STUTTGART -- It's widely believed that on-board Internet access will become a regular option in cars as technology makes the necessary mass-market breakthroughs in the next few years.
And while this is likely to translate into profits for automakers and the IT and mobile phone companies, many other industries, including insurers and auto clubs, want to use new business models to profit from the systems' expected arrival and the large profits that could be made in Europe.
"According to studies, drivers are ready to spend about 10 euros a month for safety-related services and other offerings," said Horst Leonberger, manager of Deutsche Telekom's networked vehicle unit.
"With 350 million vehicles in Europe, the result is a multi-billion euro market if just 10 percent accept these services.”
Deutsche Telekom is just one of many high profile names that include Microsoft, Google, Apple and Nokia, who are keen to be part of the new market. They want to make money in a variety of ways: from the sale of technology that manufacturers and suppliers need, to the operation of an infrastructure, including mobile online services. Meanwhile, the industry isn't just targeting the under-35 crowd, the people who grew up with the Internet and want unrestricted access to it in vehicles.
"We are convinced that the networking of the vehicle will be an important criterion in purchase decision-making for the majority of consumers in established automotive markets,” said Thilo Koslowski, an analyst at Gartner Research.
Finding the killer application
But what seems, at first glance, to be a license to print money is proving to be an uncertain foray into the future.
"Today there is no killer application that assures the commercial success of online services in vehicles,” said Guenter Zettler of the Finnish development services firm Tieto. Many experts share this view. The search is on for mobile services that customers are ready to pay for. Services that provide them with genuine added value.
"You could successfully market traffic data in real time with current traffic jam reports or warnings about the danger of an accident,” said Christian Mueller of IHS Automotive. But that real-time data doesn't yet exist. OnStar is a good example of how hard it is to make money with telematics services. The GM subsidiary has offered on-board diagnosis for many years. The driver gets breakdown services along with remote diagnosis as part of the package. The service operates at just below break-even with 5 to 7 million users and an annual fee between $199 and $299.
"There's probably no manufacturer making money on telematics services," said Oliver Bahns, HP's automotive chief. The main reason: manufacturers traditionally rely on their own systems and set high prices for navigation and infotainment systems as special equipment. So far they have been able to absorb losses from these services.
One problem facing car manufacturers is that that on-board systems can't keep up with pace of consumer electronics development. Automakers have recognized this. Instead of buying the entire navigation and infotainment system from one supplier as they once did, they now decouple hardware and software. This permits faster updates and the integration of many varied standards from other industries, but it also puts pressure on prices. BMW has gone the farthest with the Genivi Alliance, which intends to create an open, standardized platform. But, on the other hand, automakers have no intention of giving up control over their platforms, which could hinder advances in technology.
"An automaker's infotainment system, with its functions and services, its appearance, and its method of operation, greatly affect the impression that its brand makes," said Ralf Lamberti, who manages infotainment development at Mercedes-Benz.
“The manufacturers have the overall responsibility for vehicle security. That's one reason they can't allow just any application circulating on the Internet onto their infotainment platform," Christian Mueller said. Applications that interfere with the vehicle and its very operation are especially critical. As a result, many business models from the consumer industry probably won't have a prayer, such as the downloading of horn sounds for a fee, similar to mobile phone ringtones, that have become a business worth billions.
Greetings from the dot com bubble
Insurance companies and auto clubs could indeed offer affordable insurance premiums and tow a broken-down vehicle to an independent chain, right past an authorized repair shop. Or companies like Google could offer information related to a particular location, such as directions to children-friendly restaurants.
"But I can already have that information running on my smart phone via Bluetooth over the built-in infotainment system," Mueller adds.
The hype over the networked vehicle recalls the Internet bubble of a decade ago. The web's breakthrough as a mass application changed the world. But many high-flying business plans failed back then. But one thing has been true since then: it's still hard to exact money from Internet users. Why should that be any different in a vehicle?