Jan. 10 (Bloomberg) -- 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 this week 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 from harm will cover the floor of next week’s 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.”
Automakers at the show will be 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 Motor Co.’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.
At the North American International Auto Show in Detroit next week, General Motors Co. will tout 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 will show 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 AG’s Audi luxury line and Tesla each revealed latest plans this week 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,” Alan Batey, head of GM’s Chevrolet brand, said in an interview. “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,” Raj Nair, Ford’s group vice-president of product development, said in an interview. “Increasingly, you must be a technology company to be in a leadership position in the auto industry.”
Nair spent this week at the International Consumer Electronics Show in Las Vegas, where Ford unveiled Habu, a mood-music app for its Sync system that finds music playlists to match drivers’ moods, including when they’re feeling angry, somber or sexy, according to the automaker. Other new apps will allow Ford owners to reserve a parking space or order a Domino’s pizza.
“When we first came to CES in the early 2000s, people said, ‘What are you doing here?’ Now there are so many people who want to talk to us we can’t get through the halls,” Nair said.
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 Jan. 8 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 -- according to the CAR study.
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, now director of advanced engineering for Panasonic Automotive Systems.
Technology giants are also piling on. At CES this week, Google Inc. announced an alliance with GM, Honda Motor Co., Hyundai Motor Co. and chipmaker Nvidia Corp. to bring the Android operating system to cars. Apple already is working with Bayerische Motoren Werke AG, Daimler AG’s Mercedes-Benz, GM, Nissan Motor Co., Honda and others to bring its iOS operating system to cars through devices such as the iPhone. Microsoft Corp. has long provided the Sync system to Ford and even tried to hire away the automaker’s CEO, Alan Mulally, who said on Jan. 7 that he won’t run the tech company.
The intersection between the tech and auto companies could be a treacherous one for Detroit. If the tech companies define the terms of the connected car, automakers risk losing control of their own cockpits and the revenue that will flow from them, said Mark Wakefield, a director of the Detroit office of consultant AlixPartners.
“The worst-case scenario for the automakers is going to a generic interface where you plug your phone or iPad into the center console,” Wakefield said. “They want to differentiate their cars. They’d rather not compete strictly as value appliances.”
At next week’s auto show, the Detroit Three will demonstrate just how different they are as they show off their latest high-tech features. In addition to its 4G connectivity, GM is rolling out new applications including iHeartRadio, the Weather Channel and NPR.
Ford’s new apps including those that allow drivers to reserve a parking space or order Domino’s pizza. Ford said that 94 percent of the 2014 model vehicles it has sold have been equipped with Sync and that three quarters of its buyers would recommend the system to other car buyers.
“It’s why people are coming to our showrooms,” Nair said.
‘I Need Lumber’
Chrysler Group LLC will show Ram trucks and Jeep sport-utility vehicles with built-in Internet connections that allow drivers to seek services or information that show up on an 8.4-inch (21-centimeter) dashboard touch screen, said Joni Christensen, head of marketing for its Uconnect system.
“If you’re driving a Ram, you can say, ‘I need lumber,’ and it will show you lumber yards,” Christensen said.
More futuristic features will be on display from auto suppliers. Visteon Corp. said it will show a cockpit that can be controlled through hand gestures and eye movement. Drivers twist an imaginary knob in thin air to control the stereo volume and as they look to the side, the car’s gauges follow their gaze.
Panasonic Automotive Systems, a unit of Japan’s Panasonic Corp., will demonstrate a dashboard with no screen or controls at all. All the gauges and controls are in the instrument cluster in front of the driver or in a “heads-up” display reflected on the windshield. Voice commands and switches on the steering wheel control all the car’s functions.
By 2018, one in five cars on the road will be “self-aware” and able to discern and share information on their mechanical health, their global position and status of their surroundings, said Gartner’s Koslowski. A system of sensors, vehicle-to-vehicle communications and computing power will lead to intelligent cars that interact with their owners, he said.
“In the future, your car may actually tell you to stay in bed 30 minutes longer because the traffic situation isn’t as bad as it usually is,” Gartner’s Koslowski said. “Your car can talk to your alarm clock and reset it 30 minutes later so you can stay in bed without doing anything.”
Ultimately, automakers say all these smart cars on the road will be able to drive themselves, regulations permitting, leading to less road congestion and increased traffic safety. Already, many cars offer collision warnings and even automatically steer cars back into a lane when they veer off.
Explorer owner Friedman isn’t looking to relinquish the wheel just yet. The Los Angeles bookkeeper has far more modest goals for her next connected car. She would like it to act as a personal assistant that will read her texts from her Samsung Galaxy S3 and allow her to dictate responses while she’s driving.
“You can’t drive and text out here, it’s illegal,” said the mother of two. “And I don’t like to have to pull over to respond to my text messages.”
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