How apps are changing the telematics value chain

James

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27th March 2012

Looking at what downloadable apps have done in the smartphone industry has sparked quite a bit of thinking in the world of automotive telematics.

Although downloadable/Web-based apps can potentially revolutionize the way telematics services are delivered and updated in vehicles, early efforts to deploy them have also highlighted some challenges and disrupted the traditional supply chain.

“The only fixed role in the supply chain is the OEM,” says Luca De Ambroggi, senior analyst for infotainment with iSuppli. “If you go down to the tier one, two, and three level, as well as software, there’s a lot going on.”

The main problem that comes along when downloadable apps enter the equation is the “long lifecycle—and long development lifecycle—of a car,” notes Rick Kreifeldt, vice president of global automotive research and innovation with Harman Automotive/Corporate Technology Group. “How do you continue to upgrade and refresh what’s happening in the car?”

Downloadable apps (and updates) have proved a great way to do this on a smartphone, but car systems are not as easily updated, Kreifeldt notes. And that’s where the challenge begins. (For more on apps, see Telematics: Making the most of the app opportunity and Apple's App Store as a model for telematics.)

When does an app make sense?

Rather than blindly embracing this technology, it’s important to consider where Web-based applications can truly be effective in a vehicle. Technology that’s stable and has worldwide, established standards, such as email, can be built right into an embedded system, notes Kreifeldt.

But a different strategy is needed for features that have regional variations (like streaming radio) or are known for frequent API changes without much advance notice (like Twitter), he explains.

In some cases, a downloadable app framework, such as what Harman has deployed for Toyota, can manage these sorts of features effectively and updates can be added via USB memory stick or wireless download. Smartphone integration can also assist with updates on the fly, Kreifeldt explains.

And perhaps the best way to handle update-hungry applications is the cloud. When this technology is integrated into an in-car system, updates can be made behind the scenes without changing the customer’s in-vehicle interface and without rewriting code. (For more on apps and in-car content, see Telematics: What’s next for apps and services, part I, Telematics: What’s next for apps and services, part II and Will ‘freemium’ work for telematics apps?)

Another practical consideration when incorporating downloadable apps is the in-car environment. A smartphone can be updated while you’re walking around or while you’re sitting on your couch, but while you’re driving—through various mobile networks and in and out of wifi (if that’s an option for your vehicle)—an update may be harder to accomplish.

LTE networks will help, Kreifeldt says, but in general, apps for cars should be designed to require much less frequent updates than those for the phone. (For more on LTE, see Will LTE lead the 4G revolution? )

Finding common ground

Another challenge for app-oriented in-car systems is the array of OEMs and operating systems out there. Not only does this make for a much smaller customer base for any would-be third-party app creators, the strict safety guidelines needed for in-car features further complicate this market, Kreifeldt believes.

However, Android is being investigated as a possibility for in-vehicle platforms, and perhaps GENIVI could create something multiple OEMs would work from.

Still another option is HTML5, which is now used in the smartphone market to write apps that run on both Android and iOS.

HTML5 programs run “a little slower, so it’s not good for fast games,” notes Kreifeldt. But it can be “an enabler in the automotive industry.” HTML5 also has a lot of offline capability, he says—another benefit for vehicles, which may not be constantly connected. (For more on HTML5, see Telematics and the next-generation Web.)

But this shift in architecture is producing another shift. “For many reasons, not just telematics, OEMs are gaining more power than they’ve had before,” says De Ambroggi.

If OEMs move toward PC architecture and downloadable apps for their in-car systems, “all the tier ones are less present,” he says. “Somehow, they have to pay attention and adjust their business model to ensure they’re still relevant.” And they’re not the only ones.

A change in the value chain?

Most OEMs have long relied on partners, at least to some degree, to help accomplish their automotive telematics goals. And some say the migration toward downloadable/Web-based apps is nothing more than the next generation of these partnerships.

“Ultimately, the most important brand is the OEM’s,” says Harman’s Kreifeldt. “Will there be different people in the background providing things? That’s just the history of tier ones and automotive,” he says. (Click here to hear a podcast with Rick Kreifeldt.)

However others, including iSuppli’s De Ambroggi, see a larger shakeup in the works. “Continental is becoming a service provider with AutoLinQ, and ATX is becoming a tier one. They’re coming out from the traditional service provider function and becoming an integrator,” he explains. And Sync is “a tier one box developed by Ford itself.”

In addition, a few OEMs are interested in providing their own app services for embedded in-car units. BMW has a store for Connected Drive, he notes, and the app will reside in the vehicle’s head unit, not in the cloud. The OEM “will have more and more control,” he says.

As further evidence of a shift in the previous marketplace, De Ambroggi cites the reinvention of companies like TomTom and Garmin, which have seen a “steep decline” in the market for PNDs. They’re now selling their software experience to tier ones, he says, noting the partnership between TomTom and Renault that has resulted in huge sales of what is not a PND but a “low cost in-dash nav system.”

Drivers use their smartphones for navigation because they don’t want an expensive embedded system, he explains. But if it’s easy to use, adds safety, and drops to a low enough price point, which Renault has done, “success is ensured,” he says. And tier ones have yet another group vying for their spot in the value chain.

Basically, says De Ambroggi, “tier ones are at the center of a changing world.”

Jessica Royer Ocken is a regular contributor to TU.

For more all the latest telematics trends, visit Content & Apps for Automotive 2012 on April 18-19 in Germany and Telematics Detroit 2012 on June 6-7.

For exclusive telematics business analysis and insight, check out TU’s reports on In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.