Imagine the scene from Will Smith’s I, Robot movie — minus the killer robots — where cars drive themselves and their artificial intelligence talks to you and knows you as well as anyone else does. It’s a scene that might not be as far from real life off as you think. According to AutoNews, when General Motors Company (NYSE:GM) CEO Dan Akerson came onboard, moving over from the telecom industry, he asked how soon the company could get 4G incorporated into its vehicles. He saw a fresh opportunity a few years in advance, along with the profits it would generate.
He hasn’t revealed exactly what GM has in mind, but a webinar from AutoNews that included spokespeople from International Business Machines Corp. (NYSE:IBM) and Sprint Nextel Corporation (NYSE:S) may give us a better idea. After watching it myself, I believe that the connected vehicle is the next battleground for premium options and could revolutionize the auto industry. All the major players, including General Motors Company (NYSE:GM) rivals Ford Motor Company (NYSE:F), Toyota Motor Corporation (ADR) (NYSE:TM), Honda Motor Co Ltd (ADR) (NYSE:HMC), and Chrysler, will be competing to be the fastest to innovate the best-connected vehicle.
2013 North American International Auto Show in Detroit. Source: NAIAS Media Photos.
The year of the connected car
In case there’s any question, a “connected” car is simply a vehicle that has the ability to connect to the Internet, and the outside world, through Wi-Fi or 4G — and that ability is expected to increase in demand dramatically.
Intel told CarTalk.com that the connected car is the third-fastest growing technological device after phones and tablets. ABI Research noted that “the installed base of embedded and hybrid connected car systems is expected to grow from 45 million at the end of 2011 to 210 million by 2016.” Machina Research notes that by 2020, up to 20% of a vehicle’s value will be attributed to “connected life” — a staggering amount that’s estimated to equal roughly $600 billion. That’s more than Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM)’s total revenues from 2012 combined.
This type of premium option in vehicles could boost margins well above anything the auto industry has seen in its history — blurring the line between products and services. But what does that mean for automakers such as Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM)? Moreover, what’s driving this trend?
Put simply: technological innovation and the millennials. My generation was born into the digital age, is accustomed to multitasking, and has a constant multimedia connection. Most people tend to underestimate our spending power, but it’s clear that at least corporations aren’t. The millennial generation represents almost 80 million consumers, with an estimated purchasing power of $170 billion — dwarfing Generation X in size and representing the largest generation since the baby boomers.
What can we expect?
We’ve all seen the Peyton Manning commercials where he audible-calls his father with his vehicle in the midst of a construction zone. Or Blake Griffin’s commercial, where he goes back through time to give himself important advice — like how jean shorts are a no-no. As much as I’d love to tell my vehicle to take me back and save me from a few mistakes — like investing in Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) instead of in my first-big screen TV — that won’t be an option. Let’s get back to that AutoNews webinar and see what we can expect.
As handy as that could be, it will also be used for less dire situations. Most of us already have interactive displays for MPG and such, but in the future we’ll also probably be able to see specifics like how well your brake pads are holding up, leading to alerts on how to drive better for less vehicle wear and tear. Maybe the connected car will tell us to speed up 2 miles an hour to avoid running a yellow light — or to beat the annoying train that got there seconds before you did.
We already have systems that can start our engine in an airport parking lot while we’re arriving in the plane, but pretty soon the vehicles might know us better than we do. In a tense driving situation, the steering wheel could read your heart rate — much like equipment at the gym already does — and adjust the A/C during a stressful phone call with the boss.
Imagine Apple’s Siri on steroids, detecting who you are and offering your preferred industry or company news before you get to work, while on the way home it automatically recaps local events with soothing background music as an accompaniment. Or imagine that your vehicle recognizes it isn’t you behind the wheel, and rather a thief, and the car tracks itself to its new location and alerts authorities. Pretty handy.
