New cash-for-clunkers cars stop short on tech features

EL SEGUNDO, USA: While the US cash-for-clunkers incentive has been an overwhelming success in terms of spurring sales and retiring gas guzzlers, the most popular cars bought under the program are slightly below average in terms of their technology content, iSuppli Corp. reports.

According to iSuppli’s Technology Availability (TA) index, the Top-10 best-selling cash-for-clunkers cars score an average of 14.5, compared to 17.8 for all model-year 2009 autos in the United States. The TA score indicates how many infotainment and Advanced Driver Assist Systems (ADAS) are available for each model.

A range of car technologies is covered by the TA, comprising infotainment functions like navigation, iPod connections and satellite radio, to advanced ADAS features like park assist, Tire Pressure Monitoring Systems (TPMS), Electronic Stability Control (ESC) and telematics services such as General Motors’ OnStar,

“The low TA scores reflect the fact that buyers for the cash-for-clunkers cars are seeking smaller and more fuel-efficient cars, which tend to be low-end models,” said Mark Boyadjis, analyst and regional manager for North American automotive research for iSuppli.

“Despite the proliferation of more advanced technologies throughout carmakers’ lines, automakers still haven’t migrated all these features to these less-expensive vehicles.”

The table presents iSuppli’s TA index for the top-10-selling cash-for-clunkers models.Source: iSuppli, Aug. 2009

Cash for clunkers is no clunker
By August 5, the cash-for-clunkers program had sold more than 184,000 autos. General Motors accounted for 18.7 percent of those cars, followed by Toyota at 17.9 percent, Ford at 16 percent, Honda at 11.6 percent and Chrysler at 10.6 percent.

“The additional $2 billion that Congress allocated this month will bring the cash-for-clunkers sales to about 700,000 units when completed,” said Egil Juliussen, principal analyst and fellow for iSuppli’s Automotive Practice.

The attached table also presents sales for the Top-10 cash-for-clunkers cars in June and July. These 10 cars are different from the models that had the overall highest sales in July; note that the cash-for-clunkers program was only available for the last week of July. The total US auto sales increase from June to July 2009 was 16 percent.

From an environmental perspective, autos sold under the program had an average fuel efficiency of 25.3 Miles Per Gallon (MPG), a 60 percent improvement from 15.8 MPG for the traded-in models, according to U.S. Department of Transportation data through August 5.

Carbon dioxide emission reductions are proportional to MPG improvements, so the environmental impact appears very promising as well.

Infotainment features prevalent
While the top cash-for-clunkers models are far from being loaded from a technology standpoint, they do include some essential infotainment features formerly available only on higher-end vehicles.

Features such as satellite radio, Bluetooth connectivity and portable music device integration are widely available on the top-selling models under the cash-for-clunkers program.

All but one model offers Bluetooth connectivity, and three also include Bluetooth A2DP or audio streaming. All of the models offer satellite radio, either XM or Sirius, and six of the models offer USB inputs.

On the other hand, embedded telematics is largely absent from these vehicles, with only the OnStar-equipped 2009 Chevy Cobalt integrating this feature in the form on OnStar.

Ford vehicles offer mobile device telematics using the driver’s Bluetooth phone and have some telematics services, including turn-by-turn navigation, Automatic Collision Notification (ACN), and remote diagnostics programs.

“The Ford Sync option is a hit among Ford buyers and likely contributes to the overwhelming popularity of the top-selling Ford Focus,” Boyadjis observed.

HD Radio is only available on one model: the Ford Escape. This discrepancy is a result of the standardization and saturation of satellite radio in the automotive market, as well as the relative infancy of HD Radio technology in the automobile.

The safety features of the 10 models are much better than the trade-ins since every model has ESC and tire pressure monitoring system (TPMS). Few of the Top-10 models have added driver assist systems—only two models had park assist and none had any other driver assist systems.

OnStar shines for GM as auto telematics becomes mainstream

EL SEGUNDO, USA: While uncertainty is swirling about the future of General Motors (GM), there’s no doubt about the success of the company’s pioneering OnStar service, which has put the automaker at the forefront of the unfolding automotive telematics revolution, according to iSuppli Corp.

GM has sold over 16 million vehicles with OnStar control units since the inception of the service more than 10 years ago. OnStar earns GM more than $1 billion in annual revenues from subscriber services from an estimated 6 million active subscribers according to iSuppli estimates.

While such a revenue stream is important to automakers, the real value of telematics services goes beyond what is realized in services revenue.

“There is a strategic value in having connectivity to the digital systems in the car,” said Phil Magney, vice president of iSuppli Automotive research at iSuppli. “While the value of this is hard to monetize precisely, automakers have the ability to reduce warranty and service costs through telematics.”

Automotive telematics is defined as the integrated use of telecommunications and informatics, allowing the sending and receiving of information. In advertisements, GM promotes OnStar’s capability to remotely detect when a car’s airbags have been deployed, allowing an operator to call for assistance.

However, telematics goes far beyond this feature. There are a variety of other telematics applications that have long-term benefits to the OEM that justify the investment in the technology.

For example, remote diagnostics -— i.e., the capability to remotely monitor vehicle conditions -— has the potential to save automakers millions of dollars over the long term. While is it difficult to estimate the total cost savings from these technologies, GM has stated that OnStar saves it more than $100 million annually through information that flows back to it from OnStar-enabled vehicles.

“For every $100 saved on warranty and recall costs, the value gained to GM increases by $250 million,” Magney said. “It is feasible that cost savings from telematics and other internal efficiency gains could potentially go much higher than this.”

Furthermore, software updates cost OEMs millions of dollars through warranty and recall costs. During the next five to 10 years, software updates will be conducted via telematics connectivity, similar to the way PC software updates are downloaded from the Internet, cutting costs significantly.

Now bundled as standard equipment, sales of OnStar-enabled vehicles in 2009 will amount to 2.5 million, down from nearly 3 million last year as overall sales of GM cars decline due to the overall drop in car sales, iSuppli estimates.

iSuppli predicts overall OnStar revenues will basically be flat during the next few years. While OnStar is seeing an increase in Average Revenue Per User (ARPU) due to improvements in its service, the volume on GM vehicles is being hurt badly by the current auto market.

As a point of reference, iSuppli has recently conducted in depth research on telematics hardware and services including a recent tear down analysis of the latest OnStar Telematics Control Unit (TCU).