Carphone comeback: How tech giants are racing to win the smart car battle

Carphone comeback: How tech giants are racing to win the smart car battle

Matt Hartley | March 8, 2014 7:30 AM ET
Welcome to the Second Coming of the carphone.

Anyone of a certain age can remember the first time they used a phone from inside a car. And more often than not, they were excited to tell the person on the other end of the line that they were, in fact, talking to them on a carphone.

It’s not quite an iCar, but Apple Inc. is aiming to give iPhone users more and safer access to functions on their devices while driving with a new technology known as CarPlay

Sure, James Bond may have been able to take a call from his Bentley in the 1963 film From Russia With Love, but it wasn’t until the early 1980s that the idea of a carphone became something of a de rigeur status symbol.

Despite the carphone’s humble and bulky beginnings, our collective love affair with ubiquitous connectivity can be traced directly back to the technological revolution of putting a phone in a car.

Indeed, it is the automobile that all but gave birth to the mobile phone in a flurry of stringy wires and crackling communications.

Since those early days, the mobile phone has grown up, gone wireless, left its former vehicular home and taken over the world.

As for what we’ve been doing with the phones in our cars since then? Well, legally, we’re still only using it to make voice calls, with the help of some kind of hands-free technology.

But in reality, many of us are constantly stealing glances at our phones to check for Facebook status updates, to skip a Coldplay song on a music streaming service or to look up directions to the closest gas station.

As a result, we are now facing a distracted driving epidemic that the Ontario Provincial Police recently dubbed the “number one killer” on the province’s highway system.

Now the mobile phone is coming home, returning to its roots inside the automobile. The world’s largest technology companies, including Apple Inc., Google Inc., Microsoft Corp. and Canada’s BlackBerry Ltd. are making increasingly large bets that they can bring the smartphone experience — which has already revolutionized pretty much every other aspect of our waking lives — into the car, and do so safely.

Which begs the question: With the average Canadian commute now about half an hour, can technology companies and automakers come together to help make cars safe bastions of voice-control, giving us the connectivity we now demand, while helping to improve driver safety?

“I think it’s pretty clear that connected cars are viewed as the next big thing both for the car manufacturers and for the smartphone folks, but for different reasons,” said Carl Howe, vice-president of data sciences research for the market research firm Yankee Group in Massachusetts.

“For the smartphone folks, it’s the opportunity to sell something that comes in under an umbrella of $25,000 rather than $200, something that’s not a race to the bottom of the price curve. For the car makers, it’s something new to sell, and furthermore it breaks them out of the four-year design cycle. If [a car manufacturer] can tie into a smartphone, they can use last year’s technology in their brand new car, rather than four-year old technology which tends to be the way electronics gets built into the car.”

Adding new electronics such as voice controls, navigation technologies and other infotainment systems to a car is the leading earnings generator for an automaker, Mr. Howe said. It’s easy when you think that some automakers will charge more than $1,000 to install a DVD player and seat-mounted screens in a minivan, when a portable DVD player+screen combo device costs only a few hundred dollars at an electronics retailer.

For the smartphone folks, it’s the opportunity to sell something that comes in under an umbrella of $25,000 rather than $200

But for many automakers, it is the integration of the smartphone into the car’s infotainment system that clears the quickest and most direct path to providing access to mobile technologies inside the vehicle.

Anxious to tap into a market expected to be worth as much as US$14.4-billion by 2016, according to research and consulting company MarketsandMarkets, technology companies are turning their attention to in-car infotainment systems as a new growth opportunity.

This week, Apple unveiled CarPlay, an in-car technology system that enables iPhone users to connect their device to the dashboard technology from more than a dozen different auto manufacturers, including Ford, BMW and General Motors.

The technology debuted Monday at the Geneva International Motor Show and is designed to give users access to iPhone functions — including the ability to make calls, send text messages, play music and access Apple’s Maps software — using Siri voice commands.

In January, Google took the wraps off the Open Automotive Alliance, a new partnership with Audi, GM, Honda, Hyundai and chipmaker Nvidia aimed at developing ways of integrating the search engine giant’s Android operating system into cars to make driving “safer, easier and more enjoyable for everyone.”

Google is hoping to extend its influence into the automobile by following the blueprint it established with the Open Handset Alliance, a collaborative strategy that helped turn Android into the world’s dominant smartphone operating system.

Closer to home, BlackBerry chief executive John Chen has identified the company’s QNX in-car software as a potential growth area for the struggling smartphone maker as it seeks to establish itself as a provider of specialized and enterprise-grade technologies.

QNX is already the market leader in operating system platforms for automotive infotainment systems, with a market share of more than 50%, according to data from market research firm IHS Automotive.

Many of the in-car entertainment systems from the world’s largest auto manufacturers, including BMW, Honda, Mercedes and GM’s OnStar, are built on top of QNX’s software platform. QNX also works with technology companies, including Apple, to help integrate their devices into vehicles.

As Andrew Poliak, director of automotive business development for QNX Software Systems, puts it, the QNX platform is a bit like “Switzerland,” helping connect automotive systems with mobile devices across multiple automakers and device manufacturers.

Mr. Poliak said he’s seeing increased interest from both automakers and smartphone vendors on in-car tech, which is leading to increased adoption from drivers, taking many of these technologies mainstream.

“If you look at what happened in the smartphone industry, there was this feature phone versus smartphone trend that happened and started driving down price, which helped the market grow from just a few users to everyone having smartphones,” he said. “That’s analogous to what is happening in automotives.”

Automakers are looking to smartphone companies to help push down the costs of in-car technology, Mr. Poliak said. By leveraging the power of the smartphone for things such as voice commands and navigation, carmakers can take advantage of the handset’s embedded chip and the driver’s cellphone data plan to provide the backbone of the connected experience.

At the same time, smartphone companies are hoping to tap into some of the rich data generated by a user’s driving experience, including location-based data. There could also be new opportunities for digital advertising. For example, if a driver performs a Web search for a coffee shop while en route to a location, advertisers may be willing to pay more to be associated with that search as it would likely have a greater chance of translating into a sale.

Smartphone makers are also hoping that by integrating more of the phone’s functions into the car’s dash, and enabling users to access those functions without using their hands, drivers will be less likely to take their eyes off the road to make a call or look up an address.

Such improvements can’t come soon enough. According to the OPP, more people in Ontario died in distracted driving related crashes in 2013 than any other type of crash. Indeed, 78 people died from distracted driving crashes on Ontario roads patrolled by the OPP, more than impaired driving-related crashes (57 deaths) and speed-related crashes (44 deaths). At the same time, the province is upping fines for distracted driving to $280 from $155.

As technologies like voice control improve, it should help reduce the number of times a driver is tempted to pick up the phone while behind the wheel.

However, at the same time automakers are looking to improve infotainment systems, they’re also looking to beef up technological safety features, including sensors that know when your car crosses into another lane, automatic braking systems that detect when a car is in danger of running into something and, eventually, self-driving cars.

“At the moment, not everybody has these technologies, but I think we’re going to get to a point where they’re fairly common and we won’t worry quite so much about distraction,” said Mr. Howe of Yankee Group.

“At the moment, it’s a real concern and even Apple is being very conservative about it, saying they won’t be putting apps up on the screen. You can talk to Siri, but you can’t go and manipulate things on the screen unless you’re parked.”

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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