flow of traffic through intersections.  And the best news of all, we can achieve all these objectives with market-oriented implementations of existing technology. 

“Most maps, including Google Maps, have not yet mapped the area.” – The Huffingtonpost (Sept. 2012) describing the Angelika Film Center in the Mosaic District of Merrifield, Va.

Can automakers, dealers, Tier One suppliers, and automotive app developers afford to continue requiring customers to pay ($199!) for annual map updates? My latest navigation adventure highlights the fact that the time has arrived both for “free” lifetime map updates in the car and more creative means for delivering monthly, weekly, DAILY! map updates for on-board navigation systems.

The map in the car has become the spinal cord for safety, powertrain, security, infotainment, and navigation systems.  Nearly every advanced system in the car requires access to location information – preferably on-board.

Increasingly, the on-board map is becoming a shared resource both for advanced driver assist systems and contextually aware infotainment systems.  For both of these cases context is determined, in part, by location along with weather, traffic and driver status among other things.

But there is an even more urgent issue, that I will return to, and that is the danger inherent in a driver following navigation instructions with an out of date map.  Few things are more distracting or disturbing than being told to make turns onto roads that don’t exist to enter freeways that have been bypassed.

All of these elements were brought home to me this past weekend.

My wife and I were trying to get to the relatively new Angelika Film Center in the Mosaic District of Merrifield, Va. last Sunday.  It was our first trip to this theater, so I was confident that neither the address nor the name of the Theater would be available in the on-board navigation system in my 2013 BMW 3 Series.  (This assumption would later prove to be accurate.)

To get to the theater I used Fullpower’s MotionX GPS navigation app on my iPhone 4.  MotionX is one of the most popular navigation apps on the iPhone.  Unfortunately, on this occasion, it insisted on directing my wife and I to a destination five miles away from the theater’s actual location.  (UPDATE: This was due to the fact that the Nokia map data was missing the information for my destination, according to Philippe Kahn, CEO of Fullpower.)

My wife then proceeded to look up the theater in the on-board POIs, with no success.  We then obtained the address online and attempted to enter it directly into the navigation system – ignoring the fact that the system in the car will not accept addresses that are not yet in the system.  So, in this case, we entered the street number closest to the actual address of the film center.

Half an hour after the movie’s start time we arrived at the cinema.  We accepted our fate and settled into a round of shopping and dinner and went to the next show – making for a later evening than originally planned.  (At least the toney establishment had toasted caramel popcorn!)

It was a minor event at the close of an otherwise uneventful weekend, but it highlights a huge problem that remains unsolved – on-board map updates.  (Yes, there are a few ways this unfortunate incident might have been avoided such as: a) using the Sendtocar function, which for some reason has not been working for my car; b) use the on-board Google Local Search to obtain the address – just checked and this would have indeed worked; c) ring up the BMW Assist Concierge service and have them download the address; or d) try a different mobile navigation app.)

Anyone who has been through a similar experience will appreciate the minor nightmare of not being able to find a simple destination.  You can imagine my wife and I pulling over into parking lots and side streets to double-check the entry and the results and to try a different approach.  I shudder to think about the amount of eyes-off-road time that was required before we found a solution and reached our destination.

But my minor nightmare is a terrifying reality.  Not only is the out-of-date map situation a nuisance, it is a driving hazard and a customer satisfaction failure.  It is no surprise, then, that JD Power identifies navigation systems as a source of ongoing and mounting complaints for car owners.

While JD Power is focused primarily on the user interface, it is time for the industry to confront the fact that every car being sold is going out the door with an obsolete map.  An obsolete map on board is an invitation to catastrophe for the car dealer, the manufacturer and the customer.  Yet no one seems especially worried or concerned.

The problem is most obvious in emerging markets where new cities and roads are proliferating on an almost-daily basis highlighting the limitations of digitized map in the car.  It is no wonder that Strategy Analytics’ research with navigation users in China has found the typical driver using multiple navigation systems - phone, on-board and portable navigation device – to get from point A to point B.

The good news is that the leading map makers – TomTom and Nokia – have progressed their map-building processes to enable daily if not real-time map updates on a global scale.  Nokia has even taken steps to put more of its surveying vehicles on the road while also providing for crowdsourcing of map data, something TomTom initiated many years earlier.  The problem lies in delivering those updates to the on-board system.

Most consumers these days will use their mobile phones to navigate if a destination is in a new or unusual location.  I will not delve into the shortcomings of mobile phone navigation in a car, but suffice it to say it is popular based on the findings of multiple Strategy Analytics surveys.

Car makers Ford, GM and Toyota Motor Europe have tried with varying success to enable display in the car of smartphone-based navigation instructions.  Ford was first with this approach and has had the most success.

But smartphone-based navigation defeats the integration of the map – the application spinal cord of the car – into advanced safety, powertrain and infotainment systems.  While smartphones can, indeed, deliver a contextual experience to the driver, the on-board map is necessary to properly anticipate workload demands on the driver based on the integration of on-board sensors with map-based and other inputs.

So, smartphone integration, while attractive and a useful car-selling proposition falls short of a fully integrated experience.  But that doesn’t mean the smartphone can’t provide another means to solving this dilemma.

At the recent North American International Auto Show in Detroit, Johnson Controls showed a solution from NNG using the smartphone as a map updating tool.  While the details were not clear – including whether the entire map or just portions of the map will be updated or, indeed, what the cost will be – the concept is spectacular.

Any driver getting into a car ought to be able to update the on-board maps on demand as needed.  Given current connectivity options, the smartphone is the smartest and best solution to this problem.

The fact that Johnson Controls is the first to show this approach publicly reflects the power of a newcomer entering the market.  While NNG works closely with other Tier Ones, such as Harman, it is Johnson Controls that put the concept front and center in its booth in Detroit, although no press release was published.

Based on conversations with competing navigation software providers, the likelihood is that competing systems and solutions will soon be on display.  The bottom line is that, once again, the smartphone represents the solution to a hazardous driving condition, not the source.  At stake is the mitigation of driver distraction, enhancing the driving experience and assuring the highest level of customer satisfaction.

2012 will be remembered as the year of usage-based insurance. But in retrospect it is a lot of sound and fury signifying nothing. Is usage-based insurance the silver bullet to simultaneously reduce traffic congestion, carbon emissions and highway fatalities?

The ultimate objective of UBI programs is to modify driving behavior or reward existing good driving behavior. (Yes, I know, insurance companies are looking to reduce churn by rewarding their best customers and stealing their competitors' best customers, but let's look at it from the consumer's perspective.) Some progress was made in 2012, but there is ample room for improvement in the area of on-board/embedded systems, OBDII plug-ins, aftermarket systems and smartphone apps.

So where do we stand at the outset of 2013? 

First, it is important to understand the key objectives of driver behavior modification: 

1.  Increased safety
2. Reduced emissions
3. Increased fuel efficiency
4. Lower insurance premiums

I start the year off in a new 2013 BMW 3 Series with a remarkably distracting BMW Apps iPhone integration (not reviewed here).  In trading up from my 2011 BMW 3 Series I have pleased my wife by moving to remote keyless entry, but disappointed her with a car that has no seat warmers – unlike its predecessor.  Like its predecessor, it also lacks a backup camera or sensors.  (Clearly out of step with the impending U.S. mandate.)

Still, the new car does come with a turbo-charged four cylinder engine and start-stop technology significantly reducing fuel consumption while increasing horse power.  There are multiple sources of feedback around green driving in the car and there is a toggle near the shifter to select driving style – Sport or ECO PRO.

With ECO PRO, the driver can extend the range of the vehicle by adjusting driving style according to cues in the instrument cluster.  It is no surprise that a German car company offers such a function since an hour-long drive on the Autobahn can produce dramatically different fuel consumption – and, hence, range – results based on speed.

A system for discouraging speeding in a BMW is a stroke of genius, particularly for me, given the fact that my record of violations spiked following the acquisition of my first BMW.  (There is no app – not even Coyote or Trapster – that would have saved me.)

The ECO PRO driving mode introduces a series of instrument cluster symbols and signals making very subtle (it IS a BMW after all) suggestions primarily based on reducing acceleration.  ECO PRO also ties into the operation of climate control systems for maximum fuel savings.  The system is even able to calculate and display for the driver the estimated percentage of fuel savings based on the settings selected.  The driver can also control the timing and nature of the driving tips offered by the car.

This system can provide a history of fuel consumption including energy recovery.  And, yes, it can also control the rate of cabin heating or cooling and the output of the seat heater – if there were one.  Similar systems are available from other car makers, but I am most familiar with the BMW offering and it is emblematic of an industry trend.

In contrast to this system of buttons, settings, alerts, icons and statistical analysis, my wife’s Toyota Sienna is equipped with an aftermarket Pioneer Aha Radio which periodically provides an “ECO Graph” of her driving performance.  I personally think my wife is something of a lead foot, but she thinks she is performing pretty well in this report.

Unfortunately, the report appears at random intervals and fails to explain what, if anything, my wife is doing well or how she can improve.  For her, the driving feedback is simultaneously interesting, intriguing and frustrating.  She thinks there should be rewards – anything from gold stars to insurance discounts – associated with her good driving.

There is no doubt that she is correct.  Her driving experiences in 2012 included a brief stint testing Progressive Insurance’s SnapShot usage-based insurance OBDII plug in.  The device annoyed her with loud beeping during hard braking, but wirelessly delivered a graphical presentation of her driving behavior to a Website. (There are a wide range of third-party offerings with Website dashboards charting driving behavior and providing driving tips.)

Progressive offers SnapShot in Virginia, where my wife and I live, but after mailing the device back to the company, the insurer never responded with an evaluation or offer of coverage.  SnapShot claims customers can save up to 30% in the program. 

Whether that is actually true or not depends on how much you trust an insurance company.  Progressive more or less discourages drivers the company determines will not benefit from the program.

My wife briefly tested another OBDII plug-in from a company called GridLoyalty.  Founded by a former Intelligent Mechatronics executive, GridLoyalty promised a range of affinity offers based on driving behavior.  Unfortunately, most of the affinity offers were associated with organizations – such as convenience stores – in the Las Vegas area.  While the device provided wireless feedback to a Website – a la Progressive – there were no offers in Virginia.

In the year past, insurance companies and their third-party partners, crowed about the wonders of usage-based insurance.  Even government regulators embraced usage-based insurance as a tool for reducing driving and, therefore, congestion and emissions.  Studies show that drivers in UBI programs tend to drive less in general and after joining the programs.

In spite of the enthusiasm and publicity surrounding UBI programs and more than five years of market availability there are still fewer than 2.5M users of these systems around the world.  There is good reason for this lackluster consumer response.  The programs offer minimal savings and require a significant surrender of privacy.

The daily relevance of an insurance discount is less a benefit than a sword of Damocles swinging over the head of the driver in case that driver deviates from his or her previously safe pattern of driving.  What is missing are daily rewards and/or penalties.

MetroMile, an insurance startup, is introducing a pay-per-mile based offering that the company hopes to expand to other value propositions such as vehicle service and warranty offers.  The MetroMile offer is a step in the right direction, but falls short.  What is really missing is a more comprehensive affinity program tying vehicle use to offers and discounts for driving-relevant products and services such as fuel, parking, restaurants and tolls.

The MetroMile offer (Company Website: http://bit.ly/ZRHooE) is attractive for its simplicity relative to offerings from insurance companies.  But what is necessary is for local governments, tolling authorities, roadside franchise operators and such to coalesce around wireless payment systems to enable a more broad-based program of driver rewards and, yes, penalties – ie. drive less, save more.

Implications:

Car makers, such as BMW, are already delivering on in-vehicle systems designed to modify driving behavior.  The next step is actually rewarding that good behavior with more than just insurance discounts based on intrusive tracking systems. 

A free cup of coffee, tank of gas, parking space, hamburger or oil change ought to be enough to convince nearly any driver to be willing to share their location information and vehicle data.  Though distracting, BMW Apps does provide smartphone-based vehicle information feedback while also enabling some limited remote operation of the vehicle - illustrating the fact that there is a role for the smartphone in this new value proposition.

And what about traffic management authorities able to reward drivers - from specific neighborhoods and/or on short notice via smartphone apps or other alerts! - for NOT driving on days when high levels of congestion or pollution are anticipated?  Or maybe specific drivers are granted HOV lane access or other driving privileges on demand or for a particular time of day - or for a premium as in the Washington, DC area.  There are clear opportunities for public-private collaboration and/or direct consumer engagement.

Is there a future for usage-based insurance?  Yes, there will always be consumers who will do anything for a discount of any kind.  But usage-based insurance is likely to remain a niche application for the foreseeable future.  That niche role will be a disappointment to governments hoping for UBI programs to provide a market-based means for reducing emissions and traffic.

But if car makers are able to build more effective affinity programs, then UBI programs will benefit from the expansion of vehicle data sharing.  The question is which marketing partners and OEMs will lead the way in 2013 and what will these programs look like.  And, finally, is it possible to retrofit a 2013 3 Series with seat warmers?

Just picked up my wife's Toyota Sienna from the local Toyota dealer where I bought the car and heard a familiar tale of woe.  Seems a customer had a bad accident and took his vehicle to an independent repair shop as per direction from his insurance company.  The independent shop patched the car back together except that the car was no longer functioning properly.  As a result, after spending $10,000+ with an independent, the customer had to bring his car back to the Toyota dealer to try to figure out what was wrong.

The scenario is more familiar than you may think and it highlights a multi-billion dollar opportunity currently overlooked by the automotive industry.  Drivers who get into accidents - big ones or fender benders - nearly always call the insurance company first to file a claim or to get assistance and advice.  The insurance company almost always directs the customer to its network of preferred independent shops to repair the car.  There are a lot of things the insurance company is NOT telling its customer and using genuine OEM parts is just the beginning.

By going to an independent shop the customer risks his car:

-> Being rapaired with unauthorized, third-party parts which will void the warranty.  This includes everything from sensors to windshields.

-> Being repaired by a company that may not even have access to specific parts - either from the OEM or third parties - in the event the car is a new model.

-> Being repaired poorly and incorrectly - particularly with regard to electronic systems.  While independents have some protection to access repair information from OEMs, the information is expensive and independents usually can't afford to repair all makes and models.

-> Being repaired unsafely.

In the worst case, if the customer is leasing the vehicle he or she may be liable for any or all third-party replacement parts being removed and replaced by genuine OEM parts at the customer's expense.

It is for this reason that dealers in the United Kingdom have mounted a now two-year-old campaign to convince customers to call their dealers first, not the insurance company.  Using this approach, the dealer becomes an advocate for the customer to ensure a proper repair occurs, regardless of whether the repair is performed by the dealer or an independent.

As for Customer X at my local Toyota dealer, hours of labor will now go into a forensic exercise to diagnose the problem before the repair of the repair can begin.  It won't be long before dealers in the U.S. are spreading the same message.  Customers should call the dealer first before the insurance company - or at least make sure the dealer has a chance to bid on the repair.

The dealer has a much bigger stake in ensuring the proper repair is made and the customer made happy.  The insurance company is solely interested in mitigating its expense.  The well-being of the customer or the car is a lower priority.

What's at stake for dealers and OEMs?  According to the Automotive Aftermarket Industry Association, the collison repair business in the U.S. is worth $40B - and new car dealers have about a 15% market share.  That's what is at stake.  To say nothing of the opportunity to sell the customer a new car and, generally, to provide an enhanced customer care experience which is likely to produce higher customer satisfaction scores.

For additional insight:  Insurance Telematics: Path to Profit through Accident Aftercare - bit.ly/XVVYua

The U.S. National Transportation Safety Board (NTSB) released its 2013 “Most Wanted List” of solutions for transportation hazards including everything from enhanced pipeline safety to improved safety for airport surface operations. Near the bottom of the list were three items relevant to the automotive industry: reducing distracted driving in all environments, reducing impaired driving and mandating collision avoidance technologies.

The announcement from the NTSB is reminiscent of what Abraham Maslow said in 1966: “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” I believe this statement accurately characterizes the NTSB’s position - replace "hammer" with "mandate" - but it only hints at the potential negative consequences from mandating safety technologies.

The concerns of the NTSB are significant and worthy of note.  While annual highway fatalities have been in a steady decline for the past decade, the U.S. still sees approximately 100 fatalities per day on its roads.  This is clearly not acceptable.  According to NTSB estimates 10,000 lives are lost annually to impaired drivers – the single greatest source of death and injury on the road. 

The National Highway Traffic Safety Administration (NHTSA) has developed a much quoted figure of 3,000 annual fatalities from distracted driving most often ascribed to the use of smartphones.  NHTSA representatives have stated publicly they are seeking better metrics for this phenomenon, but executives at the NTSB have already voiced their preference for a ban on mobile phones in cars – something which is opposed by the automotive industry and the Consumer Electronics Association among other interested parties.

The NTSB further estimates that run-off-road, rear-end, and lane change maneuvers account for 23%, 28%, and 9% of highway accidents, respectively. The agency says collision avoidance technologies can prevent these types of accidents - or 60% of the total.

NTSB cites data from the Insurance Institute for Highway Safety for its claims that mandating collision avoidance technologies will prevent crashes and save lives.  NTSB says the IIHS “estimates that forward collision warning can prevent 879 fatal crashes annually for passenger vehicles and 115 fatal crashes annually for large trucks. The (IIHS) estimates that lane departure warning can prevent 247 fatal crashes annually, and electronic stability control, 439 fatal crashes annually.

There are a host of issues raised by this call for a mandate and I have an alternative proposal.  First, the problems.

1)      The NTSB’s call to mandate collision avoidance technologies has immediately put automotive industry lobbyists on the defensive, although some have actually already gone into attack mode.  Unfortunately, the predictable path of resistance lies in decrying the high cost of fulfilling technology mandates, which will translate as more expensive vehicles.  The agency has responded that the industry cost estimates are too high and they will decline over time anyway.  The real problem here is that it puts the automotive industry in the awkward position of arguing indirectly or directly over the value of saved lives.  This is unproductive and corrosive to the regulatory process while introducing an undue level of emotion and exposing, inaccurately,  the auto industry as possessed of a callous disregard for human life.

2)      The IIHS as a source of statistical validation is hardly a disinterested party, funded as it is by the insurance industry.  In spite of the IIHS findings regarding the efficacy of certain safety systems, consumers have seen little reward from their insurers in the form of lower insurance rates for cars equipped with these systems.  And the IIHS was not nearly as sanguine as the NTSB regarding lane departure warning, which the IIHS said, earlier this year, can harm rather help avoid accidents, in the organizaton’s own words.

3)      The mandate process itself will require years of testing to determine the efficacy of these systems for preventing crashes and fatalities.  Even if the NTSB and the industry could agree that something should be done, each technology will require extensive testing and review virtually halting existing development in the industry - which is currently moving at a rapid pace - for fear of selecting the “wrong” solution.

4)      NHTSA has already set out a target of crash avoidance and is rewarding car makers with higher safety ratings.

Here are my modest proposals for resolving this scenario.  My ideas are market driven although they will benefit from

endorsement or implementation within the existing regulatory framework.

1)      Require insurers to offer discounts for vehicles equipped with the very safety systems for which the agency is seeking “robust” industry adoption.  It’s almost impossible – if not actually impossible – to find an insurer willing to offer a discount on a Volvo equipped with City Safety collision avoidance.  If this is a life-saving technology, it is time for the insurance industry to put its money on what its data has validated and it may also be time for the NTSB or some other regulator to compel such action.

2)      We are currently at the outset of the World Health Organization’s Decade of Action for Road Safety.  There couldn’t possibly be a better time for the NTSB, perhaps in concert with NHTSA, to set forth a set of targets along the lines of the Corporate Average Fuel Economy standard of 54.5 miles per gallon by 2025.  The automotive industry howled when the 54.5 mpg standard was first proposed, but has now agreed to go along.  Could the U.S. put together individual car maker targets for lives saved/deaths prevented?  Could the NTSB and or NHTSA build a database intended to identify best practices in vehicle safety system design?  Could auto makers be forced to take more responsibility for the actions and behaviors of their drivers?

3)      How about tax credits for new cars equipped with specific qualifying safety systems?

4)      It is worth noting that car makers are already bringing a wider portfolio of safety systems to more and more of their cars at lower price ranges.  Market conditions suggest that mandates at this time are almost completely unnecessary and, if anything, will only slow adoption and deployment.

There are a lot of ways to save lives and there are a lot of lives to be saved.  Mandates aren’t the only path to less motor vehicle bloodshed.  The government and insurers should recognize and reward those car makers that have made the greatest progress in ending highway mayhem.  And drivers, too, should be rewarded for choosing safety.

Why is Pohanka telling customers to come on in for service without an appointment? The first ads I noticed were for Chevrolet, but it soon became clear that Pohanka was making the same offer for all of the brands in its Portfolio including Honda, Toyota, Lexus and Acura. (The offer for Chevrolet is especially surprising given the OnStar Vehicle Diagnostics Report, which ought to allow dealers and consumers to anticipate needed service and schedule visits in a more predictable manner.)

The offer: “No Appointment Necessary” for service. Just drive in. In fact, Pohanka of Salisbury (http://youtu.be/GeVRCmH7bUE - Youtube) goes so far as to offer free Wi-Fi, shuttle service and refreshments.

On its face, the offer is a wonderful customer-friendly proposition. The message conveyed in the advertising: Bring your car in, regardless of what is wrong, and we will fit you in right away. You can then kick back, fire up your portable computer or tablet and set up your office in our waiting area while you have a coffee or soda or maybe even a snack. We will do our best to figure out what is wrong with your car and try to fix it on the spot.

There are so many things wrong with this proposition that it is hard to know where to start, but I’ll give it a try.

1.      Dealers need to manage their business.  The only thing worse than having idle service bays is having customers come in at unpredictable times with unpredictable vehicle problems.

2.      Dealers make money from service.  For most dealers, the service operation is the life blood of their viability.  It is where they make money.  Selling new cars is a more or less break even proposition.  For dealers to have to advertise to consumers to bring their cars in suggests a vision of a bunch of idle wrench twisters hopelessly looking for and pleading for something to do.  (Maybe the cars aren’t breaking down?  Yeah, right.)  Something must be very wrong for dealers to advertise in this way.

3.      My dentist makes me wait.  My accountant makes me wait.  Everyone makes me wait.  My dealer used to make me wait.  What’s changed?  The service cycles for preventative maintenance are growing, so it is true that consumers have less reason to pay frequent visits to dealers.  But, at the same time, cars are lasting longer and consumers are holding on to them longer, according to R.L.Polk (http://bit.ly/Z9VKgQ - Length of Vehicle Ownership Hits Record High).  This means that consumers are likely shifting their vehicle servicing to independents (a fact borne out by studies from the Automotive Aftermarket Industry Association) and/or deferring service.

A couple of things could be happening at Pohanka dealerships.  Perhaps the company has decided to up its game by changing the message from one of playing hard to get (“We can see you next week.”) to an open door (“Come on in!”).  I actually welcome that message as a vehicle owner with not infrequent needs for vehicle service.  And I DO respect and appreciate the offer of Wi-Fi access and snacks, though I’d prefer a loaner car to get back to my own office.

I am concerned, though, that the offer actually reflects what is wrong with the automotive industry and something that is putting the health of 30,000+ new car retailers at risk.   With no direct connection, via OEM telematics systems or connected smartphones, to their customers, dealers are forced to take a blunderbuss approach to marketing.

New car owners in the U.S. are familiar with the post card marketing used by most dealers targeted at scheduled service benchmarks normally based on estimated vehicle usage.  GM, BMW and Mercedes have taken the first tentative steps to allow dealers to be notified of mileage thresholds triggering scheduled maintenance.

A new solution based on connectivity and tied to interpreting vehicle data is required.  Dealers shouldn’t have to resort to the equivalent of hitching up their skirts by the side of the road.  Dealers need a more scientific and targeted model built around vehicle connectivity.

Vehicles throwing off error or failure codes should be communicating those codes to OEMs, dealers AND the consumer.  In fact, on-board service scheduling like that enabled by xtime on BlueLink-equipped Hyundai vehicles is the new benchmark for customer integration.

In the future, connected cars will enable connected dealers to plan their marketing campaigns around the status of their “fleet” of connected cars.  This kind of planning will enable more efficient use of fixed assets – those service bays – and timely ordering of the necessary parts.  Dealers will also be better able to go after deferred maintenance opportunities.

At the recent SEMA/AAPEX gathering in Las Vegas multiple aftermarket players showed smartphone- and OBDII-based systems for interpreting vehicle diagnostic codes for the purpose of capturing service opportunities.  (http://bit.ly/RNpYne - AAPEX Seminar: Telematics presents the automotive aftermarket new challenges and opportunities)  OEMs may be making progress, but the aftermarket is not sitting idly by.

It’s still early days for bringing dealers into tighter communication with their customers.  But this Pohanka come-on-down offer is a sign of the coming apocalypse for any OEM that is not working to better connect the dealer to the customer and the car, or any dealer that is not investigating aftermarket customer connectivity propositions.  Until this problem is solved, I’ll be popping in to my Pohanka dealer without bothering to call, sucking down a few sodas and soaking up the free Wi-Fi.  But as an industry, we can do better.

A traffic tempest has erupted in a Washington, DC, teapot. The leading local broadcast traffic information provider, WTOP “with as many as 20 full- and part-time reporters,” in the words of one blogger, has “outed” local broadcast competitor, NPR affiliate WAMU, for using a remote traffic reporter – Jerry Edwards, previously seen regularly on NBC’s Channel 4 until his retirement in June 2011. Edwards is reporting DC traffic for WAMU from his home in Sarasota, Fla., where he moved after selling his home in Maryland, according to a Washington Post report.

The Washington Post reported the not unusual traffic reporting scenario on Sunday, November 4^th (http://wapo.st/PRFfoy), which was followed by a blog on the topic (http://bit.ly/R9km4Y). At issue is whether a traffic reporting organization needs a physical presence in the market where it is reporting traffic.

With millions of advertising dollars at stake, the question is not a trivial one and it touches every organization from the local news-radio station to the state Department of Transportation, to traffic content providers and, yes, Google. Timely and accurate traffic reporting is vital to the management and movement of traffic around metropolitan areas and the guidance provided via navigation applications.

Location, location, location

The idea boils down to whether traffic can be adequately reported and interpreted from a distance or requires on the ground information gathering – that is, on top of in-place cameras and sensors and public reporting of incidents. WAMU has clearly voted in favor of remote traffic reporting. WTOP is insisting on the merits of local traffic reporting.

WAMU has a lot of company in the remote report category. Nokia Location & Commerce spun off its media assets more than a year ago in the form of Radiate Media. Radiate Media enables remote traffic reporting by providing access to real-time traffic and probe data with inputs from various DOTs, and incident and event data from “fully staffed operations centers” with 24/7 technical support, according to the company’s Website.

Actually, Radiate Media’s arrival coincided with the closing of many of the original Traffic.com local traffic reporting offices, such that most of Radiate’s activities are coordinated between Chicago and its Salt Lake City headquarters. Traffic.com was the traffic reporting company acquired by Navteq years prior to its acquisition by Nokia.

The remote traffic reporting philosophy is also supported by companies such as Google (handset GPS probes), Airsage (network signaling), and Trafficland (DOT cameras). Each of these companies views its technique-dependent solution as either the ideal approach to traffic reporting or as good enough. While some of these organizations provide predictive traffic modeling based on their single-sourced data, they all emphasize real-time traffic information.

This analyst has trumpeted the value of hyper-local insights regarding all aspects of location information. Traffic is no exception. But it is difficult though not impossible to offer hyper local traffic insights from more than 900 miles away, as WAMU is trying to do. It all depends on the input sources.

Better is the enemy of good enough

But the traffic data market is a classic case of better being the enemy of good enough. The only problem is convincing consumers that there is a better solution when they are content to get by with good enough. Worse, good enough solutions have sown despair among some traffic information users seeking truly helpful information. These are the people who regard traffic and weather as equally unpredictable – recent well-anticipated East Coast events notwithstanding.

WTOP has taken up the gauntlet of delivering better traffic information. The station approaches traffic as “a major news-gathering undertaking,” in the words of the blogger.

But WTOP’s commitment to authenticity and local reporting faces a steep challenge as a value proposition when information regarding traffic incidents and road conditions are freely and publicly available to all on the radio and via smartphone apps.  The station emphasizes its 24/7 commitment in personnel and information integration aided by listeners who call in to describe what they are seeing on the roads.

If you care about traffic in DC, you listen to WTOP

The WTOP effort is surprisingly analog, with individuals reporting traffic events live as they unfold, in a world dominated by digital inputs.  If you care about traffic in the DC area, you listen to WTOP.

WTOP executives further note that “there are no traffic cameras on federally controlled highways” and “a good percentage” of traffic cameras in the area are out of service at any given time. It is worth noting that Clear Channel’s Total Traffic Network, which maintains a regional office in Silver Spring, Md., maintains its own traffic camera network.

In fact, it is curious that the WTOP-WAMU contretemps almost completely omitted mention of Clear Channel. Clear Channel Communication’s Total Traffic Network maintains the largest private traffic monitoring network in the U.S., with 16 regional traffic hubs operating 24/7 and 10 smaller satellite offices.  TTN also maintains a proprietary network of traffic cameras as well as some aircraft all feeding the company’s TrafficNet internal traffic data platform which in turn feeds services including SigAlert as well as embedded navigation systems.

The challenge for all lies in the fact that with improvements in technology come parallel improvements in both local and remote traffic reporting. Different types of traffic information offer different value propositions for different users.

Casual observers of traffic information online, on the radio or on TV, may be satisfied with a general overview of conditions, while people driving in cars or navigating to a specific destination will not only want more timely and accurate information they will also need predictive traffic information, whether they are conscious of that need or not.

The increasing importance of traffic information, in a world of increasingly clogged highways, has stimulated interest in traffic information. What is unfolding today is a process of traffic information user education.

For some, remote traffic reporting will be okay. The WAMU solution is not unlike the Inrix-developed traffic app within the Aha Radio service from Harman. The app converts traffic flow information into speech output integrated with relevant local event notifications. It is a good enough solution.

The debate between WAMU and WTOP has implications for satellite radio broadcaster SiriusXM. Long considered a provider of good enough subscription-based traffic information, SiriusXM is in the midst of an extended process of determining a new way forward with a better traffic solution to preserve and expand its lucrative subscriber base.  When consumers are paying for traffic data as in the case of SiriusXM good enough can suddenly become not good enough.

Traffic data evolution continues

New and improved (Bluetooth) sensor data is on the way into the market from multiple suppliers fulfilling individual municipal and DOT contracts. Also on the way are traffic cameras enhanced with object and license plate recognition technology. With more embedded telematics systems will come improvements in vehicle probe inputs as well as systems and apps, such as Waze, that enable user-generated inputs and observations.

Traffic information suppliers are also moving steadily toward digital radio and IP-based TPEG traffic information that vastly increases the amount of traffic information that can be transmitted while enabling greater granularity in the identification of congestion location. And while some suggest, perhaps sarcastically, that drones would be helpful in interpreting traffic events and conditions it is no joke that drones could well replace helicopters – of which there are precious few today, replaced by cameras – to monitor choke points.

Implications

As George Harrison once sang: “It’s all up to what you value.” If traffic information is not mission critical to you or your organization you will not care about Jerry Edwards delivering the traffic news remotely. The important thing to know about traffic is that the nature and value of traffic information is changing every day.

There is an increasingly diverse array of traffic information sources and a steady shift toward higher frequency, higher bandwidth, higher resolution sources of traffic information obtained over fatter, faster pipes. The information is being interpreted on increasingly powerful computers with increasingly sophisticated algorithms capable of integrating an ever-expanding array of data types.

The last mile of traffic data delivery can be anything from an app to a radio or TV broadcast or Internet feed. Or the traffic information could simply be operating in the background of an off-board navigation solution fine tuning optimal routes for avoiding traffic.

Digital traffic resources are increasingly challenging analog human traffic reporters. Will digital “eyes” ever completely replace the human eye? Maybe. But until that happens, WTOP remains one of the best traffic information service providers in the country and WAMU’s traffic information is probably good enough for most.

In August Fiat launched Fiat Social Drive a smartphone-based app intended to leverage the already available Blue&Me Bluetooth offering in Brazil. Available initially for free for two years on the MY2013 Fiat Punto, Fiat Social Drive allows the user to dial into an application that provides notifications and updates from the user’s social networking applications.

Created by Leo Burnett Tailor Made and Agency Click Isobar in Sao Paulo, the new application was advertised for the first time in August in Brazil (http://www.meioemensagem.com.br/home/comunicacao/noticias/2012/08/06/Fiat-apresenta-novo-Punto-com-Social-Drive.html - video). A user of the application can access it by creating an account using their phone or a computer.

To create an account the user needs his or her Fiat VIN number and as part of the registration process will receive a call on the mobile phone with a code. The next step involves configuring the account to the user’s preferences including selecting which friends to access via Facebook, Twitter and Foursquare and which kinds of information or notifications to receive via the application.

The user then saves the phone number for Social Drive in the phone’s directory and calls any time they want to connect with Social Drive.  A dealer visited in Sao Paulo last week did not have any further details and Fiat has not put a price on the application which appears intended to draw attention to Blue&Me functionality.

The notifications are delivered to the car via MMS and delivered to the driver via voice. There is no means provided for the driver to respond to the notifications for such things as news, birthdays, weddings, check-ins and posts. It is the first application of its kind for the Brazilian market, but likely the first of many with GM bringing MyLink Brazil and Ford launching SYNC in the market.

A video description of the service is available on LinkedIn: http://youtu.be/4V_PkjHpgNM

OnStar announces its next global launch today as Mexico in 2013, validating Strategy Analytics' analysis when OnStar announced Telefonica as its partner for global expansion earlier this year (http://bit.ly/ORVLii - OnStar Reveals Regional Priorities with Telefonica Selection). Details regarding cars, services, partners and pricing have not yet been announced, but the move will likely serve as a proving ground for faster future market introductions anticipated for larger more strategic markets including Brazil and Europe.

Mexico is GM's fifth largest global market with slightly more than 160,000 units sold in 2011.  Brazil represents approximately four times the volume in Mexico, but given the government's Contran 245 mandate (http://bit.ly/ORYR5S - Brazil: The Embrace of Wireless Technologies Transforms the Telematics Market) for vehicle tracking and immobilization - which has been delayed for the 10th time until January 2013 - it makes sense for GM to proceed with caution. (The rollout in Mexico also allows GM to give its new ATOMS telematics platform a dry run with a GSM network.)

The same is true for Europe, where the eCall mandate has frozen many telematics deployment plans while legal and privacy issues are resolved along with logistical issues related to equipping public service access points with required technology. (http://bit.ly/tunyIL - European eCall Mandate Aims Low, Falls Short) In the end, it is highly likely that OnStar, when it arrives on European shores, will do so as a private solution working in parallel with the public eCall - unfortunately.

General Motors, meanwhile, is on a roll, posting steady sales increases throughout the world, according to the latest sales press release reported by the GMAuthority newsletter (graphic below). No doubt OnStar wants to join and add to that momentum with its value-added vehicle connectivity platform.

The launch of the ATOMS telematics infrastructure platform earlier this year by GM/OnStar has set the stage for rapid global deployment and growth for the service. (http://bit.ly/IpSRmf - OnStar Looks to Unify Connectivity Strategy) Mexico will clearly represent the acid test, serving as a dry run for country rollouts to come as well as a proving ground for the switch to GSM technology.