Telematics – Searching For the Business Case

Over at John Day’s Automotive Electronics News Ralf Hug does a nice job discussing some of the challenges of justifying and launching telematics services in major OEMs.  In any organization the business case needs to be developed for any project and although most major OEMs are offering some level of telematics services there are still always questions about the necessity and value of the technologies.

Ralf touches on some of the major points of the telematics value proposition, but highlights the challenge of ‘the old way of thinking’ in the automotive industry.

The fundamental problem, as I see it, is that for most automakers, telematics has not gained sufficient mindshare at a high enough level. The people running car companies today are, for the most part, car people who think a lot more about mechanics than they do about electronics or feel more comfortable with it.

I agree wholeheartedly and have seen first hand some of the challenges of convincing a ‘car guy’ that in the modern landscape this new technology IS part of the car. In the end, the cost is often the greatest barrier to an OEM’s entry.  The cost of R&D, call centers, and the overall cost to the bottom line of a car (something close to every product planners heart) are all significant with the traditional model of delivering telematics services.

As Ralf notes there are numerous ways to justify these services that support traditional automotive thinking.  Things like remote diagnostics and maintenance reminders carry promises of increased customer engagement and satisfaction while the data captured also provides significant value to the OEM itself  (e.g. the manufacturing and warranty guys get more data and the marketeers get more customer contact).

Building better relationships with car owners through vehicle health reports and dealer integration not only increases the likelihood of maintaining customer loyalty but also improves parts and service revenues and profitability of the OEM and dealership and keeps customers loyal within the OEM dealer network.

Ford has taken an approach that in many ways removes the high cost of entry barrier by essentially providing less reliable services (and that is not necessarily a bad thing).  Onstar, Safety Connect, mbrace and the like are all particularly expensive (hardware and service) because the OEM is trying to deliver the best possible experience (not an unreasonable thing to do).  By eliminating the cost creating call centers, deals for wireless minutes and extensive in vehicle hardware Ford has leveraged modern technology to deliver services at a lower cost to themselves and to the customer.  Ford is also offering the Sync system across a very broad model line including lower end models (something not true of many other OEMs).  By reducing the cost and increasing the volume Ford is demonstrating one way to make justifying the business case for telematics easier.

In addition to the services everyone provides Ford has gone another step further by creating an API that will eventually allow users to create applications for the vehicle that will no doubt increase customer engagement and create as of yet undiscovered additional revenue sources for the OEM further bolstering the business case for telematics.

Continental’s AutoLinQ takes a slightly different approach by utilizing an open source operating system (the Android OS).  Their plan includes an extension to the operating system that will allow developers to create applications more closely integrated with the vehicle.  This further lowers the cost of the system and the use of an open source technology always garners the attention of a very loyal breed of developer.

Click through to AEN to see what Ralf has to say about the telematics business case and what it will take for an OEM to crack the nut.

via [Automotive Electronics News]

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