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Car-buying based on tech capability takes on new meaning

By Keith Naughton
Bloomberg News

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When it came time to trade in her Ford Explorer in September, Svetlana Friedman had a condition: No more basic radio. She wanted a car that could connect to her smartphone, her iPad and her digital life.

“I’ll take it in black, white or red, whatever you’ve got, as long as it has all these features,” Friedman, 33, recalled telling her dealer.

“I didn’t want to go back to a base model where I can’t talk on my phone and listen to my music,” she said during a voice-activated, hands-free call from her black 2014 Explorer. “This definitely makes life easier.”

Forget horsepower. The connected car is becoming the hottest model on dealer lots. In-vehicle technology is the top selling point for 39 percent of car buyers today — more than twice the 14 percent who say their first consideration is traditional performance measures such as power and speed — according to a study that consulting firm Accenture released in December. That’s why cars that talk, show drivers the way and steer them covered the floor at the 2014 Detroit auto show.

“Consumers are increasingly looking for solutions that allow them to stay connected to their digital lives wherever they are,” said Thilo Koslowski, auto analyst for researcher Gartner Inc. “This will actually make cars the coolest mobile device going.”

New frontiers

Automakers are looking to push beyond what’s on the road today such as Tesla Motors Inc.’s Model S, with a large tablet computer on its dashboard that runs a jumbo-sized version of Google Maps for navigation, and Ford’s Sync system, which the company credits for attracting customers even as it’s been criticized for imperfections.

As the difference between first and worst in auto quality has narrowed, the connected car is becoming the next frontier in how automakers distinguish themselves.

General Motors is touting its 4G LTE-connected Chevys while Ford introduces more applications that work with its voice-activated Sync system, including those that allow drivers to activate a home security system from the car.

Suppliers and carmakers are showing models that read hand gestures to control entertainment or scan eye movements to adjust where gauge displays are projected, and listen and respond with the clarity of Apple Inc.’s Siri system for the iPhone.

The number of cars connected to the Internet worldwide will grow more than sixfold to 152 million in 2020 from 23 million now, according to researcher IHS Automotive. GM, Volkswagen’s Audi luxury line and Tesla each revealed plans to offer Web connections in their cars, including Wi-Fi hot spots for tablets and laptops.

“People spend a lot of time in their car, so connecting their car to their life and making it seamless has got a lot of upside,” said Alan Batey, head of GM’s Chevrolet brand. “It connects with people who previously, perhaps, hadn’t thought of Chevrolet as the brand for them.”

Racing to see which automaker can behave most like a tech company, Detroit executives have taken to bragging about apps and bandwidth, in addition to torque and towing ability.

“The car is becoming just another device in the Internet of things,” said Raj Nair, Ford’s group vice-president of product development.

The revenue and profit possibilities of the connected car go beyond the thousands of dollars automakers charge for these high-tech options, Koslowski said. By 2017, one-quarter of all automakers will earn money from e-commerce transactions drivers make from the car, Koslowski forecast. Already, he said, 22 percent of U.S. vehicle owners say they want to make in-car purchases of songs, audio books and movies for their passengers.

“The automakers can take a cut of these transactions because this is their device platform,” Koslowski said.

That profit potential explains why automakers are pouring billions of dollars into developing connected cars, according to a study by the Center of Automotive Research. The average car now contains 60 microprocessors and more than 10 million lines of software code — more than half the lines of code found in a Boeing Co. Dreamliner airplane.

That’s a big change from a decade ago, when James Grace was working to engineer “infotainment” features into GM cars while arguing with executives who said, “People don’t care about this,” he recalled.

“Ten years later, good luck finding an auto company without a massive organization around the connected car,” said Grace, of Panasonic Automotive Systems.

At CES, Google announced an alliance with GM, Honda, Hyundai and chipmaker Nvidia Corp. to bring the Android operating system to cars. Apple already is working with BMW, Mercedes-Benz, GM, Nissan, Honda and others to bring its iOS operating system to cars through devices such as the iPhone. Microsoft has long provided the Sync system to Ford.


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