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

TomTom interrupted the epitaph writers last week with a spunky earnings call and a stunning customer presentation ushering in a new portable navigation device architecture and strategy modeled on the mobile phone market. The earnings report was significant both for the company’s ability to parry analyst skepticism and its self bestowal of the title: “fastest growing European telematics company.”

 

Skepticism surrounding TomTom’s ability to continue to grow and do so in a profitable manner was laid to rest by the Q1 2010 report which showed a 26% increase in revenue and a profit. The revenue gain came in spite of declining PND sales overall with TomTom claiming market share gains in Europe and North America.

 

The skepticism was expressed by multiple analysts on the earnings call repeatedly questioning the short- and long-term impact on TomTom of smartphone navigation. TomTom executives were quick to point out that 10M navigation application downloads, as reported by Nokia, did not directly translate into regular, daily use of smartphones for navigation.

 

TomTom’s broader survival strategy became clearer from a quick review of the earnings report which showed its non-consumer lines of business – a newly created categy – capturing 31% of revenue in Q1 ’10, up from 24% in ’09. The non-consumer segments consist of TomTom Work, licensing and the automotive business. (TomTom reports a 40% attach rate for its solution at Renault and claims 10% automotive market share as its solution is extended to additional Fiat and Renault models.)

 

TomTom Work showed 41% subscriber growth year-on-year to 104,000, well short of the 300,000 subscribers targeted for 2011, but enough to justify TomTom’s claim of being the “Fastest Growing Telematics Company in Europe.” The figure is even more important when one considers this is one of the highest gross margin businesses in TomTom’s portfolio, according to the company.

 

To round out the rosy picture TomTom pointed to the 700,000 Live Service enabled devices currently in use by consumers enabling a range of service and content transactions (including sharing of traffic and speed cam data), all of which are also exceptionally profitable to TomTom, again according to the company. With its newly announced webkit architecture strategy and adoption of the smartphone app store model (http://bit.ly/9q1jIV), TomTom hopes to build this user base.

 

An interesting note to this effort to build the TomTom user base is the fact that TomTom says it will no longer provide quarterly reports of device unit sales or average selling prices. The reason for this reticence is the company’s stated intention to alter its business model to build the base of users. Clearly TomTom is alluding to the potential for subsidizing sales of PNDs along the mobile phone model – a strategy long toyed with by the industry but never fully adopted.

 

TomTom did not specifically confirm its intention to subsidize PND sales. But this interpretation is supported by the somewhat ambiguous comments expressed in the earnings call and in the context of its plans to build its subscriber base.

 

Once TomTom has brought its open platform and app store model completely into the marketplace, expect subsidized devices, particularly among the new, simplified TomTom Ease line. The objective is to build a larger user base producing a wider range of shared location information which will become increasingly accurate (traffic) and useful (user evaluations) as the subscriber community grows.

 

TomTom’s aim is to achieve daily relevance from daily usage by a wide subscriber base. To further hedge its bets TomTom is adding new automotive relationships – such as Ford’s announced intention to use TomTom maps and content – and continuing its expansion into emerging markets (Ukraine, Morocco, Mexico, and India) where further PND growth is expected. The pieces are falling into place for Europe’s fastest growing telematics company, which has chased away the skeptics once again.

 

Further Insight:

 

http://bit.ly/cMw4f1 - Solid Q4 for PNDs, but 'Free' Navigation is Shaking Up Monetisation - John Canali – Automotive Multimedia and Communication Service

 

http://bit.ly/bMeg36 - Global Mobile Handset Navigation Forecast 2004-2014 - Nitesh Patel – Navigation and Location Opportunities

 

http://bit.ly/8Yo4U6 - Nokia & Google Shake Up $3.8 B Handset Navigation Market - Nitesh Patel – Navigation and Location Opportunities

TomTom CEO Harold Goddijn must be reading this blog or we are reading his mind. In a post on March 6th (http://bit.ly/aVONfo), we suggested TomTom needed to open its platform to developers and adopt the app store model on a wider scale. TomTom announced its intention to take these very steps at its customer event this week - embracing the app store approach and offering apps to customers by the end of the year, according to a report on pocket-lint.com (http://bit.ly/b5t6jh). It is worth noting that TomTom was the first and only PND maker to create a connected community of users able to share content and map updates. TomTom's Home application also allowed users to purchase applications online. But the platform was closed to third parties, even though TomTom users could record and share their own navigation voices and favorite routes. The new initiative represents a radical shift and a bold gamble on an entirely new business model and hardware and software platform that brings TomTom into more direct alignment with the mobile industry. It also represents a further departure from chief rival Garmin which will still have a closed platform. The report quotes Goddijn: "What is happening here is a break from the past. We have a great infrastructure, but in 2009 we decided it wasn't good enough moving forward. We decided to break the code and move on to new architecture both on the device and the backend." According to the report, the strategy calls for deployment of a webkit-based operating system and the introduction of new technologies in all new TomTom devices in the coming month to "create a platform for ... both the consumer and automotive market." The plans represent a major overhaul of how TomTom offers its services and delivers its navigation software and a direct response to pressure from the mobile phone market where application stores have become the de facto standard for application and content distribution. The new TomTom platform, based on the open source webkit browser engine is to arrive before the end of 2010, though TomTom did not specify a date. The choice of Webkit is significant given TomTom's plans to broaden its footprint in the automotive market where an open platform will facilitate integration with automotive systems. The Pocket Lint report further notes that a separate TomTom presentation described how the company is already evangelising how apps like Wikipedia, tourist guides like Time Out and others, such as piste maps, might help people get a better idea of where they are going. And the company said it was looking at the possibility of adding augmented reality to the mix possibly as a third party offering via the anticipated app store. On the hardware side, the company is preparing the launch of the first device built around the new architecture: the TomTom Go Live 1000. In a drive to keep costs down, Pocket Lint reports that TomTom has opted for the ARM 11 500Mhz processor and a separate Broadcom GPS chip rather than a Qualcomm Snapdragon processor that promises to do it all. Pocket Lint says TomTom hopes to leverage relationships with Volkswagen, BMW, Fiat, Ford, Renault, Toyota and Daimler. TomTom says it will be able to allow car makers to customise the UI, use webkit to provide a "great" programming environment that makes it easier to talk to the other systems of the car (like the heating or air conditioning), as well as deliver over the air (OTA) updates thanks to built-in connectivity (ie a SIM card), something that will no doubt appeal to car makers, normally slow to implement new technologies in the latest models.

While people are using mobile phones for a wider range of functions than just making phone calls, such as remote vehicle access and microtransactions, it is not likely that anyone will ever replace their vehicle key fob entirely with a smartphone application. With that in mind, Delphi has introduced a Smart Key Fob that uses near-field communication (NFC) - for systems intended to be used in Europe or Asia where NFC is more widely implemented, Bluetooth and UHF technology to provide drivers with remote access to vehicle information while helping to ensure the security of the data exchange.

The “key” advantage of the Delphi solution is that it provides for application to vehicle data and vehicle control and status access without the need for a cellular subscription. For this reason, the company has positioned the Smart Key Fob as a low cost solution to vehicle connectivity. The Delphi-implemented NFC solution and Bluetooth connectivity offers, secure information transfer from the fob to the phone with a low power consumption mode and a low-range communication profile – only 2 inches (5 cm) for NFC – that helps prevent hacking. The company says the data exchange is made possible with modules integrated in the vehicle. The UHF system antenna enables data transfer from the vehicle to the key fob with a range of more than 650 feet, and the transferred information can be accessed by the driver via any NFC-compatible portable device that has an active display such as a smartphone. Data that can be accessed and managed includes mileage and fuel level, safety and security information (such as tire pressure, door or window open or closed status, etc.), maintenance warnings and alerts, personalization features (seat, steering wheel, A/C configuration), vehicle location (via GPS), driver identity, in-case-of-emergency (ICE) contacts and vehicle type. Of course, the onset of electric and hybrid vehicles only intensifies the potential interest in Delphi’s low-cost solution as drivers will need to remotely assess vehicle charge. The complete roster of accessible applications for the fob-to-smartphone system includes: Enhanced command/control of all vehicle functions Notification of vehicle security and diagnostic alerts Vehicle finder Pre-trip remote vehicle setup Diagnostics Eco-scores Driving history/patterns Linkage to OEM Web portals Automatic opt-in marketing data on vehicle usage and driver preferences Control of vehicle functions remotely with graphical confirmation (e.g. doors, windows, engine start, HVAC, seat, navigation, audio) Reconfiguration of vehicle preference settings easily and remotely Delphi says the marketing propositions for the system include branding opportunities through the phone app and connected Internet portal and the opportunity to establish opt-in marketing programs to automatically collect driver usage data. Delphi has shown the solution to some OEMs, but has yet to announce a platform win. Further Insight: http://bit.ly/cPilqP - Advanced Entry and Start System Supply and Fitment Database – Mak – Strategy Analytics http://bit.ly/prpYX - Vehicle Entry and Go: Passive Systems Set to Challenge RKE – Mak – Strategy Analytics

Just as companies such as Delphi, Nokia and Apple are enabling in-vehicle HMI control of smartphone applications, Ford Motor Company is turning interface implementation up a notch with its new Sync AppLink, which will allow voice control of Android and BlackBerry smartphone apps. Sync AppLink will be available as a downloadable software program on the 2011 Fiesta, due later this year. The launch will test the limits of in-vehicle HMI technology for enabling safe access to social networking applications. Reading text messages or emails and responding with predetermined messages has already been enabled in Ford vehicles, but demonstrations of OpenBeak, which allows steering wheel controls to scroll through Twitter messages, suggest a more potentially distracting proposition though safer than using the mobile device's own voice controls or touchscreen. First demonstrated at the Consumer Electronics Show in January of this year, AppLink will enable voice control of the Pandora music service, Stitcher Internet radio content manager and Orangatame’s OpenBeak Twitter interface. Ford is simultaneously launching its Mobile Application Developer Network (www.syncmyride.com/developer) for enabling the development of Sync-enabled applications. Ford says it will introduce AppLink on all Sync-equipped vehicles next year, as well as provide interoperability with the iPhone and other smartphones. The company also says updated versions of each app, incorporating the Sync application programming interface (API), will be available through Android Market and BlackBerry App World for customers to download. Ford’s delivery platform, therefore, includes both its own syncmyride.com Website and the handset maker app stores. Ford says that as Sync-enabled versions of existing apps are released into the app stores, users will be prompted to download the latest version upon connection. Ford’s strategy clearly indicates that the company will handle the certification of application for use with Sync even if it is not the creator of all of the applications. While Ford’s 2M vehicle addressable user population is the largest in the automotive industry, the launch of developer support will be the ultimate test of Ford’s ability to attract third parties to its platform. Ford says interested developers can submit innovative ideas, and sign up for the latest information and news about the Sync application programming interface (API) and software development kit (SDK). The package will allow developers to modify existing applications and create all-new apps that can successfully interface with Sync. Ford says it is completing beta-testing on the SDK. Once beta-testing is complete, a broader release of the development tools is planned for later this year. The company says one of its development partners created a Sync-enabled version of its app just three days after receiving the development tools. Conspicuously missing from the Ford announcement is a provision for safe operation or more limited use of a smartphone in a vehicle. The recent CTIA show in Las Vegas highlighted a range of applications intended to restrict or modify smartphone usage in a moving vehicle. Ford may want to consider fast-tracking one of these applications in deference to concerns expressed in Washington. Ford has embraced the anti-distracted driving messages emanating from the National Highway Traffic Safety Administration. Ford’s 911 Assist application actually received an early endorsement from the National Emergency Number Association (NENA). But whether this new applications will be blessed by government safety authorities remains to be seen. According to a report in USNews, NHTSA director Ray LaHood contacted Ford CEO Alan Mulally directly to have a particular ad removed, which depicted what appeared to be a distracted driver using Ford's Sync (http://bit.ly/aTbVvv). Ford complied with the request, but USNEWS says LaHood is still opposed to the Ford Sync solution. Additional Insight: Nokia and RIM Push Into Automotive as 'Apps' Competition Mounts

http://bit.ly/cJ6dDF - #Ford’s Bite of the #Apple Shows One Path to Automotive #AppStore Success - Lanctot - blog - Strategy Analytics http://bit.ly/b9oVAt - CTIA 2010: Distraction Mitigating Apps on Display - Schreiner - Strategy Analytics

Delphi used the SAE 2010 World Congress event in Detroit this week to unveil D-Connect, its answer to Nokia’s terminal mode smartphone connectivity solution. D-Connect addresses an array of in-vehicle connectivity challenges – including automotive-oriented application stores - while defining a radical new vision of center stack architecture. The system architecture is described as being built around an Intel or ARM processor with a Linux kernel, common Linux packages, Genivi, ported device applications and, finally, an HMI layer. Availability of D-Connect is likely dependent on OEM adoption. For the U.S. market, its significance is its representation of Delphi’s vision of universal smartphone connectivity and arrives as the company emerges from Chapter 11. The D-Connect vision simultaneously provides center stack connectivity for any smartphone – reproducing the on-device display in its entirety on a large touchscreen display mounted in portrait mode – with separate interfaces for when the vehicle is static or in motion. When the vehicle is not moving, the display allows access to all the apps displayed on the device and allows the device to be manipulated and the apps to be accessed directly from the large display via touch or voice interface. The system was shown with a physical connection, though Delphi says the system will support Bluetooth, USB or Wi-Fi connectivity. The D-Connect vision includes Delphi’s announced intention to provide app store support. Delphi says it will certify applications to determine which will be accessible when the vehicle is in motion. When in motion, the separate HMI display will appear with large on-screen icons including “Voice Search,” “Navigation,” “View Maps,” and “Contacts.” The system appears to be positioned as an alternative to Nokia’s terminal mode, shown most recently at CeBit and at the Geneva Motor Show. Nokia’s solution similarly provides for vehicle HMI control of smartphone functions and is being developed by Nokia in conjunction with Tier Ones such as Harman, Magneti Marelli and Continental along with some OEMs. Both the Delphi and Nokia solutions are still in concept mode. The significance of the Delphi solution is magnified by its proposed use of a large portrait display in the center stack, its ability to be operating system and connectivity agnostic, its in-motion interface with app certification and its use of the Genivi operating system in conjunction with separate Linux packages. The use of Genivi and Linux is unique and represents the first demonstration of a complete solution based on the newly proposed automotive operating system. It also allows Delphi to define a new path to the much discussed in-car application store. As far as the app store is concerned, Delphi sees application downloads working strictly via the device and functioning through device connectivity – not through a direct download into the car. Delphi uses the Genivi operating system and other Linux-based applications, to interface to downloaded apps, but prefers to keep the applications themselves outside the center stack software environment. Delphi’s approach contrasts with Continental’s AutolinQ system, which brings Android into the center stack. D-Connect will connect with Android phones and applications but does not bring that code on-board.  To further build the D-Connect brand, Delphi has also chosen to name the actual phone application D-Connect.

The battle to dominate automotive connectivity has finally been taken on by Research in Motion (RIM) with the announced acquisition of Harman International's QNX Software Systems, a real-time operating system supplier focused on the automotive market. RIM had appeared to be sitting on the sidelines in recent months as fellow handset maker, Nokia, announced its terminal mode strategy and Apple grabbed multiple headlines for innovative in-vehicle connections from marketing partners. The acquisition of QNX gives RIM instant credibility as a leading automotive connectivity player and promises a spirited battle for automotive market share. The acquisition was announced this morning. The announcement says the two companies have reached an agreement for RIM to acquire QNX. The deal is subject to regulatory approval and is anticipated to close within 35-45 days. This strategic move is expected to further strengthen QNX's penetration in the automotive market and foster innovation for markets served by all parties. The move solves marketing challenges for both organizations. QNX's software is used in instrument clusters, head units and automotive Bluetooth solutions. The company had found tremendous success as part of Harman, which in recent years has come to dominate the luxury and near luxury segments of the automotive market. QNX is best known for its high-end infotainment software solutions used by Mercedes-Benz, Porsche, BMW, PSA, Hyundai and Chrysler, among other OEMs. As part of Harman, though, QNX's ability to break out into larger volume market segments was somewhat limited, and Microsoft had been winning most of the highest profile (and higher volume) automotive connectivity platforms including Fiat's Blue&Me, Ford's Sync and Kia's Uvo. At the same time, Apple was increasingly emerging as the automotive connectivity device supplier of choice for consumers and, by extension, OEMs as both the iPod and iPhone helped establish the iTunes App Store model as a compelling content, application and service delivery platform for the automotive market. It is true that some OEMs, such as Mercedes with its mbrace smartphone app, made allowances for Blackberry connectivity along with Apple's iPhone. But a growing number of OEMs, such as BMW, have been going out of their way to provide proprietary Apple connectors to enable the use of in-vehicle interfaces to access smartphone content. With few exceptions, Blackberry has been receiving no such support from OEMs and its devices remain enterprise-focused and ill-suited to automotive infotainment uses. While QNX's partnership with Alcatel-Lucent promises to target the complete spectrum of in-vehicle connectivity, a partnership with RIM opens up wider market opportunities for both QNX and RIM. The timing of the deal is ideal given that several OEMs participating in volume segments of the market have yet to launch branded, high-profile connectivity solutions. There is still time for a RIM-QNX collaboration capable of helping RIM vault into contention with both Nokia and Apple for automotive connectivity leadership. RIM also brings its unique global managed network added value to the proposition promising enhanced capabilities for in-vehicle applications that other handset suppliers are unable to match. It also presents a potential challenge to telematics service providers such as WirelessCar, Airbiquity and Telecommunications Systems. The importance of the in-vehicle connection has become increasingly important as consumers seek to use their smartphones in a growing variety of settings ranging from the home to the office and the car. QNX's existing position in the automotive market will instantly bring credibility to RIM's initiatives. It also introduces an entirely new value paradigm combining the virtues of device connectivity with the advantages of the managed network. The move is also a positive for Harman as it frees up the company to work with a wider range of software providers. Harman cannot afford to ignore the Genivi Alliance operating system, favored by its largest customer BMW. But Harman may also find it expedient to bid on Android- or Microsoft-based projects. Harman gains greater flexibility by decoupling itself from QNX. Of course, in reality the two companies will be virtually joined at the hip for the foreseeable future with a wide range of programs already underway and in the pipeline expected to extend for more than five years into the future. RIM, though, is likely the bigget winner. The company has been confronted with pressure to extend its operating system software to other industries such as netbooks, consumer electronics devices and, yes, automotive applications. The acquisition of QNX is an excellent door opener to these potential avenues of growth. QNX is in a similarly advantageous position to profit from wider market opportunities. Of course, while the move gives RIM a strong hand in contending for automotive connectivity opportunities it is likely that the merged company will continue to collaborate with Apple. QNX has a long history of supporting Apple in the automotive market including the most recent announcement of enhanced support for Apple iPods in the QNX Aviage Multimedia Suite.

Daimler has fulfilled the vision of replacing the traditional automotive head unit with the Apple iPhone. While some bloggers questioned the cost of the in-vehicle mounting device, which is yet to be announced in the U.S., the capabilities embedded in the device more than justify the price as well as validating Apple's design priorities. Apple's combination of touchscreen interface and consistent cross-generation hardware and software compatibility has created an automotive-friendly integration environment unmatched by RIM, among others. The touchscreen allows the iPhone to double as physical interface, with enlarged buttons for the automotive user, and the consistent architecture eases the usual automotive product lifecycle anxiety allowing Daimler to design the multifunction cradle. The iPhone integration for the smart developed by Daimler's Palo Alto Research Lab will arrive on the market in the U.S. and Europe during the second quarter. The application will be distributed via Apple's iTunes App Store, just as the Mercedes-Benz mbrace application is distributed. The corresponding smart Drive Kit cradle is an accessory which will be sold via the dealer networks - Penske in the U.S. and Mercedes-Benz in the Europe. The cost of the app in the US will be $9.99, which includes all infotainment features - including music and Internet radio access - except full navigation guidance and real-time traffic / fuel prices. The driver will still be able to see his or her position on a map on the device, which comes with Navteq maps. Also included is Bing off-board local search. The navigation upsell will be an in-app purchase for $49.99 which includes voice guided navigation plus traffic in the U.S. and Europe and fuel prices in the U.S. only. The smart Drive Kit does not yet have an announced price in the US, but in Europe will be 249 EUR + installation which may vary depending on whether it is being done on a new vehicle or as an aftermarket installation. The Kit is a combination of a cradle with hardmount next to the smart OE radio, integration harness to the radio, and an integration module providing: hands-free calling via external microphone and OE speakers, "smart" integration allowing the app to pre-empt the current audio source for navi prompts, as well as the ability to sense vehicle power to auto-save vehicle location for the Carfinder, and line-out audio integration for iPhone audio and charging. The positioning of the smart Drive Kit is quite different from mbrace and Mercedes has yet to announce a strategy to integrate this Daimler-developed solution either in the U.S. or Europe. But

Lately industry observers have been predicting the arrival of the automotive app store along the lines of the Apple model. The predictions seem to suggest that this is a simple and obvious proposition with a single business model and development path. In fact, it is a complex and evolving proposition with no single solution or magic bullet. Ford Motor Company and Mercedes-Benz have already learned how challenging this proposition really is. Both organizations have successfully developed – in-house – their own applications – an expensive, labor intensive, and time consuming proposition. But application development is only part of the challenge. Here is the complete list: 1.         Platform selection – Which handsets will be supported? Which carriers will be partners? Which operating systems (versions!) will be adopted? 2.         App store selection – Which app-store(s) will be supported or used? Carrier? Handset maker? Third-party? Own branded? 3.         Pricing model – Free? Free for limited time? Free with premium add-ons? Free with paid premium version? Subscription (monthly, annual, lifetime)? Pay per use? Sponsored or ad-supported? 4.         Application acquisition – Download? Activate on-board app? Access cloud-based service? Access device-based app? Dealer install? 5.         Handling of upates – Automatic wireless? Customer self-service with USB drive or direct connection of handset? Dealer? Recently announcing the sale of its second million cars equipped with Sync, Ford appears to be having the most success, early on, in the automotive app business. Ford appears to prefer to distribute its Sync application directly from its www.syncmyride.com Website. This makes sense since some of the applications, such as 911 Assist, require a dealer installation. The Website also provides detailed phone and media device compatibility information along with software upgrade information, application demos and FAQs. Most of the Sync services are available for free for the first three years, and some require a data plan. The data plan requirement reflects an industry-wide inclination to leave data charges to the customer. The provision of free applications to Ford customers reflects a market decision to leverage Sync to sell more Fords – a game plan torn straight out of Apple’s playbook. Based on Strategy Analytics analysis of the Apple business model, the app store is positioned either as a loss-leader or breakeven proposition. The primary purpose of the Apple app store is to sell more iPhones, iPods, iTouches and, now, iPads. Similarly, Sync is intended to sell Fords and, judging from the fact that 2M Fords have been sold with Sync the strategy appears to have traction with consumers. The Sync proposition also has traction with dealers and fits well with the existing Sirius Travel Link services both of which are enabled by Nuance speech recognition. Both offer an effective customer demo. At Mercedes-Benz, the mobile application is called mbrace, which is also the name of the company’s new telematics service, which replaces Tele Aid. While Ford’s Bluetooth-enabled application works with most Bluetooth-enabled phones, mbrace is compatible with a narrow list of iPhones (OS 2.2.1 or later) and Blackberries (4.5 or later) including GPS models for customers that want to access location-aware applications. The mbrace application can be obtained from Apple’s iTunes store or Blackberry App World and the only carriers that are supported today are AT&T and Verizon Wireless. The mbrace service is $240/year or $480/year (@$20/month) for mbrace Plus which includes concierge and other location-aware services. Of course, Mercedes could always vary this pricing depending on its marketing objectives. Mercedes has not yet positioned mbrace as a service offering designed to sell more cars. The immediate purpose of mbrace was to replace the existing telematics service provider and create a mobile phone integration platform. And since Mercedes is also focused on providing premium telematics services first, as opposed to simple infotainment tasks, the company does recommend that the customer have an unlimited data plan. This is not a big deal considering most smartphone customers are required to purchase data plans. Like Ford, Mercedes is interested in rolling out additional applications from third parties on a regular basis. Ford has gotten a head start on this effort with the release of its software developer kit. For now, Mercedes has been content to continue to do most of its development in house. The latest application from Mercedes, also for the iPhone, is intended solely for the Smart vehicle line and includes a full suite of infotainment applications. There is no announced plan to bring this application, which works with a separately purchased cradle, to Mercedes-branded vehicles. The real challenge for car makers is that the mobile market is a moving target. Market leadership between handset makers, operating system suppliers and carriers is a dynamic environment ruled by supplier innovation and consumer preferences. Ford’s choice of a combined Bluetooth and USB interface to enable Sync has made it easier to keep pace with the changing array of available phones. But testing for compatibility remains a substantial undertaking. (The current Ford Sync compatibility chart is nine pages long.) Apple’s influence on this market has been to add a couple of layers of complexity or, to be charitable, opportunity. By opening up its app store to third-party developers, Apple signaled a key turning point in the app store model. Developers are now able to choose the platforms they want to develop for based on criteria such as size of addressable market, amount of revenue share, variety of available revenue models, and ease of doing business. With its rapid rate of customer acquisition and the flexibility of its application revenue models, Apple has raced ahead of competing app stores in attracting application developers and applications. (Apple has even gone so far as to provide a tool for developers to target pricing tiers to specific date triggers: http://bit.ly/a4ETQw.) Strategy Analytics has estimates of revenue shares (available to clients) with the caveat that these percentages vary and change. Ford’s decision to offer Sync for free for an extended period of time along with additional free applications reflects the desire to build an attractive addressable market. While handset makers such as Nokia (with its Ovi store) and carriers can target massive user populations, car makers are more challenged in rapidly building a sufficiently large user community. Ford has a significant jump on competitors with its 2M unit addressable market. App stores are coming to the automotive market, but the path will be a crooked and expensive one. There is no single model that will work for every player. Ford and Mercedes are pursuing similar paths with completely different approaches. Every car maker will have to find its own way. Two things are clear: The investment in an automotive application store is a multimillion dollar proposition involving significant and ongoing costs in development, support and marketing. The potential upside, though, is the opportunity to redefine a brand and increase sales and market share. Ford’s apparent success to date is a demonstration that at least one version of the Apple model can work in the automotive market. Further Insights: Wireless Media Strategies: How Apple Changed the Market for Mobile Applications – David MacQueen – http://bit.ly/9KSuVL Automotive Bluetooth: Profile Strategy Key to Infotainment Success – Mark Fitzgerald – http://bit.ly/9qEXbU CES 2010: The Arrival of Converged Automotive Multimedia Products – John Canali – http://bit.ly/9gp4yo

I have been using TomTom’s XXL 540S World Traveler for the past two months in multiple locations in the U.S. as well as in the U.K., Germany and France and I can safely say this is a dangerous device. It is dangerous because it effectively leverages historic speed profile data to deliver accurate routing and travel time without live traffic data. The XXL 540S is dangerous because the effectiveness of its routing, without accessing live traffic data of any kind, turns the growing traffic data industry on its head. The historic speed profile data calculates routes based on historic speed measurements for every time of day and for every road segment, from large highways to small local roads, and includes TomTom’s IQ Routes technology. In comparison to on-board systems with enhanced traffic data, the routing and time of travel on the TomTom was comparable. I am sure I am not the only user of navigation devices and technologies who has been frustrated with the traffic information experience. I have had both positive and negative outcomes and, in spite of the negatives, I am still a believer in the power and necessity of traffic information. I recently steered clear of purchasing an opening price point PND for the very reason that it lacked traffic information. But sometimes, one is willing to accept sacrifices to achieve a greater good. In this case, that greater good is a single device for automotive navigation in North America and Europe. The sacrifice of traffic data is a small price to pay especially considering what the cost of adding traffic information for both geographies would likely represent in added subscription fees covering multiple suppliers. (Hint: The first traffic supplier with a universal solution will gain a huge advantage.) For anyone seeking a single device for vehicle navigation in North America and Europe with built-in traffic camera data and 7M POIs, the XXL 540S is ideal. (The device was even able to locate a runner’s specialty store buried in a mall in Sindelfingen, Germany, as well as functioning in a pedestrian mode trying to locate the next nearest towns in the French countryside outside Geneva.) On the downside, a shortcoming of the device is its rigid programming. It is not possible to use it as one would Google maps to pick a starting point and destination unrelated to a current location, for example. A more flexible solution will be necessary as user expectations change. If PNDs like the XXL 540S cannot offer functional equivalence to other navigation solutions, consumers will be disappointed. Switching between maps is also less than intuitive. But I can understand TomTom’s disinclination to add yet another layer to its busy user interface. When entering a destination for a new geography, the user eventually has the option to change the map. The device stores prior routes separately for each different map, which is a nice touch. In addition, the integration of user evaluations so widely available in competing connected solutions certainly pose a threat to disconnected PNDs like the TomTom device. But as a single function device, the XXL 540S delivers in spite of the missing traffic info and connectivity.. For the XXL 540S World Traveler the combination of on-board data and the access to software updates perfectly substitutes for a more robust offering of regionalized live traffic information. More importantly, the device points the way toward future product development at TomTom and other PND makers. The pocketable device (yes, even with a five-inch display) is convenient enough for world travel and amazingly, the user will make no sacrifices in POI content or even map updates – additional POIs can be added via the Home application. The device connects to the TomTom Home software application for map updates and other enhancements. Flash has clearly displaced the HDD as the preferred storage medium for PNDs and the XXL 540S has 4GB of storage. At $299.99 retail (a little pricy) the device also includes TomTom’s “Help Me!” button and lane guidance. The TomTom even showed a roundabout where the on-board system against which it was being compared only showed a standard intersection. Of course, with the map update capability, the TomTom should always have superior map data. Even as PND makers experiment with larger screens, as in the case of the XXL 540S, the devices themselves will get smaller and prices will continue to fall. Connectivity and more creative deployment of location-aware applications will be critical to the future success of the segment. Additional Insights: http://bit.ly/cMw4f1 Solid Q4 for PNDs, but ‘Free’ Navigation is Shaking Up Monetization (AMCS) – Canali http://bit.ly/a8WqRJ - A Role for PNDs…If They Get Connected - Blight http://bit.ly/c5f65I - Automotive and Portable Navigation Market Forecast 2008-2016 (AMCS) - Blight