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McKinsey Quarterly@Forbes.com
A Road Map For Telematics Backseat video, gadgets that automatically notify the authorities of a crash or help drivers navigate, sophisticated diagnostics; in the mid-1990s in-car information and entertainment services such as these, which go under the umbrella name of telematics, were expected to offer the slow-growing car industry a flood of new revenue.
General Motors' (nyse: GM - news - people ) OnStar system, first installed in Cadillacs in 1996, is now available in 36 of GM's 54 models as well as in some models from Honda (Acura) and Toyota (Lexus). OnStar's features include voice-activated telephony, navigation, roadside assistance and remote diagnostics. Ford Motor (nyse: F - news - people ) created a joint venture called Wingcast in 2000 with the U.S. wireless provider Qualcomm (nasdaq: QCOM - news - people ). DaimlerChrysler (nyse: DCX - news - people ) and BMW are working with Texas-based ATX Technologies. But the payoff these companies seek seems increasingly out of reach. Telematics might deliver an enticing variety of in-car services, which may still revolutionize the experience of driving. But carmakers aren't likely to capture a huge windfall from them. First, the total market won't be as big as predicted in some of the more optimistic forecasts. Second, the vehicle itself won't be critical to every mobile application. Carmakers betting on a full suite of telematics services face strong competition from entrenched devices such as mobile telephones and personal digital assistants. To win, automakers would have to get their customers to pay for overlapping services and somehow make those customers at least partly satisfied with last year's technology--a difficult proposition. In the long run, investing primarily in the development of great cars while selectively pursuing telematics will have a much better payoff than pouring funds and management effort into a full telematics offering. From The McKinsey Quarterly, 2002, Number 2 More From The McKinsey Quarterly
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