Auto Web surfing: new race for fatter profit margins

Thursday, March 1st 2001, 12:00 am
By: News On 6

GENEVA (AP) _ Stuck in an industry slowdown, automakers say it's a wild race to boost their bottom lines with the latest hope in automotive innovation _ Internet, e-mail and streaming video beamed directly to motorists on the go.

The push could get a big lift from a new high-speed Internet connection being developed for Mercedes that will allow well-heeled customers to surf the Web while speeding down the highway.

Unveiled at the Geneva auto show, it is an example of the kind of wireless telecommunications _ known as telematics _ and online services automakers are rushing to develop in hopes of eking out an extra profit.

While European automakers lag behind their U.S. counterparts in rolling out onboard Internet access, the new software capitalizes on Europe's expansive mobile phone coverage to bring faster, more reliable connections.

``It's like air conditioning. There's an early stage when there's a real profit margin to be made and they can charge a premium,'' said Chris Will, an auto analyst with Lehman Brothers in London. ``But for the laggards, the market will already be spoiled.''

Known as telematics, the technology would allow people on the road to trade stocks, book hotel reservations, download movies, or even tap their Internet-enabled home security camera to check on a pet.

Besides being able to charge a premium for the new technology, automakers also see it as a way to keep raking in revenues after the initial sale _ by selling customers additional services over the life of an auto.

Telematics is viewed as one of the biggest growth areas in the auto industry. UBS Warburg has estimated that worldwide revenue from telematics will grow from roughly $4 billion now to $47.2 billion in 2010, and some analysts say at least half of all U.S. vehicles could have at least basic telematics by 2006.

In the United States, more than 1 million vehicles in the United States are already equipped with telematic devices, mostly new OnStar-equipped General Motors Corp. vehicles.

Volvo is testing a similar service this summer in Sweden called Volvo On Call that allows its drivers to press a button that establishes an immediate phone connection with a service representative, who can book tickets, order flowers or schedule appointments.

So far, however, on-the-road Internet surfing has been hobbled by slow mobile phone speeds and poor connections with a moving auto. In the United States, it is also limited by poor network of mobile phone coverage.

Using a new software developed with IBM, however, a German company called MegaCar has hammered out a new 152 kilobit connection that enables a car whizzing down the Autobahn to download at twice the speed of cable Internet service.

The service will be initially available in Europe, where mobile phone coverage is more expansive than in the United States.

Drivers and passengers initially navigate the Internet on a touch screen with large, easy to see buttons. But in September, a voice-driven navigation system will also be introduced to address safety concerns.

MegaCar is developing the software for use by Mercedes but will also begin selling it to other car manufacturers this summer. On a mass scale, the new connections would add at least 3,000 marks ($1,400) to the cost of a car, estimates chief executive Eckhard Kloth.

Other automakers have already going the next step. Earlier this month, GM and Fidelity Investments unveiled their alliance to provide in-vehicle stock quotes and financial information through OnStar's Virtual Advisor service.

And Honda Motor Co. has already sold 40,000 slow-running Internet connections, called Internavi, that puts together travel information for drivers, including a guide to restaurants and events, the nearest hospitals and repair shops. It doesn't operate while the car is underway.

A remaining obstacle remains the safety hazard of trying to navigate the Internet while driving, because effective voice-driven browsers have not developed.

Analysts say that the first companies marketing a fully functional onboard Internet service should cash in big on the niche product. But they doubt whether car makers will be the ones reaping the rewards when the technology goes mainstream.