Subscription fees won't deliver connected cars
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TRAVERSE CITY, Mich. -- The auto industry may dream of one day having all automobiles connected to one another, but it won't get there if consumers have to pay the bill each month, industry officials argued here today.
Kevin Link, who founded Hughes Telematics Inc. with his brother Chuck in 2006, said that the industry must find another way to pay for the safety and information benefits that can be gained if automobiles are connected to one another and to the Internet.
His suggestion: those who can benefit from better information -- including auto dealers, manufacturers and regulatory agencies -- should underwrite the digital integration of automobiles in the United States.
"We need to get to 100 percent ubiquitous coverage, but it's going to take an industry to get to that level," said Link, whose company supplies telematics to Volkswagen and Mercedes-Benz in the United States. Currently, the few connected vehicles on the road connect via paid subscription services, such as OnStar.
Link argued that if all cars were able to be connected to one another and to the Internet, those vehicles could communicate things such as diagnostic information with dealers, allowing those dealers to offer maintenance services even as consumers are learning they are needed. A fully connected automotive fleet could automatically report its emissions, making obsolete the physical testing now mandated in most states.
"The dealer is where the rubber meets the road," Link argued.
A fully connected fleet could automate tasks from the mundane, like allowing a dealer to unlock all of the vehicles on his lot with the push of one button, to the complex, such as reducing recalls by automatically uploading software updates to vehicles without having them come in for service, Link argued.
"These are all benefits to the industry that are not available in a consumer-based subscription system," where consumers must agree to pay more to have their cars connected to Internet services, as is the common current model, Link said.
Frank Weith, general manager of connected services for Volkswagen Group of America, said that automakers understand that the existing business model that relies on consumers paying more each month won't get the job done.
"We know that the subscription base is going to erode over time," Weith said.
You can reach Larry P. Vellequette at lvellequette@crain.com.
