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.