General Motors must dump 10 percent of its OnStar subscribers-about 500,000 users-because OnStar must cut off service to vehicles equipped with outdated analog telematics equipment.
Next year, cellular phone service companies-which provide OnStar with its communications link to customers-are completing the transition from analog to digital service.
When the switch occurs on Jan. 1, OnStar risks losing customers who purchased a GM vehicle before the 2003 model year. That’s when OnStar introduced digital telematics service.
OnStar is sending letters to those subscribers offering a year of free service. What’s the catch? They must buy or lease a new GM vehicle to take advantage of the offer.
OnStar provides a range of telematics services, including the basic Safe & Sound plan for $199 a year. Subscribers get 24-hour roadside assistance, stolen-vehicle tracking, remote door unlocking, vehicle diagnostics and other services.
Ninety percent of OnStar’s 4.5 million subscribers own vehicles that already operate on the digital network or can be retrofitted. Customers with older vehicles that can be retrofitted can buy a $15 equipment upgrade at a dealership.
For OnStar, eliminating analog service will cause a significant loss of revenue. If all subscribers who own older cars and trucks do not buy new vehicles, OnStar will lose at least $100 million in annual revenue.
“It’s a frustrating situation for us and our subscribers,” says Bill Ball, OnStar’s vice president of public policy. “We are hopeful and confident that some of these subscribers will take the offer of an additional year of free service and buy or lease a new GM vehicle.”
The loss of analog service also creates a knotty marketing problem. Previously, OnStar emphasized its ability to provide emergency service to customers anywhere in the country-even in remote rural areas. Now, it no longer can guarantee blanket coverage.
An OnStar spokeswoman acknowledged that the coverage area would change. She had no further details.
“For the telematics service providers, their whole proposition is to provide safety and security,” said analyst Phil Magney of the Telematics Research Group in Minnetonka, Minn. “It’s an unfortunate situation when (the motorist) has an emergency and he doesn’t have that connectivity.”
M-B, Lexus also impacted
General Motors isn’t the only automaker grappling with the problem. Other automakers offer similar roadside-assistance services, and early versions of those services were typically analog.
A Mercedes-Benz spokeswoman said that 200,000 of its 420,000 Tele Aid subscribers will be affected by the loss of analog service. Those who own cars or trucks sold in the 2001-04 model years must upgrade their systems if they want to retain service.
They can buy equipment upgrades ranging from $600 to $1,500. Mercedes is offering mail-in rebates ranging from $100 to $200. Customers can have the equipment installed at the dealership.
Likewise, owners of older Lexus models could lose telematics service. OnStar’s analog telematics service was installed in some Lexus LS 430 cars and Lexus GX 470 SUVs made between 2001 and 2004. The service was branded as LexusLink.
Lexus stopped offering the analog service because the company anticipated the eventual transition to digital phone service.
Then it reintroduced LexusLink as a digital system, again provided by OnStar. Digital service began with the 2005 LX and GX SUVs. LexusLink did not show up in the LS and GS sedans until the 2007 model year.
Those 17,000 LexusLink subscribers who bought vehicles from the 2001 through 2004 calendar years will lose service Feb. 12 of next year.
Lexus is offering those customers two options: They can remove their system at the dealership for no charge or they can receive a $900 certificate to purchase LexusLink when they buy a new vehicle.
“We can’t retrofit the old systems,” says Lexus spokesman Greg Thome. “We looked at this long and hard, as you can imagine.”
Ralph Kisiel and Tim Moran are reporters for Automotive News, a sister publication of RCR Wireless News. Both are owned by Crain Communications Inc.
