Unlimited potential of telematics in cars

Unlimited potential of telematics in cars

Mahendra Gautama, Contributor, Jakarta

Incorporating new technology in mass-produced automobiles has
always been a risky business, because it is prone to a number of
unpredictable external developments, especially, an adverse
consumer response.

Toward the end of the 1970s, for example, some American car
manufacturers decided to develop four-cylinder cars due to the
skyrocketing price of oil.

However, in the early 1980s, when oil prices came down to
earth and remained there, such companies locked into five-to-
seven year product development plans for these four-cylinder
engines had little time to react to a new market that demanded
power over fuel efficiency.

Predicting consumer responses or reactions toward a new
technology is another headache. The Antilock Brake System (ABS)
is one example. Created and developed in the United States in the
early 1950s, this technology was applied in luxury sedans in the
1960s, but, again due to consumer protests, it was abandoned.

In the mid 1980s, however, this technology reappeared and
became standard equipment worldwide after European auto
manufacturers started using it for all their products.

Similarly, power steering, though way back in the 1950s was
hailed as "the next big thing" by Popular Mechanics magazine,
only became standard much, much later, in the early 1990s.

Today, major car manufacturers are offering customers a new
wireless communication technology in their cars: telematics.
Gaining popularity in the European automotive industry, Mercedes
Benz was one of the first companies to use it and others quickly
followed.

What is telematics? The heart of the system is the Telematics
Communications Unit (TCU), located in the car and connected
(wirelessly) to a central service center. The TCU serves as the
central command center. It communicates location-specific
information to a central service center and, in turn, the center
helps deliver support services to the driver via a cell phone or
a monitor on the car's dashboard. The TCU is also connected to
the engine control unit which enables enhanced services such as
remote engine diagnostics and automated airbag notification.

With telematics, the dream of a "wired car" is becoming a
reality. To cite only some of its applications, this technology
will help drivers access local traffic and navigational
information, find places to dine and shop as well as tap into the
Internet. Local repair shops will even be able to undertake real-
time system diagnostics on cars or to upgrade their operating
systems as their owners drive them to work.

Car makers will also increasingly provide wireless
capabilities such as music downloads, sending and receiving e-
mail and online shopping in vehicles. For car marketers this
creates a new and almost unlimited number of opportunities,
because the millions of hours a week that some drivers spend in
their cars make them a large and captive audience for various
marketing possibilities.

Analysts are also enthusiastically making predictions that in
a couple of years telematics will grow into a multi-billion
industry.

Frost & Sullivan, an international marketing and consulting
company, in its report published in Auto and Transportation
Interiors in 2000, estimated that in-vehicle computing systems,
including telematics equipment, would enjoy a 16 percent annual
growth and reach five billion dollars in sales by 2004.

A major Japanese communications company, NTT DoCoMo, also
estimates that by 2010 cars will be number two for mobile
customers and totaling some 100 million out of the company's
estimated 360 million customers in that year.

Meanwhile, another reputable consulting firm, McKinsey &
Company, in 2002 wrote three scenarios for the future of
telematics in its report "A road map to telematics".

The first scenario -- highly optimistic -- estimated that the
sales figure would reach US$40 billion by 2010 for the American
market alone. The second, slightly more moderate scenario had the
estimate at US$21 billion. Five billion dollars was the lowest,
most pessimistic forecast in the third scenario.

Noted writers and analysts on e-business, Ravi Kalakota and
Marcia Robinson, in their book "M-business: The Race to Mobility"
wrote about factors and trends that would positively affect the
growth of telematics in the near future. One important trend is
the large number of new entrants from the automotive and wireless
industries crowding the telematics-equipped automobiles.

Among the large producers, General Motors (GM) was one to
quickly enter this particular segment. Its GM OnStar System,
initially installed on the 1996 Cadillac, is now available in 36
of its 56 models. This system provides various facilities, such
as voice-activated telephony, navigation, roadside assistance and
remote diagnostics.

OnStar's competitors are WingCast, which is provided by Ford
Motors in cooperation with QualComm, and ATX Technologies, which
is a joint venture between BMW and DaimlerCrysler.

Car marketers' strategies are also important. Telematics must
be used as one of the tools to enhance customer relationships by
providing real benefits from easy-to-use and hassle-free
equipment.

As a customer relationship medium, telematics can also
increase customer loyalty through various services, such as the
provision of data on driving behavior and the ability to alert
manufacturers when cars break down and need to be rescued.

The future of telematics is promising. As market penetration
increases and the demand for enriched content grows, telematics
becomes more viable as a channel of information and
entertainment. With today's state-of-the-art information and
communication technology and affordable prices, the scenario for
telematics is one success story and the sky is the limit.