Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
At this year’s Consumer Electronics Show in Las Vegas, there was a new category of product making its debut as consumer electronics, and it was the automobile. To be fair, there have always been many cars on display at the show, but historically these were merely containers for aftermarket CE like radios, speakers, lighting, TV screens, etc. What was different this year was the big automaker themselves had booths and pavilions of their own to demonstrate the integrated infotainment systems they are building into their car lines.
And these high-end, screen-based infotainment systems are not just destined for flagship luxury liners, either. Surprisingly, many of the most innovative systems are targeted at lower-end, more budget-minded cars. The argument for this from a Chrysler rep at the show was that, “The young car buyers are the most tech savvy, and they aren’t satisfied to be left out of the car technology revolution.”
Another explanations for more integrated technology is the U.S. CAFE standards, which require average fuel economy for a manufacturer’s annual produced fleet to meet specific mileage minima (30.2 miles per gallon in 2011, up from 18 mpg in 1978). Car manufacturers have an incentive to move buyers into smaller cars, but still want to retain the profit margin of the bigger, more luxurious vehicles. Thus, the United States is seeing a surge in Euro-style small, but attractive, reliable, sporty and luxurious cars. Part of the trend is the placement of attractive infotainment systems across the fleet.
But perhaps one of the biggest drivers for the sharp rise in elaborate infotainment systems and connected cars is the automaker’s realization that they are getting shut out of their own home turf by smartphones and aftermarket devices. It’s hard to upsell an expensive in-built GPS map system when Android phones offer free turn-by-turn navigation, with more recent street data, street level photographs, traffic data, better destination search technology and decent quality voice input. It’s also hard to sell satellite radio when smartphones can stream Pandora music, or OnStar-style emergency service when AAA has an app for that. The carmakers see the risk of losing their role in the lucrative infotainment market, and understand that they need to build better systems, get their technology more up-to-date, and to put those systems in the whole product gamut, not just the supercars.
As just one example, Alan Mulally, CEO of Ford, had a keynote speech at CES in which he talked about the integration of CE and auto design. “The automobile is the all-time mobile application,” said Mulally. Ford has been early to make the shift, and Mulally surprised many when in his 2009 CES keynote he said, “We are a car company, but we are working to think and act like a technology company.” Well, if this year’s CES was any indication, Ford is no longer alone. Mercedes-Benz, Kia, General Motors, Chrysler and Audi were all spending big on sending the message that they are rolling technology platforms that can surround the traveler in safety, connectivity, voice interaction, entertainment and useful information.
Dieter Zetsche, Chairman of Daimler AG and the Mercedes-Benz brand, said, “Just like a smartphone can be so much more than a means of communication, a smart car can be so much more than just a mode of transportation.” The automakers all demonstrated this vision with concept and production cars. They used disembodied dashboards and consoles to show off their touchscreens, UI controls and myriad displays and heads-up projections. Notably, these screens seem to be much more user-customizable, much better integrated, and bring in some entertainment options from the Internet world, like streaming music and app stores with curated downloadable apps. These Internet features are achieved either through a car-embedded cellular module, or through Bluetooth pairing or docking with a mobile phone.
Meanwhile, the National Highway Traffic Safety Administration isn’t getting left on the roadside – they are proactively watching developments to see if additional regulation is required to reduce driver distractions while moving.
Make no mistake. There’s a battle heating up for your attention in the car. Silicon Valley and the mobile telecom industry got the early start, but the automakers are fighting back, and still hold a defendable position, for now. What comes next is something we love to watch: a race to out-innovate, compete in the market and offer consumers a reason to buy.
Liz Kerton, analyst for The Kerton Group and president of the Telecom Council of Silicon Valley, follows innovation across all telecom sectors.
