As the year 2014 started, the world’s biggest carmaker, Toyota Motor Corp., predicted that U.S. car sales would level off. Toyota expects to sell 2.3 million cars this year, despite seeing a 7.4% growth in 2013 sales and after four years of continuous increases. Overall, carmakers sold 7.6% more cars in 2013, delivering more than 15 million cars in 2013, a six-year record. That increase is helped by a recovering economy, low interest rates for auto loans and declining employment rate.
Jim Lentz, Toyota’s North American CEO, explains further that the slower expected growth will be because the economy is getting better, not because of what he called “pent-up demand.” In 2014 and in the years ahead, people would be buying cars because they “want to” and because they “can,” as opposed to they “need to.”
Connected cars: the natural progression
Today and in the near future, telematics systems in cars are going to be nice and cool to have. It will provide a wow factor that will bring customers into carmakers doors. Already, we are seeing telematics systems that are used to ensure security and safety. But more and more, it is being used in other functions that bring information and entertainment systems for the driver and passengers to use. Driving is made a lot more convenient and comfortable by these new telematics systems.
And it is these infotainment systems that are driving the sales for new cars now. Customers are asking for built-in connectivity for their cars and the best way to have that is in car telematics. This is true for telematics systems that make use of smartphones and tethers and those that make use of embedded telematics.
And as more people drive connected cars and use the built-in telematics system, the more applications and developers are going to jump into the fray and, soon enough, you would be able to do anything you want inside your car. You will get all the functionality you need. And this makes in-car telematics move from just something nice to have on board to something that is needed on board.
Soon, drivers will need all the functionalities that their telematics systems can give. And that will drive more sales as more and more drivers realize what they are missing out on. They will trade in their old “dumb” cars and get a connected one with a mature telematics system that delivers a lot of functionalities, extending the value of their new cars.
All cars will have a telematics system by 2025
This would drive the demand for in-car telematics and would jack up car sales growth for the next few years or so. But there are other factors as well. ABI Research calls it the “disruptive triggers” that would eliminate the challenges facing today’s in-car telematics from being widely adopted.
These triggers are:
1. The government will require it.
With the role of in-car telematics at promoting safety and security, it would not be surprising if regulators would be requiring them in cars sooner or later.
This is what is happening in the European Union, where they are pilot-testing a system called Harmonized eCall European (HeERO) Pilot. HeERO makes use of telematics to help European motorists stay safe on the road. If you are involved in an accident and you become unconscious, the telematics in your car will call for 112, which is the European equivalent of 911. The telematics system will automatically place the call to 112, send them your GPS locations and other types of information such as air bag deployment and the type of vehicle you are driving. This way, the emergency responders would know what type of rescue response to send and where.
The HeERO program is currently being tested in:
- the Czech Republic
- the Netherlands
The system drastically reduces the emergency response times in the countries that implement them. In the countryside, emergency response times are cut in half while more populated areas experience 60% faster emergency services. It goes without saying that the faster emergency response times have saved hundreds of lives each year in Europe.
eCall also works for witnesses. If you see an accident, you can simply push a button inside your car and it will call the emergency number by itself. You do not have to grapple for location details because the button also transmits your GPS locations automatically.
The plan is to roll out the eCall and the HeERO system by 2015 in the member states, hopefully with telecom operators, carmakers and emergency call centers on board.
2. Pricing models for data are becoming more affordable.
One aspect of telematics involves the wireless connectivity that transmits and receives data. The good news is that it is now more probable that telecommunication companies will be more open to reducing their prices for data access, or at least come up with innovative pricing structure such as split billing, reprogrammable SIM cards and shared data plans. This will help boost the use and demand for telematics systems.
It is no longer just for phones. Right now, in-car telematics applications are hosted on native apps but that will soon change to being hosted on the cloud. With data connectivity getting cheaper, it would make sense that the information and data that you would need are stored in the cloud and are made accessible whenever and wherever you want it. This would spur the use of embedded telematics more than just mobile phone tethering.
The Electric Vehicle
There is another trend that is sure to drive the growth of telematics and make it apparent how telematics would help sustain growth in the auto industry: Electric cars.
Telematics in electric cars help bring down range anxiety. You can use the embedded telematics to show you the nearest charging stations, while also accounting for traffic. This means that if you are losing battery power in your car and you need to charge as soon as possible, you can check your dashboard for not only the nearest charging station but also the one that you could get to at the least possible time.
More than this, telematics in electronic vehicles can help you keep tabs on the car’s charge levels even remotely. It can also help you save energy by allowing you to remotely control heating and air conditioning so that you could get into your car when it is comfortable instead of turning on the heat and air conditioning at full blast and thereby eating up more energy.
The prospect of governments requiring telematics inside cars, as well as the falling cost of telematics hardware, the rise of smartphones and the cheaper Internet connectivity, are making telematics the breakthrough feature that are helping car makers sell more cars. GM led the pack by making OnStar a standard feature in its vehicles and, soon, all the other car makers will be scrambling to follow suit. Mercedes-Benz, for one, introduced Tele Aid and then Mbrace. Toyota has its Safety Connect, while Lexus came out with Enform and Nissan introduced CARWINGS lite into the market. Now, more and more carmakers are putting telematics into their cars.
In the short term, the telematics system would help sell more cars because it is cool. You simply cannot resist the new functionalities in your car. In the longer term, however, these telematics systems would be able to deliver a lot of value, accurate information and personalized entertainment into the mix. It is no longer just a safety and security tool that you get to use when you have an accident or when you lose your car. It is something that you use every day and has become a part of your life. In short, it is no longer just an option, but an essential feature of your car.
More than that, technology will change in such a way that even car infotainment systems would have the horsepower of a computer. This will make it open to more functionalities, which will be added by car manufacturers who are looking to make their telematics systems different from their competition.
Telematics systems may be a domain of luxury cars now, but every component of a telematics system would be cheaper in the near future. The sensors would be cheaper, the wireless connection would be cheaper and the operating systems to the chips you use will be cheaper. In short, it would not be long before even entry level cars would have its own telematics systems.
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It is safe to say that everyone will be looking at cars that have their own telematics system on board. For now, it does not matter whether it is tethered to a smartphone or has its own Internet connectivity solution embedded in it. The functionalities will make telematics system a must in the future, and these will become a distinguishing feature that carmakers would use to differentiate their cars from their competitors. It will drive growth in car sales because drivers and passengers would know its inherent value from safety to security to entertainment.