Article

Is 2017 the Year of Telematics?

Dealers and their sales and service teams must prepare for a watershed moment in vehicle technology this year.

January 2017, Auto Dealer Today - WebXclusive

by Mike Esposito

The author believes 2017 will mark the year telematics technology makes its mark in the retail automotive segment. Photo courtesy NASA Goddard Space Center
The author believes 2017 will mark the year telematics technology makes its mark in the retail automotive segment. Photo courtesy NASA Goddard Space Center

As if I don’t get enough emails, I recently leased a new vehicle that constantly sends me emails. My vehicle tells me when I’m low on fuel, when the tire pressure drops and what the outside temperature is. The dashboard looks like something from Star Trek, and it took a good half hour tutorial by someone at the dealership before I felt comfortable turning on the radio.

Welcome to the new world of telematics. For years, we have known that connected cars were coming, but I believe 2017 marks their official arrival. Percentage estimates of vehicles with installed telematics that will be sold in 2017 range from 60% to 80%. For now, the market for connected car packages continues to center on premium vehicles. By 2022, however, 75% of connected car packages will be sold as part of smaller, less expensive cars.

For dealers, telematics produces new opportunities in both sales and service. On the sales side, each OEM decides which connected car packages it offers and bundles with new models. Your salespeople, however, are the ones in the position of defending list prices, explaining product differentiation, and explaining the value add of these packages to consumers.

Sell the Value

One example of a value-add for customers is usage-based insurance rates. Are your salespeople informing customers that, with the right connected car package, they could potentially lower their car insurance rates?

According to one report, consumers are willing to pay up to $10,000 or an additional 15% of list price for a connected car package. But the graphical user interfaces and control mechanisms of many of these systems have proved to be difficult and distracting, which in many cases turns the customer off. Offering your customers a free clinic or class on how to use these connected car systems may help to boost customer confidence and overcome the price tag obstacle.

Click here to learn how 2017 NADA Chairman Mark Scarpelli’s “Tech Teams” are connecting with car buyers at his Chicago-area stores.

Perhaps the most revenue potential in telematics for dealerships lies in the service department. Many connected cars come with predictive maintenance capabilities, meaning they notify the owner and manufacturer when it’s time for an oil change, new tires and other routine maintenance.

The problem with the current model is that connected cars send their data to the OEM instead of directly to the dealership that sold them the car. The OEM then notifies the appropriate dealership service department that a customer’s vehicle is in need of servicing. The dealership must then reach out to the customer to schedule an appointment.

This process is inefficient and provides too much potential for notifications and emails to slip through the cracks. To solve this problem, OEMs are already talking about integrating their telematics data directly with your dealership management system.

DMS Integration Is Key

As a DMS provider, I believe integration is a necessary precursor for monetizing telematics. Imagine the potential if a service department is notified when one of its customers’ vehicles has just broken down on the side of the road or has been in an accident. Of course, the OEM telematics system such as GM’s OnStar reaches out to the customer to offer assistance. But what if service advisors could then follow up with a personal phone call?

Imagine the potential if a service advisor turns on his computer every morning and up pops five notifications of customers’ vehicles that are due for routine maintenance. Wouldn’t those be the first five phone calls that service advisor would make?

Imagine the potential if a sales manager is notified when a customer’s car is stolen or totaled in an accident?

Connected car technology provides the potential for higher revenue and customer retention rates. Of course, the customer will always be free to choose where their car is serviced. But dealerships will have an advantage in terms of knowing which repairs need to be done and when cars need to be serviced.

Prepare Your Service Department

Many of the technologies involved with telematics are technologies that work interactively with the vehicle’s network, such as anti-lock braking systems, vehicle stability control, electronic throttle controls and accident avoidance systems. We’ve had the precursors to these technologies in shops for years in the forms of backup sensors, cameras and adaptive cruise controls.

It’s critical for your fixed ops and service manager to stay on top of new technologies in the pipeline so service departments have technicians who are trained and knowledgeable.

The most common telematics systems include:

  • Emergency crash notifications
  • Emergency or “Good Samaritan” assistance via a “Help” or “SOS” button
  • Roadside assistance with embedded GPS
  • Vehicle diagnostics and health report emailed to both the customer and the dealer
  • Remote door unlock
  • Navigation requests
  • Traveler services such as gas price finder or local restaurant search
  • Streaming sports/news/stock information
  • Streaming music or media via Pandora and other providers
  • Text message and email display
  • Traffic information and rerouting
  • Weather information
  • Vehicle speed or location alerts
  • Stolen vehicle tracking and remote shutdown
  • Vehicle software updates

The mechanical aspect to these new technologies will require acclimation, but that process should not be overly difficult. Today technicians can diagnose and perform software updates via factory communication systems.

The other important thing to consider as cars are communicating over the internet is network security. Dealerships will need to have ultra-secure networks so hackers can’t gain access to a vehicle’s systems, or use the open channel to install malware that will infect the dealership.

Last but not least, dealerships may potentially generate revenue from the usage of all the customer data being tracked and collected by telematics systems. Look again at the above list of common telematics systems and imagine all the data they can capture.

Integration with the DMS will be helpful in created targeting messaging campaigns, e.g. a dealership could search for all customers who experienced a breakdown in the last year, or who drive more than 1,000 miles a month, or who lost their car keys, for specific service promotions. I’m sure there will be other uses for this data that have yet to be dreamed up.

Telematics has officially arrived, and soon our cars will know more about us than we do about them. Overall, this is a good thing. Telematics in the form of vehicle control systems will save many lives.

I look forward to hearing what 2017 will bring in the form of new technologies and news from the OEMs regarding DMS integration, which will greatly benefit dealerships.

Mike Esposito is president and CEO of Auto/Mate Dealership Systems and an expert in dealer management system (DMS) technology. Contact him at [email protected].

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