Sync-Effect Driving Profitability

An emerging new segment in the auto industry, dubbed the “Technology Enthusiast Driver,” is poised to grow in-vehicle consumer electronic sales 13% this year to $12.2 billion, a study from the Consumer Electronics Assn. says.

The study describes Technology Enthusiast Drivers as “early to mid-adopters of technology.” They are “highly interested” in emerging technologies, and 61% say they want voice-activated wireless communications systems onboard their vehicle.

Auto makers would do well to take heed of this growing segment, says Gary Shapiro, CEO of CEA.

“We think that despite the difficult economic times, consumers are making (buying) decisions based on what technology is in the car,” Shapiro tells Ward's in a recent interview. “We see technology as a selling point, without question.”

Shapiro cites Ford Motor Co.'s Sync system as proof of the selling power of in-vehicle electronics. Sync, which is based on Microsoft Corp. software, allows drivers to link their portable electronic devices to the vehicle and control them via voice commands.

“Ford had great experience with Sync,” Shapiro says. “Vehicles with Sync are outselling non-Sync alternatives by a 2:1 ratio. And those cars cost more, so it doesn't take a rocket scientist to figure out its profitable.”

Although there are other auto makers that offer systems similar to Sync, Shapiro credits Ford for bringing such technology to the masses by offering it across its entire vehicle range.

“Call it the ‘Sync effect,’ if you will,” he says. “What Ford is doing is huge and a good indicator of the future.”

While convenience and entertainment are key drivers, electronics can address other issues as well, including meeting state laws limiting cell-phone use to hands-free devices.

In-vehicle electronics will follow the same cost path as home electronics, Shapiro predicts, noting that as broadband companies competed for business, prices came down.

Once vehicles have broadband-Internet capability, there will be a “phenomenal amount of applications” that will lead to the “rebirth of automotive,” he says.

Key to bringing Internet access to vehicles is a new broadband initiative to come called “Protocol Version 6.”

All computers today have their own unique Internet address, similar to a vehicle identification number. Those addresses are running out, which temporarily has slowed the migration of broadband into the automobile.

Protocol Version 6 will lengthen the Internet addresses, allowing for expanded use of broadband applications.

“If you have broadband going to a car wirelessly, which you will, your car will be able to communicate with other products, with each other and with advertisers nearby,” Shapiro says.

Advertisers will be able to send coupons or driving directions to their locations directly into the vehicle via the wireless Internet connection, he says.

Auto makers now see electronics as a market differentiator, as evidenced by their growing presence at the CES' annual exhibition in Las Vegas, Shapiro says.

The 2009 International CES will be held Jan. 8-11 and will feature a keynote address by Ford CEO Alan Mulally. Last year, General Motors Corp. CEO Rick Wagoner keynoted the event.