Subject: [NEXTEL-1] Telematics Today and Tomorrow

From: Marcel <[email-masked]>
Date: Wed, 29 Jan 2003 16:41:49 -0500

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Telematics Today and Tomorrow

29 January 2003

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Only 1% of the over 700 million cars that will be on the road by the end of 2003 will be equipped with telematics technology. Noah Elkin examines the current state of the telematics service provider market and its future potential.

By Noah Elkin
In comparison to the number of vehicles on the road, estimated by the Telematics Research Group (TRG) to reach 742 million worldwide in 2003, those currently equipped with in-vehicle information systems (IVIS) represent a small fraction -- roughly 1%. However, telematics services represent a high value-added component on new cars sold today in terms of the hardware as well as the service aspect. From a branding and customer relationship management standpoint, the question that arises for original equipment manufacturers (OEMs) stocking their vehicles with IVIS and the telematics service providers (TSPs) with which they contract is: to whom do the customers belong?
At issue is the way the two leading US TSPs -- OnStar, owned by General Motors (GM) and the independently owned ATX Technologies -- market and brand their services to OEMs. With the exception of a solution developed for Lexus, OnStar does not offer private-label services, while that is ATX Technologies' main business, with clients such as Mercedes, which markets its telematics service under the Tele Aid brand. The situation is complicated further by the Ford Motor Company's June 2002 decision to dissolve (as part of a campaign to stanch loss-making operations) its partnership with QUALCOMM in Wingspan, an attempt at building a service to compete with GM's OnStar. Although Ford continues to offer telematics services from ATX Technologies on its Lincoln brand (Lincoln RESCU) and on Jaguar models (Jaguar Assist), it recently contracted with Cross Country Automotive Services to provide a telematics system for its Volvo brand, like Jaguar, a member of Ford Premier Automotive Group. The Volvo system, also a private-label solution, is known as Volvo On Call Plus.
In the case of OnStar and the other car manufacturers to which it licenses its services, non-GM brands such as Acura, Audi and Subaru benefit from offering their customers cutting-edge technology, but a natural conflict also exists in that these OEMs are sending a revenue stream as well as access to their customers to a competitor. For those OEMs that contract with ATX Technologies and Cross Country Automotive Services, the conflict of interest does not exist, as the TSPs are there to collect and pass along customer usage data to the OEMs.

The situation in Europe is somewhat analogous to the US, in that third-parties provide IVIS to automotive OEMs. However, the European market is considerably different than the US not only because of its compact geography and multiplicity of languages but also for consumers’ emphasis on traffic data, navigation aids and travel information. To date, TSPs have tended to have single-country operations, but TRG indicates that pan-European service is in the works for Tegaron, among others. In Japan, meanwhile, all of the leading OEMs have sponsored their own TSPs, creating a model distinct from the US or Europe.
While consumers may be happy to use IVIS as long as they are free, as many are for an initial period for those models that come equipped with telematics devices, renewal rates following the end of the grace period have been dismal. The clear message from customers is that they are unwilling to pay high monthly service fees -- a lesson OEMs and their TSP partners should take care to heed.