Ford Could Lose This High-Tech Battle


The popular MyFord Touch "infotainment" system is now available in nearly all Fords, including the big Super Duty pickups. Photo credit: Ford Motor Co.

It's easy to see this trend coming: Cars of the future are going to be much more interconnected than they are now.

It's also easy to see this coming: The demand for in-car data connections will likely boom once automakers show us more of the possibilities.

Ford's (NYSE: F  ) plan to jump on these trends involves tethering, improving the ways in which your car links to and interacts with your smartphone. It will build on the company's MyFord Touch system, which is already popular with customers – and profitable for Ford.

That seems to make a lot of sense. But is it really the best way for Ford to be going?

GM is making a much more elaborate move
I raise this question because Ford archrival General Motors (NYSE: GM  ) is unfolding a very different approach to this challenge.

Before joining GM's board in the wake of the company's 2009 bailout, CEO Dan Akerson had spent much of his career in the telecom industry. Naturally, when he later took the automaker's top job, GM's future plans for in-car wireless connectivity were very much at the forefront of his mind.

GM already has some in-car connectivity with its OnStar service, which provides safety services and navigational help to owners who choose to subscribe.

But that's just a 2G connection. What Akerson envisions is apparently much, much more extensive. Lately, we've been seeing some signs of what that vision looks like.

One way or another, in-car data is about to get very big
GM announced back in February that starting with model year 2015, vehicles equipped with OnStar capability (which is most of the cars and trucks GM sells, at least in the U.S.) would come with embedded 4G LTE connectivity.

In the U.S. and Canada, the connections will be delivered via AT&T (NYSE: T  ) ; GM expects to announce providers in other parts of the world later this year.

GM hasn't said exactly what they plan to do with this vastly increased bandwidth. But Akerson has dropped some hints, suggesting vastly increased in-car entertainment options – as well as, possibly, in-car advertising.

Akerson clearly sees this as a major revenue opportunity for GM. If he's right – and remember, he has extensive experience in this area – is Ford setting itself up to miss out?

Ford bets on your smartphone instead
Reports have suggested that Ford thinks consumers will object to paying for more than one data plan. Why not get the data via folks' smartphones, the argument goes, since they're already paying for that connection?

There's some merit to that argument. But at the same time, it's worth noting that there's a precedent for people paying to upgrade their in-car entertainment options. Your humble Fool is one of millions who pay well over $100 a year to hear SiriusXM's (NASDAQ: SIRI  ) satellite radio service in their cars.

If people are willing to pay that much for what is essentially a bunch of radio channels, is it reasonable to guess that they'd be willing to pay, say, $200 a year for a service that brought them in-car TV or movies or games? (Or maybe more to the point, a service that brought these features to the kids in the back seats?) Along with real-time traffic and navigation updates?

It's a big question. At least right now, I can't blame Ford for taking a more conservative approach. But I have a feeling that GM's plan is going to work out pretty well – and unless the Blue Oval has another plan up its sleeve, that could leave Ford scrambling to catch up.

There's good reason to think that Ford still has big growth opportunities ahead. We've outlined those opportunities in detail in the Fool's premium Ford research service. If you're looking for some freshly updated guidance to Ford's prospects in coming years, here it is -- click here to get started now.


Read/Post Comments (5) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 13, 2013, at 9:19 PM, gigbit wrote:

    I see more death on the road with all this high-tech.

  • Report this Comment On May 13, 2013, at 10:17 PM, zukerman wrote:

    This is good news indeed for those that plan to live in their cars. I expect to hear any day now that Google will be releasing a FWD TV that goes 0 - 60 in 7 seconds. If you have a plan that costs only $100 from Sirius it would have to be a discount on a higher plan because you tried to cancel, or a music only channel. We have reached the saturation point where so many players battle for the attention of a few that it's a zero sum game anymore. The threat that Apple will begin the streaming music service on a daily basis to continue the chase for the ever shrinking moat makes me giggle. Microsoft has been in the dash for awhile now and hasn't made much of an inroad beyond their initial introduction. Between my phone, cable and internet, it now equals my mortgage just to stay connected to basic functions. Bubbles? If your looking for one, just look at the many in this space that are forced to package or place something where it has never been before in an attempt at unobtainable revenue retention. Pandering to those that scare the hell out of me while driving doesn't excite me very much, laws are being considered as we speak. In the near future people will be stepping away from all the gadgets that allow the data minors to know where you are 24 hours a day. BrightHouse pulled a Netflix creating another tier of Roadrunner rendering my current speed equal to dial up, then they call saying I'm grandfathered in at the old rate plus $5 for a year but can't tell me how much it will cost next year. I'll be changing my service very soon as a result. Commercials are everywhere, you rent a movie there they are, you try to watch a movie and something is jumping out of the corner of your set about another show, even Sirius's DJs are getting chatty like they're Casey Kasem these days. My next tech purchase will be the camera that watches the phone user behind me in traffic so I can add evidence to my lawsuit.

  • Report this Comment On May 13, 2013, at 10:47 PM, ddeleo wrote:

    It is too early. There will come a time when all cars will have LTE wired to it. The car of the future cannot avoid it. It will help in saftey, data collection, insurance rates, you name it not just entertainment. But that isn't today. FORD doing it this way today does not mean its car of the future won't have it. It just means they know what the market and technology is today. For example now GM and any owner of a GM is locked into ATT. Well that's just great because ATT LTE is plain vanilla and will be for a long long time. It is not advanced LTE (TD LTE). The global standard. 10 times faster than vanilla LTE. And actually the purest definition of 4G because its truly mobile and goes 100+ Mbs. For the record only Sprint will have this starting if on schedule this fall. Why won't ATT or Verizon have it for a long time. Because all the spectrum they own is not contiguous bandwidth. It's more like quilt patchwork bandwidth. Advanced LTE requires contiguous bandwidth. Good luck GM.

  • Report this Comment On May 14, 2013, at 12:49 PM, TMFBlacknGold wrote:

    Interesting article John. Do you know how in-car WiFi works? Some cars offer this hotspot service already.

    --Maxxwell

  • Report this Comment On May 14, 2013, at 1:04 PM, TMFMarlowe wrote:

    GM and several other automakers have offered in-car wi-fi for a few years now as a dealer-installed add-on. I think it's 3G, $30 a month or thereabouts in the US.

    But at least for GM, this is different -- it'll be built in just like OnStar is now, which means that GM can build things that exploit its capabilities right into the car from the start (and collect fees for some of those things from providers).

    John Rosevear

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