Telematics suppliers remain optimistic that their market is poised for a solid takeoff, but a number of questions still surround this nascent market. Vendors are searching for the right mix of functions and services as well as for the best technology to bring those services into vehicles.
One key positive point is that telematics is getting a boost from regulators. In Europe, the emergency call mandate means that vehicles will have the hardware needed to communicate with the outside world, creating myriad opportunities.
“Emergency calling is providing a pathway into the car; once the pathway is there, it can be used for revenue,” said Dan Martensson, Automotive Vice President for Telenor Connexion, a Swedish connectivity provider.
One of the big challenges will be figuring out how to get data to and from the car. Cellular links are the most viable pathway. Most observers feel that the emergence of high-bandwidth telecom links will be necessary to provide the many features and functions being bandied about by suppliers. But, at present, the widespread second-generation telecom system can handle the basics of telematics.
“For most applications, 2G networks are sufficient,” said John Horn, National Director of T-Mobile. “As we go to more robust solutions, infotainment will need more bandwidth.”
Telecom providers are expanding their 3G offerings, with some already starting to roll out faster 4G networks. However, speakers at the Telematics Detroit conference held in Novi, MI, this summer noted that it will be quite awhile before higher bandwidth 3G networks are widely available outside of major cities.
Regardless of what type of telecom network they access, carmakers have to determine how to connect. There is a debate between those who feel vehicles should have an embedded system that will always be available and those who feel it is both frugal and flexible to leverage the driver’s cell phone.
“It would be ridiculous for us to bolt the device into the car and expect to be relevant in 24 to 36 months,” said Joe Berry, Business Development Director at Ford’s Connected Services Solutions Organization. “The power of the platform is that you can go to third parties and get there faster and cheaper.”
But that is far from a universal view. Many speakers noted that embedded systems will be needed to send diagnostic information to dealers and simplify firmware upgrades—applications many predict will be a key driver for telematics growth.
Several others predict that many suppliers and consumers will want safety systems that use embedded hardware. That is because cell phones may be at home or have dead batteries when it is time to call emergency responders, leaving vehicles unconnected. A hybrid system may emerge.
“Embedded modules and systems that use mobile devices will coexist. Drivers may not know which is which,” said Phil Magney, iSuppli’s Vice President for Automotive Research.
While one segment of the industry tries to determine how to link the vehicle to the outside world, many other groups are trying to figure out how to support the cost of installing this hardware and software. Though many service providers want to help OEMs justify the costs, many observers feel that the automakers themselves will find that connectivity lets them add value.
One popular concept for OEMs is to use telematics to upgrade software. Though reliability must be well proven before most automakers will use this approach widely, proponents feel the potential benefits will spark plenty of research.
“Connected vehicles can help OEMs save money, reducing recalls and letting them introduce new functions virtually overnight,” said Kevin Link, Vice President of Hughes Telematics.
Even if automakers feel they gain enough benefits to justify the cost of designing in telematics, they hope to share costs with partners. Many different suppliers are expected to step in, offering services that will probably be customized for different types of vehicle owners. Figuring out which suppliers to team up with will be a key determiner of success or failure.
“The supply chain in telematics is very different than other parts of the industry,” said Thilo Koslowski, Automotive Vice President at Gartner Inc. “Nobody has complete control over the value chain, so creativity and partnerships will be very important.”
Those differences extend to every segment of the broad industry. Telecommunications providers note that the auto industry poses vastly different challenges from the conventional cell-phone market, changing the billing and support services.
“With cell phones, each SIM (system identity module) card is one customer. With automotive OEMs, one customer buys thousands of SIMs,” Telenor’s Martensson said.
The telecom industry is only one of the nonautomotive industries that is trying to get in at the start of the connectivity era. Several service providers are joining the suppliers of hardware and software for vehicles. Vehicle owners will only pay subscription fees if they are offered a range of navigation, entertainment, and data that is relevant to them.
Once vehicle connectivity hits critical mass, more industries are expected to use data sent from cars. Some will want to know how the car is being driven. "Sooner or later, insurance providers are going to use telematics to manage risk,” Magney said.
When insurance companies, infotainment providers, and others connect to the vehicle, figuring out who pays and who profits will be a key challenge. This quandary is likely to be resolved on a case-by-case basis, with partnerships that change over time as pricing opportunities arise.
“Monetizing services is a big challenge; there won’t be any one-size-fits-all approach,” Koslowski said.